These past few months have proved two hard truths: first, that we can neither spend arbitrarily nor overregulate economically during the COVID crisis, and second, that we need a set of targeted but temporary means to protect American residents and preserve our economy.
This is especially true when it comes to housing and jobs. While many families have received a reprieve through stimulus checks and unemployment benefits, too many are falling through the cracks and struggling to pay bills or dependent on others for such payments as rent.
Renters and landlords are both vulnerable. More than one-third of U.S. households rent their homes, meaning that over 100 million Americans live in rental housing. And many landlords are dependent on monthly payments to support themselves, along with their employees if they own businesses. Both a wave of evictions or a wave of landlord bankruptcies would trigger an enormous housing crisis in our country.
Twentysomethings and households with incomes of less than $50,000 a year have almost half the homeownership rate of households earning more than $50,000. Young adults and lower-income families—a core part of our workforce—will be disproportionately affected by inaction or an overreaction. Miami residents have much to lose, given that the city proper has the third highest number of renters in the U.S. at 68%, after Newark and Jersey City, N.J.
Any federal government decision over the next few days on rental policy is crucial. The CARES Act eviction moratorium just ended, but even if it were still in effect, a moratorium alone won’t solve the problem without provisions that support tenants and landlords.
We propose a better solution that protects renters and landlords for another quarter, using a similar tool that the U.S. utilized to disseminate millions of stimulus checks: a refundable renter’s tax credit (RTC). A refundable tax credit would be the quickest, most reliable way to reach renters in most need.
People who rent their primary home and don’t own a home on the side will be able to claim the RTC every month on the rent they pay. To target the tax credit at low-income renters, it would be capped at 40% of the monthly income each family or household earned last year. Borrowing also from the design of the stimulus checks, the credit would phase out above $75,000 in income if you are single, or $150,000 if you are married, but would be larger for families with children.
Because the RTC is targeted and temporary, it would bolster economic and social sustainability until more jobs are created and hardworking Americans can get back to work. Families won’t be compelled to suddenly move to larger apartments or to rent more space than they need. Families won’t be evicted in the middle of a pandemic, and landlords won’t also be forced into bankruptcy owing to missed rent. Instead, it will keep families and landlords whole through another peak in this economic catastrophe.
In the city of Miami, this would mean up to around $1,500 a month in assistance for a family of four making $40,000. The RTC program would last for four months initially, but could be extended by Congress if needed. We estimate that, all told, the cost would come to around $30 billion a month. On average the credit would cover more than 80% of rent for low- and middle-income families; for many of them, it would cover the whole bill. Even over four months, our idea would cost less than many of the ideas Congress is considering for the next $1 trillion–plus fiscal stimulus package.
Our recovery will be a marathon, not a sprint. The RTC is one more step in this marathon. We have a long way to go, and we need solutions that address the one-third of our country that remains vulnerable. The RTC would protect families, avoid disastrous evictions, and prevent landlord bankruptcies—helping our country and our economy heal.