A renters’ credit would help rebalance the nation’s housing policy, as well as its housing-related tax subsidies. The federal government spends more than $200 billion annually to help families pay for housing. But the bulk of that goes for homeownership tax subsidies (like the mortgage interest deduction) that favor higher-income families, most of whom could readily afford homes without assistance.
He provides “two reasons, the renters’ credit should complement — not replace — the LIHTC.”
First, the LIHTC does not by itself typically make housing affordable to the poorest Americans, such as low-wage workers and the lowest-income elderly people and people with disabilities. The renters’ credit would help these households afford rents in developments subsidized through the LIHTC and in other buildings.
Second, before creating the LIHTC, policymakers had long struggled to establish efficient, accountable subsidies for construction and renovation of affordable housing, an important need in many areas. The LIHTC has performed well in this role, though it could be made even more effective.
Policymakers should streamline inefficient housing tax expenditures, such as the mortgage interest deduction, to better achieve their goals and generate revenues to contribute to balanced deficit reduction. They should also use a portion of the savings (after meeting deficit-reduction needs) to address growing hardship among low-income renters by establishing a renters’ credit to complement the LIHTC.