The time is right for policymakers to consider
instituting a renters’ tax credit to help more
poor families afford housing, according to a new report
from the Center on Budget and Policy Priorities.
“There is increasing talk about tax
reform and potential changes to tax expenditures,”
said Will Fischer, senior policy analyst at the Center and
co-author of the paper. “We think there could be
an opportunity to balance housing policies.”
A renters’ tax credit capped at $5 billion,
costing less than 5 percent of the total federal
homeownership tax expenditures, would assist an estimated
1.2 million of the lowest-income renter households.
“It could reduce each household’s rent
by an average of $400 and cut the number of very low-income
households paying more than 50 percent of their income for
housing by about 700,000,” said the proposal.
“Its value would lift 250,000 families out of
poverty and lift four of five of the poorest families it
assists out of deep poverty.”
There’s strong potential for a tax credit to be
a flexible tool, said Fischer.
The credit would complement the existing low-income
housing tax credit (LIHTC) program, which helps finance the
development of affordable housing, he said.
Like the LIHTC, the renters’ credit would be
administered by states and implemented through a
public-private partnership with property owners and banks.
Each state would be given a fixed dollar amount of credits
to allocate, under the Center’s proposal.
In general, families assisted with credits
would pay no more than 30 percent of their income for rent.
“States could award families credit certificates
that would enable them to use the credit to help rent a
modest unit of the family’s choice,” said
the report. “Alternatively, states could also
enter into agreements allocating credits to particular
owners or banks, which would use the credits to assist
The owner of the rental unit would claim a federal tax
credit based on the rent reduction it provides or could
pass the credit through to the bank holding the mortgage in
return for a reduction in the mortgage payments.
The proposal would also help balance the
nation’s housing policies, which have long been
weighted toward homeownership. About 75 percent of the
federal housing expenditures support homeownership when
both direct spending and tax subsidies are counted, said
the Center, adding that the bulk of the homeownership
expenditures go to the top fifth of households by
The paper, “Renters’ Tax Credit Would
Promote Equity and Advance Balanced Housing
Policy,” can be found at www.cbpp.org.