Florida nearly leads the nation in a concerning statistic: young people living at home/with parents. Nearly 40% of young adults in Florida live with their parents, and that percentage has been rising rapidly. This is mainly driven by a supply side issue in producing affordable housing, but a state run Earned Income Tax Credit (EITC) could be an effective way to alleviate this housing pressure and jumpstart the economy.
The EITC is a federal program, often supplemented by state governments, that gives low-income working families a credit on their federal income taxes. The program is designed to incentivize working by providing assistance to low-income earners. It is generally considered a success and is up for expansion.
Florida has no income tax nor an EITC, nonetheless, here’s why a state EITC would greatly help Florida’s housing situation and economy, especially for those at the lower rungs of the income ladder.
Florida has a disproportionately high amount of low paying food and service industry jobs due to its heavy reliance upon tourism, which is not necessarily a bad thing. However, these workers are in a vice between a regressive tax code that is skewed toward homeownership, and a lack of affordable housing.
The state government practically bends over backwards with tax credits and incentives to help people buy and stay in homeownership – something most of these young and low-income workers can’t afford in the first place. Unable to afford home-ownership, most rent, not a bad thing, but where they face climbing prices caused by restricted supply of affordable rental housing. Or perhaps worse: move back in with Mom and Dad.
For these budget constrained working class people, there is no tax credit equivalent to those enjoyed by individuals who buy homes.
An EITC that is adjusted for the price of local housing—call it a Workforce Housing Tax Credit, WHTC– would give these workers a chance to spur the real estate development market in Florida and expand their financial freedom.
Essentially, any working family or individual making about $30,000 or less could receive a tax credit around $1,000 – $3,000, depending on income, to be applied to housing. A 2 bedroom apartment that rents for $1,000 a month would cost about $12,000 annually. The WHTC would cover about 10-20% of low income housing costs.
That could make moving out of the parent’s house into an apartment much more feasible for many young adults. By sharing apartments with others who qualify for the WHTC, housing in many areas would be within reach of low-income workers. The program would be even more potent combined with changes in local policies that restrict new apartment project or impose conditions that make them more expensive.