New Tax Credit Would Make Rent Affordable for Half a Million American Families With Children

Rhea-AI Summary

The new child tax credit is set to provide an average of $221 per month to families earning $150,000 or less, potentially making housing affordable for 500,000 American families. Redfin's report indicates that rent-burdened families will decrease from 5.5 million to 5 million, marking an 8.6% reduction. While the credit aims to alleviate housing costs, many families will remain rent-burdened, emphasizing a severe housing affordability crisis. The annual credit cap is $3,600 per child under 6 and $3,000 for ages 6-17, applicable to couples earning up to $150,000.

Positive

• The child tax credit will provide an average of $221 per month to qualifying families.
• The number of rent-burdened families will decrease by 8.6%, from 5.5 million to 5 million.

Negative

• Many families will still be rent-burdened post-credit, indicating ongoing affordability issues.
• High-cost areas will see minimal impact from the tax credit, leaving significant housing challenges.

SEATTLE, March 18, 2021 /PRNewswire/ -- (NASDAQ: RDFN) — 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. That's according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. Just over 5 million families in that category nationwide would be rent-burdened—meaning they spend more than 30% of their gross income on rent—with the credit, down 8.6% from about 5.5 million families before the introduction of the credit.

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. Redfin's analysis compares the number of households that earn less than $150,000 with children that were rent-burdened before the new tax credit to the number that would be once the credit goes into effect. The analysis calculates the average amount families will receive in child tax credits by metro area, taking into account the average number of children in each age range in that metro. 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.

To view the full report, including the 50 most-populous metro areas with the number of families that are rent-burdened before and after the new tax credit, please visit: https://www.redfin.com/news/child-tax-credit-impact-affordable-housing/

About Redfin
Redfin (www.redfin.com) is a technology-powered residential real estate company, redefining real estate in the consumer's favor in a commission-driven industry. We do this by integrating every step of the home buying and selling process and pairing our own agents with our own technology, creating a service that is faster, better and costs less. We offer brokerage, iBuying, mortgage, and title services, and we also run the country's #1 nationwide brokerage website, offering a host of online tools to consumers, including the Redfin Estimate. We represent people buying and selling homes in over 95 markets in the United States and Canada. Since our launch in 2006, we have saved our customers nearly $1 billion and we've helped them buy or sell more than 310,000 homes worth more than $152 billion.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

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SOURCE Redfin

FAQ

How will the new child tax credit affect housing affordability in the U.S. for RDFN?

The child tax credit may make housing affordable for approximately 500,000 families earning under $150,000, reducing the burden on rent.

What are the financial benefits of the child tax credit per child as announced by RDFN?

Families can receive $3,600 per child under 6 and $3,000 per child aged 6-17 from the child tax credit.

What percentage of families will remain rent-burdened after the child tax credit is implemented according to RDFN?

Approximately 45% of families will still be rent-burdened despite the child tax credit.

What is the current number of rent-burdened families in the U.S. before the tax credit, as reported by RDFN?

Before the tax credit, about 5.5 million families are considered rent-burdened.

What is the maximum income to qualify for the new child tax credit impacting families as reported by RDFN?

Couples earning up to $150,000 are eligible for the full child tax credit.