U of M study: Child Tax Credit expansion helped housing affordability
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A study released this month from University of Michigan researchers found that a temporary expansion of the Child Tax Credit helped some low-income families maintain stable housing.
Why it matters: In a city with a high poverty rate and serious affordable housing crunch, the analysis of the national tax credit expansion provides insight into the potential for monthly payments to help stabilize low-income families' housing.
Catch up quick: The Child Tax Credit was created in the 1990s to help with the cost of raising children and mostly benefits middle-earning households. To help families struggling with costs during the height of the pandemic, Congress approved a temporary expansion of the tax credit in March 2021.
The benefit was expanded to include families with little to no income, and the amount rose from $2,000 to $3,600 per child for children younger than 6, and $3,000 for children ages 6-17.
- The temporary expansion also gave half of the tax benefit in monthly payments over six months starting in July 2021, instead of just during tax season.
- The U of M researchers report that the temporary change made 26 million children across the country newly eligible or gave them better benefits. It led to a historic temporary decline in child poverty, according to PBS.
- However, support couldn't be mustered in Congress to make the expansion permanent, so the credit reverted back to normal in 2022.
By the numbers: An additional $100 a month in tax credit benefits helped reduce the amount of back-owed rent parents faced by around 13% and past-due rent by 3%, according to the study. It also reduced the likelihood of needing to move due to housing costs by around 13%.
- The researchers also were interested to see that the credit appeared to help parents "gain residential independence" from ex-partners who they may have still been living with solely for financial reasons.
Zoom in: The researchers' focus was on the tax credit program at the national level. But with Detroit's high poverty rate — 33.8% in 2022, compared with Michigan's 13.4% — it's likely that a lot of Detroit families were impacted positively by receiving it, Natasha Pilkauskas, U of M associate professor of public policy and an author of the study, tells Axios.
- The program particularly helped people earning less than $10,000, she adds.
- As of 2022, an estimated 13% of families in Detroit earned less than that amount, per American Community Survey data.
How it works: The study's authors used national data from a sample of 20,500 parents using SNAP benefits, a large amount of whom became newly eligible for the Child Tax Credit when it was temporarily expanded.
- The study's other authors were Katherine Michelmore, also a U of M associate professor of public policy, and Nicole Kovski, a former U of M postdoctoral fellow now at the University of Wisconsin.