Is a Renter’s Tax Credit in Our Future?

By E-Renter Tenant Screening
Posted on September 18, 2012 under Housing Trends | Be the First to Comment

The United States has long had a policy of promoting homeownership. Federal expenditures in the form of direct spending and tax subsidies benefit homeowners in all income brackets—including those who could afford homes without the subsidies.

Lower-income families typically spend more of their incomes for housing than higher earners. They also face other housing difficulties, such as instability and even homelessness, which are alleviated by rental assistance programs. However, federal rental assistance programs are currently reaching only one in four eligible tenants, due to limitations on funding.

Policymakers are introducing reforms to the homeownership mortgage interest tax deduction as an attempt to reduce the federal budget deficit. Some say the savings should be funneled to lower income renters in the form of a federal tax credit, administered by the states.

The idea is to provide credits to poor families so they can afford rental housing, to lift them out of poverty and positively impact children’s health and long-term development. Families would pay no more than 30% of their income on rent, while credits would pay the remainder. Landlords would be able to claim a federal tax credit on any rent reductions provided to families, or pass the credit to the mortgage holder in return for a reduction in payments.

Supporters say rental assistance can move the elderly or those with disabilities out of nursing homes and into housing that better meets their needs, provide support for families at risk of having their children placed in foster care and reduce homelessness among veterans and other at-risk groups.