How the 2021 Child Tax Credit Transformed Housing Stability for Low-Income Families

• The expanded Child Tax Credit (CTC) significantly decreased the likelihood of low-income families needing to move due to rent or mortgage affordability issues, reducing housing instability.
• The expanded CTC effectively reduced the amount of past-due rent or mortgages owed by low-income families, alleviating financial stress and enhancing their economic well-being.
• Additional income from the CTC allowed parents the financial flexibility to leave shared living arrangements, contributing to smaller household sizes and less crowded living conditions.

Introduction

In 2021, a temporary policy shift made a lasting impact on housing for millions of low-income families.

This is the main finding of a new study by Natasha V. Pilkauskas of the University of Michigan, Katherine Michelmore of the University of Michigan, and Nicole Kovski of the University of Wisconsin . Their study, published in Demography, a top social science journal, investigates the effects of the 2021 expansion of the Child Tax Credit on the housing status of low-income families.

Read on to learn more about their research into the positive correlations between the 2021 Child Tax Credit and low-income housing outcomes.

Background

The Child Tax Credit (CTC) was established in 1997 to help offset the costs of raising children. Initially, it mainly benefited middle-income families and was nonrefundable, meaning families without tax liabilities, often low-income households, couldn’t take advantage of it.

Over time, the CTC amount increased, the minimum earnings threshold lowered, and the credit became partially refundable. By 2017, the CTC reached $2,000 per child, but families needed to earn at least $2,500 to claim any benefit, and the credit phased in at 15% for income above this threshold. Consequently, the poorest third of U.S. children were still ineligible for the full credit.

In March 2021, Congress passed the American Rescue Plan Act, temporarily expanding the CTC:

• The credit increased from $2,000 to $3,000 per child aged 6–17 (17-year-olds were included for the first time) and to $3,600 per child under age 6.
• The earnings minimum was removed, making those earning less than $2,500 eligible for the credit.
• The CTC was made fully refundable, eliminating the phase-in structure.

The 2021 CTC reform significantly benefited low-income families, many of whom gained access to the credit for the first time. For families in Pilkauskas et al.’s study, with an average annual income of $10,000, the CTC represented a substantial share of their income, averaging a 60% increase in monthly income.

Half of the credit was distributed as monthly payments from July to December 2021, with the remaining half given during tax time in early 2022. Despite discussions on making these reforms permanent, the expanded CTC expired in January 2022.

Past-due Rent, Housing Affordability, and Living Arrangements

Pilkauskas et al. expand on previous research by measuring the amount of past-due rent or mortgage, which helps assess whether families paid down their debt. They focus on those paying rent/mortgage to understand the CTC’s effect on housing affordability better. They also examine if respondents expected to move due to housing affordability issues, providing further insights into the CTC’s impact.

Unsurprisingly, income is a crucial factor in housing affordability. Studies suggest that the 2021 CTC improved families’ economic well-being and reduced child poverty. Parents often used the monthly CTC payments for housing and bills, with research showing that for every additional $100 from the CTC, parents spent $31 on housing, particularly among lower-income and Hispanic households.

Three studies have already examined the CTC’s effects on housing affordability:

• One study on New York City residents suggested improved housing affordability but with no significant findings.
• Another national survey found no evidence that the CTC reduced the likelihood of missed housing payments.
• A third study using Census Household Pulse data found no significant effects on current rent or mortgage payments but noted significant reductions in past-due rent/mortgages during tax time.

Pilkauskas et al. also explore the CTC’s effect on living arrangements, such as doubling up (living with additional adults) and living with a partner:

• Research shows that doubling up is common among low-income and minority households, often as a response to poverty or housing needs.
• It’s possible that the CTC might reduce economic-based doubling up by providing additional income.
• Conversely, the CTC might lead to more hosting of others, as low-income families are typically embedded in low-income networks.

For those living with a partner, economic strain can lead to partnership dissolution, while improved economic well-being is associated with stable relationships. Therefore, the CTC might either enhance stability or enable individuals to leave shared living arrangements compelled by financial constraints.

Overall, Pilkauskas et al.’s study aims to understand how the 2021 CTC reform impacted housing affordability and living arrangements among low-income families. By examining various dimensions of housing and living situations, they aim to provide a comprehensive picture of the CTC’s effects on family well-being and stability.

Methods

Pilkauskas et al. used data from a monthly cross-sectional survey of individuals currently or recently receiving SNAP (Supplemental Nutrition Assistance Program) benefits. Their survey was conducted in partnership with Propel, the creators of the Providers app, a tool that helps SNAP beneficiaries manage their benefits, access coupons, and find other services. The app, free to users, was utilized by about 5 million SNAP participants across the U.S. during their study, which represents approximately 25% of all SNAP recipients.

Following the implementation of the expanded Child Tax Credit (CTC), the study authors collaborated with Propel to incorporate questions related to economic well-being, housing, and living arrangements into their monthly survey:

• Each month, Propel invited a random sample of app users to participate via an in-app banner, leading to a survey hosted on an external website available in English and Spanish.
• The survey took approximately 11 minutes to complete. Although respondents were not compensated, they were informed that their responses would help improve services and support community advocates.
• Between 4,000 to 6,000 users responded monthly, about 65% of whom were parents living with children.

Pilkauskas et al.’s analysis focused on data from eight monthly surveys conducted from June 2021 to January 2022, covering a period that included two months before and six months after the first CTC payments were distributed:

• The study authors restricted their sample to parents with children under 18 living at home, totaling 20,545 respondents.
• To ensure representativeness, they compared their sample’s characteristics to those in national surveys such as the 2019 Current Population Survey Annual Social and Economic Supplement (CPS ASEC) and the 2019 American Community Survey (ACS), as well as administrative data from the 2019 SNAP Quality Control Database.

