Bills
| 3.23.22

Should the Federal Gov’t Offer a Tax Credit to Subsidize Renters? (S. 3250)

Do you support or oppose this bill?

What is S. 3250?

(Updated July 31, 2020)

This bill — known as the Rent Relief Act — would provide refundable tax credit to renters who spend more than 30% of their annual gross income on rent in housing that’s less than 150% of the fair market rent for their location as determined by the Dept. of Housing & Urban Development (HUD). The tax credit would cover a higher proportion of rent costs for lower-income renters, and wouldn’t apply to renters earning over $100,000 annually (or $125,000 for especially high cost areas as determined by HUD). A breakdown of how the tax credit would apply to renters in various income ranges can be found below.

The tax credit would cover the specified proportion of rent for renters in the following income ranges (note that the $100k references are changed to $125k for high cost areas):

  • Less than $25k: 100% of rent;

  • $25k - $50k: 75% of rent;

  • $50k - $75k: 50% of rent;

  • $75k - $100k: 25% of rent;

  • Over $100k: 0% of rent.

This legislation would apply to the 2018 tax year if enacted.

Argument in favor

For many Americans, just paying the rent and keeping a roof over their heads consumes more than a third of their total earnings. Offering refundable tax credits to subsidize rent will help many families afford the high cost of living by making housing more affordable.

Argument opposed

A federal program to subsidize renters would not only be tremendously costly for American taxpayers, but it’d encourage landlords to continue to raise rents while doing nothing to encourage the construction of more housing — the most effective way to lower housing costs.

Impact

Renters meeting income thresholds; and HUD.

Cost of S. 3250

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Sen. Kamala Harris (D-CA) introduced this bill to create a refundable tax credit to provide renters with relief from rising housing costs:

“America’s affordable housing crisis has left too many families behind who struggle each month to keep a roof over their head. This bill will ensure no family is priced out of the basic security of a place to live. Bolstering the economic security of working families would strengthen our country and increase opportunity.”

A column in National Review by Jibran Khan faulted Harris’s proposal for doing nothing to encourage housing reform to allow construction of more housing in high cost areas, and argued that the benefit to renters from the tax credit would be short-term:

“Why would the relief be short-term? Because as landlords become aware that renters are receiving a subsidy, they will simply raise rents by the amount of the subsidy. The cost will be the same for renters -- who today are lining up for a chance to rent, showing that they are willing to pay it. In the end, then, this would be an effective subsidy for landlords, not renters.”

This legislation has the support of four cosponsors, all of whom are Democrats.


Of Note: According to the Washington Post, Harris’s bill was influenced by a similar but smaller plan written by the Terner Center which was projected to cost $76 billion annually. For a sense of scale, the U.S. will spend roughly $23 billion on Section 8 low-income housing vouchers in FY2019, plus $12 billion on project-based Section 8 housing.


Media:

Summary by Eric Revell

(Photo Credit: iStock / ablokhin)