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Would a universal basic income help you make rent?

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The idea has gained momentum, but its effect on housing is hard to game out

Aerial view of dense apartment buildings. Shutterstock

With candidates ranging from centrists to socialists, the Democratic primary for president has surfaced policy prescriptions from across the ideological spectrum. And while a number of candidates have released formal plans for solving America’s affordable housing crisis, there’s one idea that could indirectly have a big impact on your ability to make rent—the universal basic income (UBI).

If implemented, a UBI would provide monthly stipend to every American, courtesy of the federal government, regardless of employment status or income level. A minimum wage retail worker would receive the money, and a billionaire like Jeff Bezos would get the same amount of money.

Entrepreneur and Democratic candidate for president Andrew Yang has made a UBI the centerpiece of his policy platform, so much so that there’s an entire section about UBI on his website.

Under his proposal, the UBI is called a “Freedom Dividend” that would provide $1,000 per month to everyone in the United States. Yang believes this is a necessary entitlement in the age of automation and artificial intelligence, which have the potential to replace millions of American current jobs.

While people could spend the money on anything they want, it’s not hard to envision a UBI being a godsend to an individual struggling to make make rent. But could a UBI be a solution to the affordable housing crisis on a broad scale?

It’s a tough question to answer in the abstract because there’s no telling how much of the money would be spent in the housing market. But the risk of a UBI to housing would be if the added income generated by a UBI would simply create more demand for housing in the United States at a time when demand is already high and supply is low. Additional income for everybody means everybody has more money to spend on housing, so a lot of people would be looking to move into a bigger or nicer place.

In the aggregate, this would put upward pressure on rents, because high demand and low supply allows suppliers to charge more money for the goods, in this case housing. If a UBI caused rents to rise, it would eat into the subsidy.

This would play out differently across income brackets. For wealthy renters in expensive apartments, an added $1,000 in income likely wouldn’t have a huge impact on rents because $1,000 is proportionally not as much when you make six figures and your rent is already $5,000.

But the risk gets higher as you move down the income bracket. For low-income renters, the extra $1,000 would allow them to absorb a higher rent than they could before—potentially a much higher rent. Landlords would recognize this, and it would very likely cause rents at the bottom end to rise.

Would a UBI help the poor who already depend on subsidies for housing? That would depend on whether a UBI supplements the existing housing social safety net—housing vouchers and public housing—or whether it replaces it altogether.

If a UBI replaced housing vouchers—Yang’s plan doesn’t—then voucher recipients would simply get a $1,000 check per month. Housing vouchers cover rent for any amount above 30 percent of a person’s income that they pay in rent, so there’s a scenario, albeit an extreme one, in which the $1,000 UBI payment is actually less than what someone’s housing voucher is worth. That would leave a select few at the very bottom of the income spectrum worse off than they were before.

Jenny Schuetz, a housing policy expert with the Brookings Institute, says a UBI replacing housing vouchers could have one benefit. Landlords have often been accused of discriminating against voucher recipients. A UBI could eliminate that possibility.

“Rather than pushing for more source-of-income discrimination laws, which have to be done state-by-state and then still raise enforcement issues, giving poor families cash would put them on par with other applicants for apartments, assuming landlords think that UBI is a stable source of income,” Schuetz says.

So while some people could undoubtedly benefit from putting their UBI payment toward housing, the net effect gets murkier the further down the income bracket one gets.