California Sen. Kamala Harris on Thursday unveiled a proposal to give federal tax credits to millions of low and moderate-income households nationwide who pay more than 30 percent of their incomes on rent and utilities.
The Democratic senator’s proposal has yet to win support from Republicans and could be a heavy lift in GOP-controlled Congress, but it reflects a growing concern about how those of modest and little means are struggling to pay ever-greater shares of their income on shelter. It also comes amid a contentious ballot measure campaign to roll back California’s decades-old restrictions on rent control.
Financial experts advise against spending more than 30 percent of income on housing, but in California alone, the majority of renters — 3 million — are doing so, according to the state’s housing department. Nearly one-third of renters in the state, roughly 1.5 million households, are sending more than half of their income to their landlords, the department found.
“Nearly every Oakland resident who pays rent will save money under this law,” Oakland Mayor Libby Schaaf said in a statement Thursday. “At a time when our city is fighting the displacement of long-time residents, The Rent Relief Act of 2018 will help working class families, artists, senior-aged tenants, and anyone else who struggles to make the rent each month.”
The plan would benefit households earning up to $100,000 annually — and in high-cost regions, such as the Bay Area, up to $125,000 — who pay more than 30 percent of their pre-tax income on rent, electricity, gas and water. Very low-income residents would receive a dollar in tax credits for every dollar they spend over 30 percent, while those with higher incomes would receive less for each dollar.
Also pending is a bipartisan California bill by state Sen. Steve Glazer, D-Orinda — Senate Bill 1182 — that would increase state tax credits for low-income renters for the first time since 1979. The California Franchise Tax Board, which collects income taxes, estimates the credits would cost the state $60 million next year and $110 million by 2022-23 — less than one-tenth of a percent of the state’s current $139 billion general fund budget.
While many homeowners with mortgages receive a federal tax deduction, no federal tax credit exists for renters. An analysis last year by the Washington, D.C.-based Center on Budget and Policy Priorities found the federal government spent $170 billion on housing tax benefits in 2017 — and that 90 percent went to subsidies for homeowners.
Harris, California’s previous attorney general, is widely considered to be a potential presidential contender and said last month that she was not ruling out a 2020 run.
“America’s affordable housing crisis has left too many families behind who struggle each month to keep a roof over their head,” Harris said in a prepared statement Thursday. “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.”
Source: FS – All – Real Estate News 1
Federal tax credits for renters? Sen. Kamala Harris proposes breaks for the rent-burdened