Perhaps nothing, his tenants will likely move to apartments in better neighborhoods, or, buy their own homes. He'll need to keep rents the same to continue to attract replacement tenants.
So demand for cheap apartments fall and prices stagnate. But you can't just think about one step, you have to consider the implications of that step.
For example, if people are moving out of their bad apartments into nicer apartments and homes, demand for nice apartments and homes will increase, driving prices higher. Which makes sense--suddenly there is much more money available for housing. But that's not the end of the story, either.
What is the incentive for the owners of small apartment complexes? It seems clear. They need to renovate their apartments so that they can capture the new up-market demand. Successful, mid-tier apartments could buy up cheaper complexes to renovate them and charge higher prices (this happens even now).
The low-demand, low-price alternatives will fade away, because the land owners can make more money with slightly nicer, more expensive units.
Why would the low-price apartments see lower demand? There’s going to be a huge number of folks who are now making a low income looking for housing. Many of these people are currently either totally unhoused or living with family/friends because they can’t afford even low-price places. If there’s a huge new demand won’t apply in fact increase?
They'll buy their own homes? Through cheap government sponsored mortgages? Add that to the list of government spending that will expand under UBI.
They'll move to better neighborhoods? What's going to happen to the people living in those neighborhoods? It's not like there are houses sitting vacant...
Sure, no government incentives required. The median home price in the US is $226,000.
A typical mortgage payment on that mortgage is $1,100.
Adding $1,000/month will put many renters above the minimum income they'd need. Keep in mind, a married couple will be getting $2,000/month.
There will be vacancies for the same reasons. People moving up-market.
Highest end homes will also increase in value. Everybody moves up, and homeless folks who are homeless due to loss of income will have a place to live.
The majority of our mortgage market is govt guaranteed at artificially low interest rates (i.e. the US govt is taking losses on the time value of that money)- that was my point.
Everybody moves up- meaning more homes being built- so you'd expect this to increase house production in the US, correct?
So, despite a disincentive for low payed laborers (like those who do construction) to go to work, the housing market will not just continue, but actually become more productive?
That $1100 a month- doesn't include home insurance, doesn't include property taxes, and assumes a $60k down payment, correct? Seems like a charitable number to pick.
Artificially low interest is not a guarantee. It's an opportunity for the time being.
They are already paying rent, and if married, they get $2,000.
If their rent is $600, they would have $2,000/month to save a down payment and then have $2,600 to buy a median priced home. That's enough to cover insurance and property taxes.
The standard down payment is 20%, so a $226k home would be $45,200.
