There’s been an upsurge of interest in Universal Basic Income (UBI), or Citizen’s Income. This would scrap means-tested payments and complicated eligibility criteria and pay all citizens a single amount. Could this major overhaul be the answer to the welfare system’s twin problems of giving too little support to those who need it, while winning too little public backing for the system as a whole?
A few people have been in touch to ask what Shelter thinks of UBI. The crucial test for us of any welfare system is whether it will help people house themselves despite unaffordable rising housing costs and prevent homelessness. And we’d also like it to be non-stigmatising and sustainable.
Would a basic income help people house themselves?
UBI throws up immediate challenges for housing – and they’re challenges that have long dogged architects of the welfare state. Beveridge named it the ‘problem of rent’: housing costs are too variable by tenure and geography for a single payment to ever deal with people’s varying needs adequately. A universal rates means some people will receive too little and won’t be able to house themselves, and/or others will receive too much, which aside from being hugely expensive would also risk driving up housing costs by inflating demand. The levels of UBI frequently mooted would be simply inadequate to meet housing costs for many, and no one seems willing to tolerate the cost of setting the rate high enough to meet the needs of every household.
This is why many advocates of a Citizen’s Income accept that a separate system for housing costs would be required. This could be housing benefit, either in its current form or modified to echo some of the principles underpinning UBI. For example, the taper could be flattened to better incentivise work or some restrictions such as the Shared Accommodation Rate (which limits payments for under 35s) could be removed to create greater parity.
Responding to the ‘problem of rent’
The RSA has thrown its considerable weight behind the idea of UBI and given some thought to how to address housing costs. Aside from tinkering with housing benefit it also floats the idea of a Basic Rental Income. This would be paid to all individuals with a tenancy agreement. Unlike the broad principle underpinning UBI, conditions could be attached, including that a household had been resident for three years. This would be paid at a rate to reflect local market conditions. The RSA notes that homelessness duties would remain in place.
So would this approach solve the problem of rent?
Jaded renters will spot the immediate problem with linking housing support to continuous residency – with private tenancies starting at just 6 months many renters would not be eligible for support. This would leave huge swathes of the private rented population struggling to find or keep a home: which would be wholly unacceptable to us.
The promise of protection from homelessness by the existing legislation also appears alarmingly blasé. England’s homelessness legislation performs a vital and world-leading safety net. But preventing homelessness will always be more vital than picking up the pieces. Drastically cutting support and leaving legal protections to cope with the consequences would also be grossly unacceptable. And that’s before we ask the practical problem of how councils could rehouse people not eligible for sufficient financial support.
The proposed flat rate of Basic Rental Income for individuals would also lose many of the advantages of the current system. Single parents, for example, are not currently disadvantaged compared to couples, meaning that children’s housing is not compromised by the lack of a second income. The basic rental income would drastically cut single parents’ buying power compared to couples. While couples’ new-found resources could inflate demand.
It also has no apparent capacity to recognise the additional needs of children – parents would receive no additional help to house larger families. This is of course very much the direction of travel of current benefit reforms; but it is odd for a supposedly progressive, quasi-utopian solution like Citizen’s Income to mimic the harshest consequences of policies like the benefit cap.
Even with Basic Rental Income’s (welcome) link to local market conditions, variables would remain. Private rents are on average twice that of social rents. This could be accommodated by having different rates for social and private tenants. But then you’re getting very close to recreating the current system of multiple benefits reflecting different circumstances.
One aspect of the RSA’s ideas that does intrigue me in principle is the proposal to fund the Basic Rental Income by tapping into housing wealth, potentially through a land value tax. This would recognise the gross inequalities that exist in housing. However, by not just excluding but penalising wealthy homeowners it does cut across the universal appeal commonly claimed by Citizen’s Incomes.
The false attraction of simplicity
This exposes one of the greatest fallacies behind the appeal of a Universal Basic Income. To smooth out the winners and losers of an affordable system, advocates often concede that additional allowances must be paid, for example for housing costs, disabilities or children. As Emran Mian has pointed out, the better these additions are at dealing with real, complex needs, the closer we get towards recreating the current system, which for all its flaws and complexities is sensitive to a wide range of different circumstances.
The benefit system is frequently criticised for its complexity, and at Shelter we see first-hand how this can leave people struggling to navigate it. But that does not mean simplification should be the goal at all costs. There will always be a trade-off between complexity and efficiency at responding to need and varying circumstances. The notable complexity of housing benefit is unsurprising when you consider the wide variation in housing circumstances.
In later blogs we’ll look at the potential of UBI in a narrower sense to boost incomes as well as look at public attitudes towards benefit systems – which explain the greatest appeal of ideas like UBI. But for now it looks like a red herring for anyone trying to fix the housing safety net.
A Citizens Income is just that, and has nothing to do with disability or housing issues. It’s pretty dumb to try and conflate them. Emran Mian’s article one of the more stupid I’ve read on the subject.
Housing Benefit should be scrapped altogether, as it simply distorts the market, unfairly subsiding housing costs (better location) for some, while in an equal and opposite way increasing costs for others.
There wouldn’t be a single less home available tomorrow if HB were ended. All we’d see are some people living in nice locations doing a swap with those in not so nice locations. Rents/selling prices in some areas would go up, and in an equal and opposite measure, down in others. Some landlords would get less income, some perhaps more.
By what right do we think we should skew the market so some people are priced out from where they would otherwise be able to afford? That’s all that Housing Benefit achieves. Perverse social engineering and a landlord subsidy.
Of course, despite the deadweight losses from the taxes needed to finance it, and the allocational inefficiency it causes, HB remains as politicians love to bribe the electorate with their own money.
It also likes to pander to the public who like to see the poorest jump through hoops to get their benefits.