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Former ‘Foreclosure Capital’ Experiments With Anti-Poverty Measure

money in the pocketOnly a few years back, in 2012, the city of Stockton, California, was the “foreclosure capital” of the nation, with one in every 135 homes in foreclosure. The city was hit hard by the 2008 financial crisis, becoming the second-largest U.S. city to file for bankruptcy protection. Stockton left its bankruptcy in the rearview in February 2015, and now the city is trying out something potentially revolutionary—attempting to help its struggling residents escape the grip of poverty and housing insecurity with an experiment in Universal Basic Income (UBI).

The notion of a Universal Basic Income is nothing new, but it’s gained popularity among tech giants such as Elon Musk and Mark Zuckerberg. Proponents of UBI posit that providing a guaranteed monthly income could help pull people out of poverty, provide stability during hard financial times, and even mitigate the impact of increasing automation as it renders more jobs or career fields obsolete.

Stockton isn’t looking to solve all those problems right out the gate. They’re starting small—as reported by CNN, the city’s UBI program will give 100 local residents $500 a month for 18 months. For residents who qualify, there are no work requirements or any other “strings” attached.

During a CNNMoney interview earlier this year, Facebook co-founder Chris Hughes said, “It is such a fundamental idea behind America that if you work hard, you can get ahead—and you certainly don't live in poverty. But that isn't true today, and it hasn't been true in the country for decades. I believe that unless we make significant changes today, the income inequality in our country will continue to grow and call into question the very nature of our social contract."

Even having moved beyond bankruptcy, Stockton is still a strong candidate for a trial run at UBI. One in four of the city’s residents currently live in poverty. The city’s median income is a little over $49k, well below the national median of $57,617. The project is expected to launch in 2019.

While $500 a month might not seem like much in the grand scheme of things, its consistent, guaranteed nature could be quite a comfort for families struggling to make ends meet. As CNN describes it, “The goal is to create an income floor no one will fall beneath.”

Some 16.1 million U.S. households currently live in poverty. Moreover, according to the United Way’s ALICE Project, another 34.7 million families fit under the category that gave ALICE its name. It stands for “Asset Limited, Income Constrained, Employed.” Members of this group are technically above the Federal Poverty Line but are unable to meet the basic needs of housing, food, healthcare, childcare, and transportation. Households that fall below the “ALICE Threshold” account for 43 percent of American households, and ALICE persists across all regions of the nation and among all ages, races, and ethnicities.

More than two-thirds of U.S. jobs pay less than $20 per hour, according to ALICE Project data, and “the dominance of low-paying jobs shows no signs of slowing down.” More than 30 percent of households in each state fall below the ALICE-defined “basic survival budget.” Moreover, “One of the most difficult conditions that most ALICE households face is the high cost of housing,” according to the ALICE Project.

The ALICE Project identified a “mismatch between the number of households with income below the ALICE Threshold and the number of housing units that they can afford in a given county.” While markets generally adapt to what consumers are able and willing to pay, the United Way said, “there are many constraints on the housing market that prevent it from adjusting quickly.”

About Author: David Wharton

David Wharton, Editor-in-Chief at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has nearly 20 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. He can be reached at [email protected].

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