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 eligible families.”

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 income.

The paper, “Renters’ Tax Credit Would Promote Equity and Advance Balanced Housing Policy,” can be found at www.cbpp.org.