A New Proposal to Help Low-Income Renters

Is a renter’s tax credit a step in the right direction?

By Dwyer Gunn

(Photo: Scott Barbour/Getty Images)

For decades, the primary goal of American housing policy has been to encourage home ownership, and the bulk of federal housing spending has gone to the mortgage interest deduction, which primarily benefits wealthier home owners. But a growing, bipartisan chorus of voices is calling for a new kind of housing policy, one that focuses less on tax breaks for wealthy home owners and more on making housing affordable for low- and middle-income families, regardless of whether they rent or own. A new proposal for a “project-based” renter’s tax credit, from the Center on Budget and Policy Priorities’ Will Fischer, Barbara Sard, and Alicia Mazzara, is a step in the right direction.

Here’s how it would work: The federal government would provide states with credits to allocate to the owners and developers of rental housing units. Property owners, in turn, could use those credits to close the gap between what tenants can afford to spend on rent and what the units actually cost — rent and utilities would be capped at 30 percent of income for families living in the affected units. States could make their own decisions about which kinds of recipients might get priority under the program — some states might focus on welfare recipients or veterans, while others might focus on low-income disabled or elderly people, for example. The CBPP has, in the past, supported (and still does support) renter’s credits that states could give directly to tenants, but the project-based approach outlined in this recent report has the advantage of being much easier to administer and so “a good starting point for rebalancing federal housing tax policy.”

At present, only 25 percent of eligible, at-risk, low-income households receive housing assistance, which leaves over 15 million poor households struggling to pay rent. The CBPP estimates that a $6 billion project-based renter’s credit would help 720,000 low-income families, and points out that “[t]his would amount to less than 5 percent of current federal homeownership tax expenditures and just 14 percent of the cost of the mortgage interest and property tax deductions now provided to taxpayers with incomes above $200,000.”

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