The U.S. housing market has scared off many potential home buyers, sending them toward home rentals. The increased demand has made it significantly more difficult for low-income families and individuals to take advantage of lower rents, a problem the Obama administration recognizes. As a means of relief, legislators are currently exploring the idea of instituting a home renter’s tax credit as a part of a larger overhaul of the tax system, reports MarketWatch.
The rent is too damn high
A recent Harvard university study found that about 26 percent of renters – 10.1 million people – spent more than half of their pre-tax household income on rent and utilities in 2009. This can be attributed to stagnant or retarding wages brought on by the recession, which is a bad place to be when rents continue to rise. U.S. Housing and Urban Development Secretary Shaun Donovan believes there needs to be a way out for struggling tax payers searching for residency, and the home renter’s tax credit is an idea that is gaining traction.
Boosting government support for home renters is an idea “that is worth looking at,” according to Donovan. If such a rental housing tax break were to be instituted, it would require adjustments to other parts of any new U.S. tax code in order to avoid unnecessary addition to the federal deficit.
Homeowners receive tax credit love
Consumers who own their own homes currently are able to reap the benefits of government subsidies through tax deductions of mortgage interest payments and property taxes. In addition, mortgage buyers Fannie Mae and Freddie Mac have received ample federal support through taxpayer bailouts.
In 2009, the government granted $230 billion in subsidies for homeowners, reports the Congressional Budget Office. Over that same period, home renters received only $60 billion.