Can a federal tax credit help rent-burdened Americans?

Homeownership remains increasingly out of reach for more and more Americans, yet homeowners reap most of the country’s tax savings and benefits, which do not apply to renters. That could change under a new bill which would extend tax credits to renters—the first major response from federal legislators to address a growing housing affordability crisis.

Under the Rent Relief Act, a refundable tax credit would be available to those who make less than $100,000 a year and spend at least 30 percent of their income on rent, including utilities. The credit offered would range based on income and household size, and in pricier cities the income threshold would be raised to $125,000. Plus, people who already live in government-subsidized housing would be able to claim the value of their rent as a refundable tax credit as well.

Senator Kamala Harris, a Democrat from California, introduced the bill, which she says could end up impacting over 13 million families. “America’s affordable housing crisis has left too many families behind who struggle each month to keep a roof over their head,” reads a statement from Harris. “This bill will ensure no family is priced out of the basic security of a place to live.”

The credit would help many people living in cities, where a growing portion of the country's urban population is severely rent-burdened—according to a New York University study, about half of the renters in the country’s 53 largest cities spend more than 30 percent of their incomes on rent—while the government, and an understaffed Housing and Urban Development department, is spending less and less to address the crisis.

Federal housing policy currently transfers a great deal of the country’s wealth to homeowners, who have historically benefited from tax breaks like the mortgage-interest deduction. A new Brookings report shows that not only does current policy benefit homeowners, but it disproportionately benefits the country’s wealthiest homeowners. Even with the new tax rules, about $40 billion will go to homeowners in 2018.

Ten California mayors provided endorsements for the bill, with some noting that the tax credit offered their constituents relief from the new Republican-authored rules. “With the billions in tax subsidies allotted to billionaires through last year’s tax changes, this legislation provides a refreshing contrast for working families who struggle daily,” said San Jose Mayor Sam Liccardo, whose city is facing a particularly acute housing crisis.

The bill would not fix a bigger problem related to the availability of affordable housing in many cities. The National Low Income Housing Coalition’s most recent report shows a nationwide shortage of 7.4 million affordable rental units. Some housing policy analysts want to see a complementary federal effort to increase the number of new homes in cities where supply issues have driven rents sky-high. This is also a concern for various rent control initiatives, which are on the ballot in several parts of the U.S., including California.

Offering some form of financial stability for families that are severely rent-burdened, however, might help more Americans stay in their homes while new housing is being built. Homeless populations have ballooned in many major cities as rising rents have forced working-class residents out into the streets. The author of Evicted: Poverty and Profit in the American City, Matthew Desmond, who has written compelling arguments for how current federal housing policy fuels the U.S.’s growing economic inequality, praised the bill as addressing a “national emergency” in a statement. “Senator Harris is bringing heightened awareness to a crisis that’s been ignored for far too long.”

The bill—which is unlikely to pass as-is in a Republican-dominated legislature—is part of a bigger suite of housing reforms. Also this week, a group of bipartisan senators introduced a bill to create an Affordable Housing Task Force which would research and propose more solutions for the crisis.

Various other measures addressing rent control and tenants rights are popping up on ballots coast to coast, positioning affordable housing as a key issue in the 2018 and 2020 elections. In fact, a similar measure to the Rent Relief Act had been introduced in the House by Representative Joseph Crowley, a Democrat from New York City. Crowley recently lost his his primary reelection race to Alexandria Ocasio-Cortez, who has an even more progressive housing platform—that housing should be a human right.