There is a recent proposal by Senator Kamala Harris (whose book, The Truths we Hold, I recently listened to) to give out refundable tax credits to those whose rent is a high proportion of their income (see https://www.harris.senate.gov/imo/media/doc/RRA.pdf for the full proposal). As I read through the proposal, I have many thoughts, but the most important of which is that tax incidence is really a thing. If you hand out tax credits for some type of behavior, who you hand the check to does not determine who will receive the economic benefit. Who does it go to? It may well be that a tax credit is given to renters, which decreases the after-tax cost of renting, which increases demand, and rental prices increase, with the actual economic benefit of the credit going to landholders (you can year Henry George shaking his head in the background). Of course, this may not happen. We have good evidence that when tax credits were given out to Prius purchasers, it was the actual Prius purchasers that got the benefit (https://www.aeaweb.org/articles?id=10.1257/pol.3.2.189 ). We can’t really know how prices will settle unless we enact the policy, but we should not ignore the fact that this expensive policy may well end up benefiting only landlords (presumably not the intent of the policy).
Refundable tax credits are also one of the biggest sources of fraud the IRS deals with, but we may be able to design a system whereby refundable credits are not so fraud-prone (which would likely involve third-party interaction with the landlord).
Personally, whenever I hear about rent being too high, I first thing about this amazing song. If you didn’t click on that link, reconsider.
