In fact, developers have gone on an unprecedented building spree, “leading to a housing stock which caters to higher-income individuals.” Rent control has fueled “the gentrification of San Francisco, the exact opposite of the policy’s intended goal.” Echoing Downs, the Stanford economists found that rent controls often damage the very groups of people that the measures are intended to protect. With him, they conclude that direct renter subsidies are the best panacea for cooling the overheated rental market: “The substantial welfare losses due to decreased housing supply could be mitigated if insurance against large rent increases was provided as a form of government social insurance, instead of a regulated mandate on landlords.” In other words, tax credits. A TAX CREDIT IS NOT A TAX CUT Introduced by California Senator Kamala D. Harris, the Rent Relief Act of 2018, “amends the Internal Revenue Code to allow a refundable tax credit for individuals who pay rent for a principal residence that exceeds 30% of the individual’s gross income for the taxable year.” Playing off the popularity of the existing $140 billion in deductions and other tax breaks for homeowners, Harris’ bill proposes to reimburse low-income households for a portion of their excess rent. The tax credit is not available for incomes above $100,000. Structured as a refundable credit, a renter’s federal income tax liability would be reduced dollar for dollar. The remaining balance of the excess rent paid by the renter would be
returned as a cash refund by the IRS after the tax liability goes to zero. Renter tax credits are neither a new nor a revolutionary idea. The United Kingdom and Netherlands have similar programs. In fact, Harris’ legislation is modeled on a 2016 proposal by pro-business ideologues at the Terner Center for Housing Innovation at Haas School of Business at the University of California, Berkeley. That proposal envisions a range of tax-based options to alleviate rental burdens costing from $41 billion to $76 billion a year. Critics of the bill fear that the tax credits are a hidden subsidy to landlords, who will raise rents to maximize the subsidy amount. They warn that developers will be incentivized to overdevelop, as occurred with the Savings and Loan debacle of the 1980s. Others decry the tax credit as welfarism that will breed dependency and sloth. One thing is for sure... Rent control is not the sole problem of – nor is it the sole solution to – the rental housing crisis in America. Peter Byrne Peter Byrne’s reporting has been recognized by Investigative Reporters & Editors, the American Association for the Advancement of Science, and the Society of Professional Journalists. His books on strange physics, medical fraud, and political corruption are critically acclaimed. Based in Northern California, his work can be found at www.peterbyrne.info.
66 October 2018
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