Terner Center Blog: No Limits

Balancing the Burden: Proposing a FAIR Tax Credit for Renters Facing Affordability Challenges

Posted on by Carol Galante, Carolina Reid, and Nathaniel Decker

By most accounts, rents have never been higher. In the United States, over 21 million people see more than 30 percent of what they earn go to rent each month. And over 11 million Americans are paying more than 50 percent of their income to rent their home, leaving little left over for other essentials like healthcare and food, and leaving too many facing a precarious stretch of days until their next paycheck.

And this is not just a problem of poverty: because rents have risen faster than incomes, even renters who are working full-time and earning modest wages are facing cost burdens. Too many families simply don’t have housing options at a price they can afford in, or near to, the communities where they can find work.

For these families, for the economy, and for the future of the American workforce, the cost of inaction is high. While an unstable housing experience undermines the physical and psychological wellbeing of families (as described in Matthew Desmond’s bestseller Evicted), their economic stability and pathways to building wealth and accessing homeownership are also increasingly out of reach. And such broad housing instability also has the cumulative effect of lowering overall economic productivity and diminishing the viability of a strong local workforce.

That is why today, we are sharing a bold proposal to help better serve renters, and ensure current and future generations can secure the housing they need to live stable, healthy, productive lives.

The Federal Assistance In Rental (FAIR) Tax Credit is a policy proposal that uses the federal tax code to provide millions of American families with relief from their current rent burdens. Our federal budget and tax code reflects our priorities as a nation, and right now, renters are largely left out; while wealthy homeowners collect thousands of dollars in deductions from the federal government by filling out a form, low-income renters stand in line to enter a lottery in which only 1 in 4 will receive any support at all.

The FAIR Credit seeks to rebalance this distribution of resources within the tax code to more fairly meet the needs of the renter population and to better ensure equal access to opportunity. It is a proposal that addresses our “demand side” challenges, and would serve as an important complement to supply-side solutions which are also needed to lower overall rental burdens. Ultimately, with big solutions on both fronts, quality rental housing that is affordable to a range of incomes will be within our reach.

The paper proposes three potential structures for the Credit: a Rental Affordability Option which would lift the burden from all renters who are a) earning less than 80 percent of the local median income and b) paying more than 30 percent of their income in rent; a Rent Reduction Option which targets the same population but provides more calibrated relief (depending on the severity family’s financial circumstance); and a Composite option which couples with the Rent Reduction option to provide additional relief in a voucher-like credit for very low-income families.

Each of these options has merit, and their advantages and potential implementation challenges are discussed in the paper. Though it is no secret that this type of effort would take significant resources - ranging from 41 to 76 billion dollars depending on the option - this amount is not out of proportion to either the needs of renters nor to other tax expenditures for homeowners and corporations. And there is evidence that it would work: similar in many respects to the widely popular and effective Earned Income Tax Credit, the FAIR Credit is an efficient use of the tax code to direct resources to those who need them most.

As we look ahead to a new administration and transitions in political leadership across the country, we have the opportunity to elevate the importance of housing stability for children, workers, and the U.S. economy, and promote more meaningful action. If we wish to remain a nation of opportunity, we must have the audacity to consider ideas that challenge the status quo and lead us towards a fairer system and more inclusive society. At the Terner Center we look forward to engaging with leaders and stakeholders to do just that.


Housing Highlights from the 2015 American Community Survey

Posted on by Jed Kolko
Filed under: Demographic Trends,

The Census Bureau has just released the 2015 American Community Survey (ACS), the most detailed and comprehensive regular source of housing data for the U.S. and local areas. The housing market continues to ease back toward normal, with a drop in vacancies, an increase in single-family owner-occupied units, and a decline in cost burdens. However, homeownership fell yet again, household formation remains below normal, and more young adults are living with parents (2016 Current Population Survey data). Here are the housing highlights from the 2015 ACS, with more detail available in this slide deck: Homeownership and household formation (slides 3-10): The…


A Golden Rule for the Golden State? How State Action Could Help Solve California’s Housing Crisis

