Creating a Fair and Equitable Tax System for Affordable Rental Housing

Did You Know?

• We subsidize affordable homeownership 4x more in tax credits and tax expenditures (tax write-offs) funding than we do for affordable rental housing opportunities?
• That the majority of these resources go to Caucasian homeowners?

These tax credits, tax expenditures (write-offs), and bonding include: first homebuyer mortgage revenue bonds, mortgage interest, property tax and capital gains write-offs, and the Homestead Tax Credit.

NLIHC recently released their Out of Reach 2022 report, which concludes that in every state in our country,  we do not have enough rental housing that is affordable to people at the incomes they are earning or have available to them.  “In 2022, a full-time worker needs to earn an hourly wage of $25.82 on average to afford a modest, two-bedroom rental home and $21.25 to afford a modest, one-bedroom rental home.”

The National Coalition for the Homeless believes that the U.S. Tax Code could be proven to be an effective means of increasing the accessibility and affordability of rental units. The U.S. Tax Code has already done this by increasing the supply of affordable housing through the Low-Income Housing Tax Credit and the Child Tax Credit as a way to lift families out of poverty.

Tax Credits for Rental Housing Opportunities

These two models would significantly increase rental housing opportunities that are affordable for incomes people have available to them:

1. Renter’s Tax Credit- Like the Child Tax Credit Program, the renter would receive a monthly tax subsidy, so they only pay 30% of their income for housing.
2. Landlord Tax Credit- Landlords willing to rent to people with limited incomes would charge tenants 30% of their monthly income for rent. The landlord would receive a monthly tax subsidy for the remainder of the rent.

These new tax credit programs would complement our current subsidy programs like Housing Choice Vouchers, Public Housing, other housing funded through appropriations, and our current tax credits for rental housing, which include Low Income Housing Tax Credit (primarily targeted at 60% median income) and some already established State level renters’ tax credits.

Read more here about these two models and other models of how the U.S. Tax Code could be a great equalizer in making rental opportunities affordable and accessible to more households.

[Feature Photo Credit: Tumisu from Pixabay]