We’ve long been champions for being proactive through public policy that can help to prevent the downward financial spiral faced by so many middle-income families across our city, and have found that high rental housing costs in the Baltimore metro region are the the reason why so many people are having difficulty getting a handle on their financial future.
Senator Ron Wyden (D-Oregon), and Ranking Member of the Senate Finance Committee, released a draft of a proposed tax credit that could alleviate the housing cost burden for millions of American families, many right here in Baltimore. The Middle Income Housing Tax Credit (link opens a PDF) is probably one of the most important pieces of housing legislation introduced in recent years. From the discussion draft:
America today faces an affordable housing crisis. Over a quarter of renter households in the United States – more than 11 million people – spend more than half their income on rent. This leaves these renters with too little for other necessities like food, medical care, and transportation. In the meantime, our nation continues to lose affordable housing stock.
Tools like the Low Income Housing Tax Credit (LIHTC), created in 1986, have helped finance 2.8 million affordable homes, assisting 6.5 million households. LIHTC is a critically important federal policy, which encourages the production of affordable housing for low-income families.
The discussion draft proposes a Middle Income Housing Tax Credit (MIHTC) to expand upon the success of LIHTC and provide a robust portfolio of tools to encourage the expansion of affordable housing stock in the United States.
However, like all common-sense legislation, there are some irrational arguments against it. Some myths being perpetuated:
- Funding this credit will take away from the Low Income Housing Tax Credit (LIHTC).
FALSE. This credit will be made available, in addition to the existing LIHTC, with the proper support from local/grassroots and national organizations. Also, any credits not allocated by the state to middle-income projects are carried forward and added to the state’s annual allocation of Low Income Housing Tax Credits for the following year.
- Only 100,000 middle-income people nationwide are housing-burdened (meaning they’re paying more than 30% of their net monthly income on housing.)
FALSE. According to the State of the Nation’s Housing report, burden rates for renters earning $30,000 to $45,000 per year actually increased more rapidly over the past decade than rates for those with lower incomes. (See also this article from Shelterforce for more.) Baltimore City’s median income fits squarely between those two figures, and in the 10 highest-rent metros nationwide, renters with incomes between $45,000 and $75,000 per year have an average cost burden rate of 49 percent. A cost burden rate this high will almost certainly mean many, if not most, of those renters will experience financial hardship until that burden is relieved — some will absolutely fall into poverty. The MIHTC would provide middle-class people who rent the opportunity to achieve more stable financial footing.
- The MIHTC is just another way to keep people renting, and ignores homeowners.
FALSE. Moderate-income working people aspire to homeownership like anyone else, yet due to the undue rental cost burden they’re facing, they can’t save for a down payment, which in many cases, is as high as 20-30% of the home’s purchase price. Also, when you’re paying as much as 49% or more of your net monthly income on rent, credit issues can arise, preventing many potential homeowners from ever qualifying for a mortgage. The MIHTC gives moderate-income families more financial flexibility, and boosts their chances of becoming homeowners in the future.
What people can do now:
- Participate in the public commentary process (info on how to participate and where to send comments are in this document).
- Support the organizations that are fighting hard for this ground-breaking and important tax credit.
- Contact your Maryland Senators and ask that they support Senator Wyden in his fight for moderate-income families across the country.