Scholar argues that to make progress on affordable housing, policymakers must clarify their objectives.
Over half of Americans spend more than one-third of their income on rent. The federal Housing Choice Voucher Program, also known as Section 8, is intended to ease this burden by providing rental assistance. Each year, however, over a million Americans receive a housing voucher—only to watch it expire when they cannot find compatible housing in time to use it.
In a recent article, Michelle Layser, a law professor at the University of San Diego, evaluates the leading proposed alternative to federal housing vouchers—“renters’ tax credits.” She argues that, despite some differences compared to vouchers, renters’ tax credits replicate the same approach.
Does this fundamental similarity mean that renters’ tax credits are doomed to fail? That depends on policymakers’ goals, argues Layser. She claims that credits could expand affordable housing access for new renters but would do less to alleviate costs for existing renters.
Renters’ tax credits would function similarly to vouchers by capping tenants’ rent at a fixed portion of their income, while the government makes up the difference. But whereas the government pays voucher users’ landlords directly, credit recipients would pay rent in full, then be reimbursed later through a tax refund.
The credits’ core innovation is integrating housing policy into the tax code, Layser argues. She notes several possible benefits, including that a tax refund may be less stigmatizing than vouchers as well as more politically palatable. Furthermore, the U.S. Internal Revenue Service is already well equipped to measure taxpayers’ income, so it may be able to administer benefits more accurately and cost-effectively than the dedicated Public Housing Authorities that currently administer vouchers, Layser argues.
Layser sees potential downsides to tax credits, however. Renters must bear the upfront cost of rent, since reimbursement is tied to the yearly tax cycle. This timing delay also creates the risk of over- or underpayment if a renter’s income changes, creating uncertainty for recipients.
Yet Layser argues that despite these differences, renters’ tax credits represent continuity more than change. Both housing vouchers and credits rely on the same underlying “public-private partnership” strategy, using incentives to shape private markets and encourage landlords to supply more affordable housing.
Layser contrasts this approach with direct public assistance, such as cash payments, that delivers resources straight to recipients. Should policymakers stick with a public-private approach or switch to a direct approach? Layser contends that the answer depends on whether their goal is to ease rent costs for existing renters or expand access for new renters.
Layser argues that if the goal is to alleviate costs for existing tenants, public-private partnerships are less cost-effective than direct assistance. When a voucher or tax credit caps tenants’ true rent obligations, tenants become more indifferent to the sticker price of rent. In turn, landlords can raise rents without resistance, since tenants are unaffected, while still increasing the remaining balance the government must pay. When landlords take a portion of the subsidies for themselves in this way, less funding is left to benefit renters, providing less benefit compared to the federal resources spent, Layser explains.
She argues that a direct cash transfer would better alleviate renters’ costs because it would guarantees that subsidies go entirely to renters. The concept is not new. Layser observes that other existing tax credits can already be “cashed out” into direct payments.
But as Layser notes, policymakers might prioritize accessibility over affordability. This subtle distinction matters because lack of availability, like high costs, can prevent would-be renters from finding housing, Layser explains. Renters face a supply shortage—some renters could afford housing with government assistance but find that no affordable units are available. Layser points out that many housing voucher recipients lose their vouchers because they cannot find compatible housing within the required 60 days. Furthermore, landlords often discriminate against low-income or government-assisted renters despite anti-discrimination laws, Layser observes.
Fixing the shortage requires that landlords rent a greater number of affordable units, Layser argues, and direct cash payments, though they alleviate renters’ costs, do not give landlords a reason to take on more low-income tenants. By contrast, voucher and credit recipients are especially attractive tenants for landlords because, with their real rent obligations capped by the government, those tenants are less likely to oppose rent increases. This fact encourages landlords to offer more housing to such renters, Layser argues.
Layser acknowledges, though, that vouchers and renters’ tax credits waste resources in other ways. Some landlords already rent to low-income tenants without any government incentive. When these landlords raise rents to capitalize on subsidies, the federal resources expended on those subsidies has not increased the affordable housing supply. Similarly, some qualifying individuals already live in adequate housing, so if they use subsidies to “trade up” to higher-quality housing, those subsidies do not advance the goal of accessibility.
Ultimately, Layser declines to recommend or denounce renters’ tax credits outright, reemphasizing her call that policymakers clarify their objectives. Direct cash benefits would represent a shift in approach. They may also be politically unattainable, Layser argues. Credits, despite their inefficiencies, offer real benefits to renters by integrating vouchers into the tax system, and Layser warns that “policymakers should avoid making perfect the enemy of better.”
