Thursday, March 10, 2016

Affordable housing and basic income

Affordable housing is an issue of concern to poverty advocates, while cheap housing availability is a related issue that is more a concern of the poor than of poverty advocates.  Affordable housing gets political attention, but rarely more than mere lip service or corrupt illusions of addressing the issue.

The conflict
  1. Its much more important to property owners to see property values rise than it is to non-property owners to see them temporarily crash.  Temporary crashes are rarely understood as temporary when they occur.
  2. Our hamster wheel economy relies on housing appreciation to enjoy its mediocrity compared to its collapse.
  3. Creating segregated ghettos can be done under affordable housing mandates.  Creating toxic bad neighbourhoods increases the property values of the good neighbourhoods.
  4. The hotel and apartment industries are harmed by home sharing.
 The difference between affordable and cheap housing
Affordable housing is usually a euphemism for "nice housing that I would like at a subsidized price".  Cheap housing is best achieved by building more housing "that I would like".  Increased supply of any housing type decreases the rents or purchase value of that housing type.

The general policy of building more housing is appropriate mainly because no one has a legitimate right to stop you from doing so.  From a society standpoint, 10% more housing will not lower the price per house by 10%, because it will attract more people, and that creates more work and revenue opportunities.  So, more total income and total property wealth.

Its a moral imperative to increase total wealth and income rather than protect individual property owners by restricting supply.  Also, as a rule, replacing a large housing unit with 2 attached units has both more total value and lower energy costs.

Discouraging subsidized social housing
Social housing subsidizes "commercialized housing spaces" (apartment buildings spaces and other single family occupied dwellings) offers "nice large" units as a lottery prize to various qualifying criteria waiting list participants.  Its necessarily a lottery because there is a waiting list.  The qualifying criteria are not always the poorest people.  Poverty, medium-low, and middle income affordable housing programs exist.

Winning the affordable housing game relies on staying poor/qualifying during the waiting list period (8 years and waiting list increasing every year in Toronto), but though I call it a lottery, there is no open strict impartial process for determining winners.  Its a discretionary decision open to cronyism.  Even without specific favouritism, its a gift to the official housing industry: Guaranteed-paid top dollar rents.

The real problem with subsidized housing is that it significantly increases housing costs for everyone else.  Property taxes are higher than if taxpayer subsidies to housing were not offered, and housing inventory available to the market is reduced, and so increases housing cost of "standard commercialized housing spaces" to everyone else too.  Higher housing costs harms non-housing income opportunities from lower consumer discretionary spending budgets.

The Toronto, Vancouver and San Francisco housing markets
These housing markets have a lot of new supply, but it's mostly at the high end.  That high end housing costs $1M rather than $1.2M does not make it any more attainable for the vast majority of society.  High end housing doesn't necessarily mean its large units.  A trend for small units in the best areas seems to suit developers.

The high end unit construction growth in Toronto is driven by Asian investor demand.  The most relevant part of this is that they are investors speculating in chasing up price momentum.  The relevance of being Asian is that they are absentee investors/owners flipping properties in a far away land.  Even if Asian demand is not a sustainably increasing resource, it does not necessarily lead to a crash.  That there may be no new Asian investors does not create forced selling stress on existing owners.  But only when that investor demand dies down, will there be a small trickle down in housing affordability to the almost high end.  That may take 5 to 10 years.

In the meantime, speculative frenzy increases everyone else's housing costs.  Its an easy pitch for housing salesmen to make that housing a mile away from $1M units is worth close to $1M too, and the fact that approved housing development is priced for Chinese investors, means that few new "real" housing is created.

While very little trickle down (to affordable housing in other price categories) occurs from building significant high end housing, and there is a risk of an economically depressing price crash from the policy, there is significant trickle up in affordability from building low end (small) housing.

Trickle up of affordable housing from increased availability of smaller spaces
Allowing people to share their homes, or allowing small homes, or building new small apartment units improves housing affordability for everyone.   Very few people in Toronto have the option of spending as little as 3/7 of after tax income on housing (social housing lottery winner repayment rate).  Building more "market affordable" housing gives people the option to lower their housing costs to income ratio.