Posted on by Carol Galante, Carolina Reid

In the United States today, over 20 million households are spending more than 30 percent of what they earn just to pay the rent or mortgage on their home. Both locally and nationally, the repercussions of this affordability crisis are taking center stage. In recent weeks, the resignation of one local leader over housing costs and frustration with chronic political inaction in her community set off a flurry of media coverage and social media conversation. Meanwhile, recent poll results have elevated the issue of housing affordability onto the national stage as well. Underlying these recent events is the reality that the…


Small Houses, Big Impact: Accessory Dwelling Units in Underutilized Neighborhoods

Posted on by Rocio Sanchez-Moyano and Carol Galante

As NIMBY’s (Not in My Backyard) continue to oppose new housing development, a new group of homeowners are saying yes, by literally building new homes in their own backyards.  Accessory dwelling units (ADUs), also referred to as in-law suites or granny flats, are smaller, independent units on the same lot as a single family home (sometimes even an extension or a reworking of the home itself). ADUs were common in the early twentieth century, but went out of favor post-World War II as single-family, suburban style development characterized by large lots and an emphasis on the nuclear family became the…


State Policy Solutions to the Short Supply of Housing

When it comes to a lack of affordability in housing, it’s no secret that California is outpacing the nation. Average home prices are about two and half times more expensive than the rest of the country, and rents are about 50 percent higher. A shortage in supply is a key contributing factor, and we need both public policy and private sector solutions that will help expand housing production to better meet demand. This week, the Terner Center is sharing an analysis of one important avenue to meeting this challenge in California: improvements to state land use regulations to promote an…


Putting the Tool to Work: Takeaways from the Housing Development Dashboard

Posted on by Carol Galante

The Terner Center’s recent release of the Housing Development Dashboard was met with enthusiasm from media outlets, practitioners, and policymakers, all commenting on its important contribution to our understanding of local housing production and related policies. I want to share some of my biggest takeaways from the Dashboard, to illustrate why and how I think it can provide critical insight into these issues, and help to pave a way forward in addressing our housing challenges in the Bay Area and eventually, nationwide. In many ways, the Dashboard validates, and provides evidence for, much of my intuition (honed from a career in…


Launching the Housing Development Dashboard

Posted on by Carol Galante

In the short time since we launched the Terner Center for Housing Innovation, I have been inundated with requests to weigh-in on the issue of how to best address the housing affordability crisis- not just at its epicenter in the San Francisco Bay Area- but in similarly situated high job growth regions from Boston to San Diego. While there are multiple contributing factors to the crisis, I keep coming back to one simple premise: supply matters, and we need to expand housing supply in equitable and environmentally sustainable ways.  This statement rarely makes anyone happy.  Most want to hear answers…


Why By-Right Affordable Housing in California is the Right Thing to do

Posted on by Carol Galante

The following piece was originally drafted as a letter of support for Governor Jerry Brown’s proposed legislation to streamline local housing approvals. The original letter, with citations, can be found here.   The Permit Streamlining Act. On May 13, 2016, Governor Jerry Brown proposed a change to state law that would streamline affordable housing proposals and spur much needed housing production. Introduced as a part of the administration’s May Revision to the 2016-17 Budget, the by-right bill would effectively change the way local jurisdictions approve housing projects. In doing so, Brown has acknowledged that in order to facilitate more building throughout…


Has The Expansion of American Cities Slowed Down?

Posted on by Issi Romem
Filed under: Informing the Dialogue,

This piece originally appeared on the BuildZoom blog. The original post can be found here. Key takeaways: As a whole, U.S. cities maintained a constant pace of outward expansion into rural territory since the 1950s, but behind the facade two groups of thriving cities are behaving very differently. The first group of cities substantially reduced the pace of outward expansion beginning in the 1970s, channeling its economic strength into higher property values. This group includes San Francisco, Boston, New York, Los Angeles, Seattle, San Diego, Washington, Philadelphia, Portland and Miami. In contrast, the second group of cities accelerated its outward expansion,…


Urban Revival? Not For Most Americans

Posted on by Jed Kolko

The U.S. population is now less urban than before the start of the housing bubble. While well-educated, higher-income young adults have become much more likely to live in dense urban neighborhoods, most demographic groups have been left out of the urban revival. In recent years, numerous studies and media reports have documented that college-educated young adults have been drawn to urban centers. At times some have claimed a broader demographic reversal in which cities grow faster than suburbs, and even the end of the suburbs. But, in fact, the U.S. continues to suburbanize. The share of Americans living in urban…