Tax credit for housing proposed

An expanded federal Earned Income Tax Credit program would ease housing affordability troubles for millions of working families, according to a study by the Brookings Institute, a Washington, D.C., think tank.

The study’s authors, Michael Stegman, Walter Davis and Ro- berto Quercia, argue that policymakers should explore the potential of the EITC as a national housing policy resource, expand participation in the program and include a supplement to account for gaps in household income and average rent.

“The affordability problem has escalated to the point where it can no longer be addressed by housing programs alone,” the authors wrote.

The EITC is a refundable tax credit for low- and moderate-income workers that provides more than $30 billion a year to 20 million working families, according to the study. It was created in 1975.

The authors suggested including an implicit EITC housing supplement in the tax credit based on a median housing-cost standard. The supplement would account for the difference between monthly rent and half a household’s income plus its current tax credit. The median housing-cost standard would be based on a national distribution of local median housing costs.

Tax credit programs that benefit those who are severely burdened by housing costs are increasingly valuable because federal programs overall haven’t kept pace with the need for housing assistance. The authors noted that housing problems stem mostly from insufficient income, not lack of supply.