Renters' Tax Credits

• Pages: 1107-1164
• Date: 01 May 2025
• Published date: 01 May 2025
• Author: Michelle D. Layser
• Subject Matter: Derecho Civil

Renters’ Tax Credits

MICHELLE D. LAYSER*

America is facing an affordable housing crisis that current policies have

failed to mitigate. Even before the COVID-19 pandemic, half of American ten-

ants were rent burdened, paying more than one-third of their income on rent.

For this reason, Renters’ Tax Credit (RTC) proposals are gaining traction in

Washington and in policy circles. The most ambitious proposals would

reimburse tenants for rent payments that exceed 30% of their income

level, subject to rent limits. In scale and signif‌icance, such RTCs would

almost certainly overshadow—or even replace—the nontax Housing

Choice Voucher Program that has been the centerpiece of federal hous-

ing policy since 1974. It would be the f‌irst time since 1993 that a large,

existing nontax public welfare program was shifted into the Tax Code,

and it would be the f‌irst time that a major nontax, in-kind welfare benef‌it

was integrated into the tax system.

Through a case study of the evolution of American housing policy, the

recent failures of the Housing Choice Voucher Program, and current RTC

proposals, this Article explores the potential and limits of in-kind integration

of housing benef‌its into the tax system. Drawing on theory about the integra-

tion of tax and spending programs, it argues that an RTC may be appropri-

ate if the goal is to expand access to housing. However, if the goal is to

f‌ight poverty by assisting rent-burdened tenants, then a more eff‌icient and

equitable approach would be to “cash out” the vouchers by converting

them into unrestricted cash or tax credits. Cashed-out vouchers would have

advantages over an RTC, including institutional design, simplif‌ication, eff‌i-

ciency, and distributive benef‌its. It would also fundamentally change the na-

ture of the intervention from a public–private partnership model to a public

assistance model, with consequences for program outcomes. This analysis

provides essential context for policy debates about RTCs, advances theory

about the integration of in-kind benef‌its, and highlights the urgent need for

clarity in policy goals.

TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1109

I. THE AFFORDABLE HOUSING POLICY LANDSCAPE . . . . . . . . . . . . . . . . . . . . 1113

* Associate Professor, University of San Diego School of Law. © 2025, Michelle D. Layser. The

author would like to thank Professors Edward De Barbieri, Brandon Weiss, and Etienne Toussaint for

their comments on this draft.

1107

A. THE POLICY PROBLEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1113

1. The Housing Access Frame .......................... 1113

2. The Antipoverty Frame.............................. 1114

3. The Economic Frame ............................... 1115

B. THE EVOLVING POLICY RESPONSE . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. From Public Housing to Housing Choice Vouchers...... 1117

a. Public Housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1117

b. Housing Vouchers. . . . . . . . . . . . . . . . . . . . . . . . . . 1118

2. The Limitations of the Housing Choice Voucher Program 1122

a. Underfunding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1122

b. Two Shortages: Housing and Landlords . . . . . . . . . 1123

c. Economic and Distributional Outcomes . . . . . . . . . 1125

II. RENTERS’ TAX CREDIT PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1128

A. TENANT-BASED RTCS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1129

1. Uncapped Tenant-Side RTCs......................... 1131

2. Capped Tenant-Side RTCs........................... 1136

3. Uncapped Landlord-Side RTCs....................... 1137

B. PROJECT-BASED RTCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1138

III. RENTERS’ TAX CREDIT AS PUBLIC–PRIVATE PARTNERSHIPS . . . . . . . . . . . 1140

A. LOCATING RENTERS’ TAX CREDITS WITHIN THE SOCIAL WELFARE

SYSTEM ................................................ 1140

1. Direct Public Assistance...................... ....... 1141

a. Nontax Instruments. . . . . . . . . . . . . . . . . . . . . . . . . 1141

b. Tax Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1142

2. Public–Private Partnerships .......................... 1143

a. Nontax Instruments. . . . . . . . . . . . . . . . . . . . . . . . . 1143

b. Tax Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . 1143

1108 THE GEORGETOWN LAW JOURNAL [Vol. 113:1107

1117

B. THE PUBLIC–PRIVATE PARTNERSHIP MODEL AND THE LIMITS OF

RTCS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1145

1. Tenants’ Behavior .................................. 1146

2. Landlords’ Behavior ................................ 1147

3. A Closer Look at Landlord Incentives ................. 1151

4. Note on Distributive Outcomes ....................... 1152

IV. IN-KIND INTEGRATION VERSUS CASHING OUT . . . . . . . . . . . . . . . . . . . . . . 1154

A. THE INTEGRATION OF HOUSING VOUCHERS. . . . . . . . . . . . . . . . . . . . . 1154

B. ALTERNATIVES TO IN-KIND RTCS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1157

1. Uniform Tenant Tax Credits .........................

2. Cost-of-Living Adjusted Refundable Tax Credits ....... 1159

3. Effect of Cashing Out ............................... 1160

C. THE NEED FOR GOAL CLARITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1161

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1163

INTRODUCTION

America is facing an affordable housing crisis that current policies have failed

to mitigate. Even before the COVID-19 pandemic, half of American tenants were

rent-burdened, spending more than one-third of their income on rent.

1

Low-

income renters face the most severe housing burdens, yet only one in four eligible

households receives any federal rental assistance.

2

Peggy Bailey, Rental Housing Programs for the Lowest-Income Households: Renters’ Tax

Credits, in ADVOCATES’ GUIDE ‘23: A PRIMER ON FEDERAL AFFORDABLE HOUSING & COMMUNITY

DEVELOPMENT PROGRAMS & POLICIES 4-108, 4-108 (2023), https://nlihc.org/sites/default/f‌iles/2023-

03/2023AG4-19_Renters-Tax-Credit.pdf [https://perma.cc/VV4K-EV9E].

The largest federal affordable

housing program, the Housing Choice Voucher program, suffers from long waitlists

and underfunding.

3

See Kimberlin et al., supra note 1, at 133 (regarding waitlists); WILL FISCHER, BARBARA SARD &

ALICE MAZZARA, CTR. ON BUDGET & POL’Y PRIORITIES, RENTERS’ CREDIT WOULD HELP LOW-WAGE

WORKERS, SENIORS, AND PEOPLE WITH DISABILITIES AFFORD HOUSING: INVESTMENT WOULD HELP

REBALANCE HOUSING POLICY 2 (2017), https://www.cbpp.org/sites/default/f‌iles/atoms/f‌iles/3-9-17hous.

pdf?ts=1613413813016 [https://perma.cc/J2RP-8ZSQ] (citing budget constraints).

For this reason, Renters’ Tax Credit (RTC) proposals are gaining

traction in Washington, D.C., and in policy circles.

4

Two RTC bills are currently

1158

1. Sara Kimberlin et al., A Renter’s Tax Credit to Curtail the Affordable Housing Crisis, 4 RSF:

RUSSELL SAGE FOUND. J. SOC. SCIS. 131, 131 (2018).

2.

3.

4. See, e.g., Bailey, supra note 2, at 4-109.

2025] RENTERS’ TAX CREDITS 1109