JD
An interesting side effect of TOP’s Universal Basic Income (UBI) proposal is its likely effect on rents. Of course landlords will raise rents to claw back the Land Tax payable on their rental properties but even more apposite is the fact that every employed renter will suddenly find themselves with thousands of extra UBI dollars in their pocket each year, which has further effects.
Renters with more cash will look to move into better accommodation, placing upward pressure on demand and leading to increased rents.
Plus, every landlord will know their employed tenants are suddenly several thousand dollars richer each year and, human nature being what is, will increase rents further in order to siphon off part of that money.
These reasons are why rents increase to meet the increased cash supply in the market, negating part, if not all, of the proposed UBI payments. Of course, sweeping rent controls could be implemented to prevent this but we know from countless examples worldwide how this compresses rental market supply even further.
Additionally, the $54 billion in incremental UBI payments, excluding those that substitute for part of the pension and/or current welfare payments, will drive a massive spike in demand-side general inflation.
Part, but not all, of this will be offset by TOP’s proposed higher income tax rates dampening that money supply. However, Oliver Hartwich, of the NZ Initiative, used TOP’s published tax calculator and was unable to find anyone who would pay more tax!
In total, the flood of ‘free money’ in the form of the UBI will cause increased rents and inflation-driven price hikes. This will disadvantage pensioners, especially the 20 per cent of over 65s who currently rent, who will receive zero incremental pension to offset these costs.
