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.