The "craigslist housing" innovation 15-20 years ago, opened up convenient sharing of space, and did successfully mitigate rental prices in the "official space" sector.  The key to affordable housing for everyone is a reasonable vacancy rate which is achieved by building more low priced housing.  In terms of policies that don't already exist:

  • remove regulations on tiny homes.
  • remove regulations on urban farming (limits food inflation, and increases income opportunities form homes)
  • Build single-familly occupied housing spaces that can be market priced at $500 to $900 housing costs per month.
This last option is the obvious key policy that anyone with a genuine concern for affordable housing would advocate.  The lack of implementation and advocacy simply proves that those motivated to keep housing expensive have more power than those who'd like more affordability.  Subsidized housing is a policy means to keep housing expensive while tossing crumbs at trouble makers and lottery winners.  Homelessness is an intentional policy feature.

The relationship to basic income and how it facilitates real affordable housing policies
The only reason to oppose basic income is if you profit from authority, oppression and desperation in society.  Everyone who has a genuine desire to expand (value) economic growth, opportunity, and work profits significantly from basic income.  UBI gives everyone the power and agency to help themselves, and thus creates significant opportunity to directly provide the goods and services that will help them (taking their money in the process).

While the "profit from authority oppression and desperation" typically first evokes the exploiter of labour, who underpays workers by taking advantage of their position of being unable to refuse work, the group extends to those with "good guys" images.  Charities rely on the persistence of desperation.  The near entirety of political chatter not devoted to murdering and oppressing people in foreign lands is devoted to being concerned about the oppression and desperation in our lands.

The one actual poor group of people who are not advantaged by a $1250 monthly UBI (that replaces social assistance/services) are those receiving housing benefits worth $1000 to $1500 per month through subsidized income based rents.  They are the only group with a morally arguable position against basic income.

The fear of UBI's effect on housing cost inflation
UBI has the largest economic benefit for low income, including part time and gig, workers.  It is a $15000 pay raise.  Those earning $20k in pretax employment income have the option (but not obligation) to raise their housing costs from $800/month to $1800/month with the same resulting disposable income.   And so they all have market rent opportunities, but also the option to save for reasons that include buying a home.

That opportunity will create significant demand for "traditional housing spaces", and so some price inflation for those spaces.  UBI is also a material benefit to middle income earners, and so pricing pressures on better than standard housing options will occur as well.

But there is a fixed quantity of people to house.  The upward pressure on standard housing means downward pressure on small and shared housing prices.  And people have the choice between all of the housing options they can afford.

The comprehensive UBI and affordable housing policy
A $1250/month UBI payment guarantees that every adult can afford to pay $700/mo in housing costs.  Creating more housing spaces in general, and specifically deliberate housing priced around $700/mo ensures both that everyone has affordable housing options, and counteracts the inflationary gift given to housing providers from UBI, with the deflationary pressure of supply competition.

Another housing price deflationary tool is to increase property taxes.  That can help pay for UBI.  Property taxes decrease home sales values without decreasing rents though.

As a temporary bandaid alternative to eliminating the subsidized housing system,  change the income based repayment terms as a way to free up space for those that really need it.  For instance, rent payments of $700 from UBI +20% of net income, but the amounts can depend on the city.  In general, such policy would allow Toronto Community Housing to provide a net budget contribution to the city budget (rather than a cost), and transition more units into "affordable fixed" rentals, and provide the funding to build new smaller space inventory.  This bandaid would provide an orderly shutdown of subsidized housing program without forcing eviction on anyone.

Another example of UBI fixing a major evil
Managing housing prices up is more sensible than forcing them down.  The idea is perpetuating winners winnings as a path of least resistance.  It is easier to convince losers that they deserve their outcomes, than to convince winners that their fortunes should be (deserve) reversed.  Yet home prices going up advantages sellers over buyers with no personal control or accountability for the reward or higher costs.

A clearer injustice occurs in the divide between those granted subsidized housing vs. those on a perpetual waiting list, or simply those unaware that the system would intend to help them.  What makes it a greater injustice is the conditionality of benefits, and the individual selection of recipients.

While there are greater evils in the world than the consequences of managed (selfish equilibrium) housing policy, the consequences are intentional.  The policy designers want a persistent problem that needs their attention and permission granting.

Basic income, as a universal benefit, avoids the discretionary policy decisions that necessarily create arbitrary disappointment.  Together with the simple moral policy of increasing needed housing supply, everyone with a moral claim to benefit, benefits from basic income.

While UBI is known to create a fair labour market, providing everyone with basic housing power allows freer housing markets to provide outcomes suitable to more people, if not everyone.

1 comment: