It’s no secret that housing is expensive. Home prices are relentlessly marching forward, making it more difficult for first-time home buyers to purchase a home. One of the contributing factors is the low inventory of homes for sale.
The deficiency of homes on the market is limiting options and stoking competition among determined home buyers, many of whom are willing to offer slightly more than then their cohorts.
Affordability is not only an issue for home buyers. It’s also an issue for renters. According to the US Census Bureau’s American Community Survey five-year estimates results (census.gov), the median rent in the US increased about $21. That does not sound life-changing; however, it is the result of an analysis of nationwide monthly rents.
Results of the Survey indicated that, “Of the 382 metropolitan areas in the United States, the median gross rent in 156 areas did not change between 2007 to 2011 and 2012 to 2016…” However, “Of the 219 that did change, increases outnumbered decreases four to one with 175 increases and 44 decreases.” Some areas had a decrease in rent, while others faced increases. Among some of the areas with top increases include Andrews TX and McKenzie County ND, where monthly rents increased an average of $352 and $397 respectively.
The Census Bureau recent survey on rent concludes that “gross rents are on the rise.” Other Census data indicates that 2017 had the lowest percentage of renters move since 1988.
The combination of fewer available rentals and increased rents are making it difficult to find an affordable rental.
Although the term “affordable” has been tossed about like a football, it wasn’t until Mary Schwartz and Ellen Wilson’s (US Census Bureau) analysis of the 2006 American Community Survey that really gave it meaning (Who Can Afford To Live in a Home?: A look at data from the 2006 American Community Survey; census.gov).
The analysis revealed the percentage of income that is spent towards housing. The report indicated that forty-six percent of renters spend 30 percent or more of their income on housing costs.
Compare that to home owners: thirty-seven percent of owners with mortgages and sixteen percent of owners without spent 30 percent or more of their income on housing. Schwartz and Wilson came up with the “30 percent standard,” and discussed that thirty percent or more of income spent on housing is considered a “housing-cost burden.”
Last September, Representative Joe Crowley introduced H.R.3670 – Rent Relief Act of 2017 to help renters with their housing-cost burden.
The credit would only be available for taxpayers whose gross income is less than $125,000. The bill allows for a refundable tax credit when rent exceeds 30 percent of the individual’s gross income for the taxable year. Depending on the renter’s gross income, the amount of the credit could range from 10 to 100 percent of the excess (above 30 percent).
One caveat is that if the tenant’s rent exceeds 150 percent of the fair market rent for that specific residence, the excess above 150 percent won’t be included for the purpose of determining the amount of the credit. Government-subsidized renters would be able to claim a credit equal to 1/12 of the rent paid by the taxpayer.
Although the bill was last heard in the House Committee on Ways and Means, it is being prepared by Senator Kamala Harris to be introduced in the Senate.