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So, how does the government decide who gets beachfront property and who lives behind the power plant?
The same way that it works now? The unit is for rent, you take an appointment and the first person that qualifies get it.
This is not the gotcha you think it is. What so different than the current system?
If nothing is different, why bother changing?
Because the government wouldn't be trying to bleed every penny out of tenants just because they can.
That's some alternative reality, you're talking about. My government does try, and succeeds in bleeding every last penny that I earn.
Those are called taxes. We need those.
Unless they are not used for the betterment of society and are not thrown into the black hole of beurocracy.