Renter Tax Credit

Rebalancing tax inequity between property owners and tenants; moving towards a universal rental subsidy

Renter's Tax Credit in the news
     How about a tax credit for renters? Real money from IRS to offset your rent burden? That's the plan being presented in a new report by Terner Center for Housing Innovation at UC Berkeley and discussed among housing advocates. There's five good reasons for Congress and the President to consider a renter's tax credit.
     Here's the bad news. A new system of renter tax credits would be expensive. The Terner Center "gold" plan would cost $76 billion to cover 13.3 million households. That's almost three times the number of households covered by housing choice vouchers, public housing, and project based rental assistance. Some of the costs of a renter tax credit could be offset by savings in other programs like Housing Choice Vouchers and homelessness services funds. The authors of the Terner study understand that sticker shock could be a show stopper, so they offer a couple of variations: one that would cover fewer households and one "hybrid" that would provide added features for the lowest income households. The sponsors admit that the plan might need to be phased in over time, but that would risk losing some important features. 
     Simplify does not mean simple. Even though a renter's tax credit could reduce lots of bureaucracy, IRS would need to figure out the right level of support for each household based on the household income, the amount of rent they pay, and the fair market rent in their community. That's a lot of math. Then too, Congress would need to figure what to do for households that don't file income taxes or households that have less conventional living situations. Finally, there would need to be a way for households to receive their credit monthly in order to pay rent. Usually tax credits come annually.
     Under a system of renter tax credits, tenants would need to become their own inspectors, financial managers, and code enforcers. No one from government will be checking for housing quality standards, rent reasonableness, or unconscionable lease provisions. That could mean tenants would need more reliance on private counselors and legal services agencies to support tenants when things go wrong in the landlord-tenant relationship. On the other hand, tenants with a renter tax credit would not face the road block of discrimination based on Source of Income. 
     It is hard to assess the likelihood of a renter tax credit in the near future. Tax reform seems to be on the short list for Congressional action in 2017, but, as usual, rental housing is not high on the agenda. The FIRED (Finance, Investor, Real Estate, Developer) lobbyists will be opposed to shifting tax benefits away from wealthy property owners to tenants. Still, the concept has been endorsed by a wide variety of groups and rental tax credits could meet some objectives of Republicans who know they need to govern, not just obstruct. Many in Congress represent low income renters who are expecting something tangible in return for their support for President-elect Trump. Others in Congress might see renter tax credits as a counter to  the wave of rent control measures bubbling up from local areas. Time will tell. 

posted November 13, 2016

What's News?

April 14, 2017 The problem with Low Income Housing Tax Credits is low income people cannot afford the rents
The solution could be a renter's tax credit. CBPP reports "Renters’ Tax Credit Would Complement Existing Housing Development Credit" could lower the rents in LIHTC properties to a level that will work for the Extremely Low income renters who are now served by HUD project based programs and vouchers. "The nation’s most pressing housing needs are heavily concentrated among extremely low-income families, defined by federal policy as those below the poverty line or 30 percent of the local median income. These families, which include low-wage workers like cashiers and food workers along with the poorest elderly and disabled people, account for close to three-fourths of renters who pay more than half of their income for housing...."
If Congress will be considering tax reform (not just tax cuts for the wealthy) a benefit for low income renters could be offset by reductions in the Mortgage tax credits for the highest income owners. more on renter tax credits here and here

MARCH 9, 2017 Center for Budget and Policy Priorities New Renters’ Credit Would Help Struggling Families Afford Housing

November 8, 2016 NextCity Tax subsidy for tenants?
FAIR (Federal Assistance in Rental) credit gets a boost. Next City reports on a study of the financial feasibility of a guaranteed Federal tax credit for rent burdened tenants. This is even more ambitious than universal vouchers or tenant tax credits that mimic mortgage interest deductions. ",,,the most ambitious, all rent-burdened low-income families would receive a tax credit equal to the difference between their income and their rent or the HUD-established fair market rent, to ensure they pay no more than 30 percent of their income in rent. "