The newly enacted child tax credit, which will put an average of $221 per month into the pockets of families earning $150,000 or less with children, would make housing go from unaffordable to affordable for roughly half a million American families. The number of rent-burdened families—meaning they spend more than 30% of their gross income on rent—would go from 5.5 million to just over 5 million, an 8.6% decrease.
The credit would have a small but significant impact on helping a more reasonable portion of income go toward rent. It’s just one provision from the latest stimulus bill that will provide financial help to low- and middle-income Americans—the bill also provides stimulus checks and extended unemployment benefits, among other things. But the child tax credit has the potential to become permanent, which means it could have a bigger long-term impact than the bill’s other provisions.
“Although the expanded child tax credit would make housing affordable for many low- and middle-income families, a huge number of them would remain rent-burdened, particularly in expensive parts of the country,” said Redfin Chief Economist Daryl Fairweather. “That speaks to the severity of the housing affordability crisis in this country.”
The research in Redfin’s report finds that nearly half of the American families included in its analysis are currently rent-burdened. Although that share would be reduced to about 45% with the child tax credit, that’s still a large portion of middle-class families who have a hard time paying rent.
“The stimulus package and tax credit are a promising start, and they will certainly help a lot of families pay rent and put food on the table,” Fairweather continued. “But it’s critical that the Biden administration implement long-term policies that substantially increase the supply of affordable housing to improve housing security for low-income families and help abate the homelessness crisis.”
The child tax credit provides a $3,000 annual benefit for each child aged 6 to 17 and $3,600 for each child under the age of 6, with the full credit available to couples earning up to $150,000. That’s up from the previous credit of $2,000 per child. The data in Redfin’s report is from the U.S. Census Bureau’s 1-year American Community Survey for 2019, and the median family included in the analysis has two children, pays $1,294 in monthly rent and earns $50,247 per year.
The credit provision will have the biggest impact on low-income families in relatively affordable areas like El Paso and Raleigh, mainly because extra money goes further in places where rent and other costs are already less expensive. It will have a smaller impact on pricey areas like the Bay Area and Los Angeles.
Edited by Maryssa Gordon, Senior Editor, Price of Business Digital Network