Debating a Renters' Tax Credit at the Federal Level

Senator Kamala Harris (D-CA) recently proposed legislation that would create a refundable tax credit for qualifying rental households.

2 minute read

July 31, 2018, 7:00 AM PDT

By James Brasuell @CasualBrasuell

U.S. Senator Kamala Harris (D-CA)

Karl_Sonnenberg / Shutterstock

Jared Brey reports on the potential impact of the tax break proposed by the Rent Relief Act, proposed by Senator Kamala Harris (D-CA) as a companion to legislation of the same name introduced in the House last summer by Representative Joe Crowley (D-NY). Before discussion fo the potential impact of the legislation, Brey describes the policy changes the legislation could enact:

[The Rent Relief Act] would create a refundable tax credit for families that spend more than 30 percent of their income on rent, with a sliding scale based on income. At the low end, families whose income is less than $25,000 a year could claim a credit for 100 percent of the rent they paid that year, while at the upper end, families earning between $75,000 and $100,000 could claim a credit for 25 percent of their rent. The credit would be capped so that renters could only claim a discount for rents that fall within 150 percent of Fair Market Rent. It would also allow families in subsidized housing to claim a credit for one month’s worth of rent each year. And perhaps most significantly, it would represent a major show of support for struggling renters from the federal government, which typically does much more to help homeowners than renters.

According to Brey, the bill has "almost no chance of passing," with Congress and the presidency to thoroughly tilting toward the Republican Party. It's still worth pondering whether the tax break makes sense as a policy mean to mitigate the worst consequences of the nation's affordable housing crisis.

Brey also notes that the bill is based on a policy paper published by the Terner Center for Housing Innovation at the University of California, Berkeley called "The FAIR Tax Credit" [pdf]. A renters' tax credit it pitched in that paper as a way to close the gap between incomes and supply.

Brey also notes that some critics of renters' tax credits say the credit would benefit more renters. That viewpoint is expressed in full in the Forbes article included in the list of additional reading that follows below.

Monday, July 30, 2018 in Next City

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