The survey examined several key measures related to housing instability and living arrangements. To measure housing instability:

• The study identified respondents at risk of moving due to affordability concerns by noting those who reported an inability or probable inability to stay in their current living situation due to financial constraints.
• Additionally, the authors assessed whether respondents owed any past-due rent or mortgage payments, creating indicators for both the presence of any past-due payments and the amount owed.

To assess living arrangements and household composition, their analysis focused on four measures:

• Changes in living arrangements within the last 30 days (e.g., moves or household members moving in or out).
• Living with a partner (husband/boyfriend or wife/girlfriend).
• Living in a doubled-up household (with individuals beyond the respondent’s children or romantic partner, such as extended family or friends).
• Household size (top-coded at 7 or more members).

Analytical Approach

Pilkauskas et al. employed a parameterized difference-in-differences approach to evaluate the effects of the 2021 CTC, utilizing variations in benefit generosity based on the number and ages of children in respondents’ households before and after the CTC expansion. They calculated CTC exposure using a simulated instrument, which involved summing two products: the monthly benefit for children under age 6 ($300) times the number of such children, and the monthly benefit for children aged 6–17 ($250) times the number of such children. This measure assigned $0 to all respondents in months before the expanded CTC was distributed.

They also controlled for various respondent characteristics (age, race/ethnicity, gender, education, place of residence) and adjusted for state- and month-specific policies that could influence the outcomes (e.g., SNAP emergency allotments, Pandemic Electronic Benefit Transfers, and extended federal Unemployment Insurance). They also included fixed effects for state of residence, survey month, and the number of children under 18.

This comprehensive analytical approach allowed them to understand how the 2021 expanded CTC influenced the living arrangements and housing stability of low-income families, providing valuable insights into the policy’s impacts on economically disadvantaged groups.

Findings

The Child Tax Credit (CTC) had a modest but positive effect on housing affordability for low-income families. For every additional $100 received in monthly CTC benefits:

• Reduced Need to Move: The likelihood that parents needed to move due to rent or mortgage affordability issues decreased by 1 percentage point, a 13% decline from data gathered before the expanded CTC took effect.
• Decreased Past-Due Rent/Mortgages: The likelihood of owing past-due rent or mortgages dropped by 1.7 percentage points, reflecting a roughly 3% reduction.
• Lower Amount of Back-Owed Rent: The amount of back-owed rent decreased by approximately 13%.

Overall, these findings suggest that the CTC improved housing affordability, even if the changes were not always statistically significant.

The CTC also influenced living arrangements and household composition. With each additional $100 in monthly CTC benefits:

• Increased Change in Living Situation: Families were 1.4 percentage points more likely to report a change in their living situation from the previous month, representing an 11% increase. This includes both changes in household composition and moves to new households.
• Decreased Partner Co-residence: The likelihood of parents living with a partner decreased by 1.4 percentage points. This suggests that the CTC enabled some parents to be able to afford living independently, reducing the necessity for cohabitation.
• Reduced Household Size: Household size decreased by an average of 0.14 people, or 3%, likely due to fewer partners and their associated kin living in the household.

These changes indicate that the additional income provided by the CTC gave parents the financial flexibility to exit shared living arrangements, contributing to smaller household sizes and potentially less crowded living conditions.

The effects of the CTC varied by race, ethnicity, and income levels. With respect to race and ethnicity:

• Black Families: Significant improvements in housing affordability were observed. An additional $100 in CTC benefits led to a 2.4 percentage point decrease in the likelihood of moving due to affordability issues, a 3.7 percentage point decrease in owing past-due rent/mortgages, and a 30% reduction in the amount of rent/mortgages owed.
• Hispanic Families: Although not statistically significant due to smaller sample sizes, the effects were similar in magnitude to those observed in Black families.
• White Families: The effects on housing affordability were less pronounced compared to Black and Hispanic families.
• Living Arrangements: Hispanic parents experienced the most significant changes in living arrangements, followed by White parents. Black parents showed no significant changes in this regard.

With respect to income levels:

• Lower Earnings (<$500/month): This group saw more substantial improvements in housing affordability. The CTC payments significantly reduced the likelihood of owing past-due rent/mortgages and decreased household sizes.
• Higher Earnings: The effects were smaller and less significant for this group. Interestingly, higher earners saw a slight increase in doubling up, while lower earners saw a decline.

Several robustness checks and extensions were performed to ensure the validity of the findings:

• Alternate Specifications: Various model specifications, including controls for the number of children and state-level COVID-19 rates, confirmed the robustness of the results.
• Sample Specifications: Excluding certain survey months and male respondents strengthened the findings, indicating the results were mainly driven by mothers.
• Reweighting Data: Adjusting the sample to match national demographic distributions showed consistent results, although with some variations in the strength of certain effects.

In short, the study found that the 2021 CTC reforms, which provided monthly universal child benefits, improved housing-related outcomes for low-income families:

• These benefits reduced the need for moving due to affordability issues, decreased past-due rent/mortgages, reduced household sizes, and lessened the necessity for cohabitation.
• The positive effects were more pronounced for Black and Hispanic families and those with lower earnings.
• The results highlight how monthly cash transfers can alleviate housing instability and enhance residential independence for vulnerable populations.

What Can You Do?

Improving housing-related outcomes for low-income families requires collective action and commitment. Here are some concrete steps you can take to make a difference:

1. Advocate for Policy Changes: Support the expansion and permanent implementation of the Child Tax Credit (CTC) by contacting your representatives and participating in advocacy campaigns. Policies like the expanded CTC can provide critical financial support to low-income families.
2. Support Affordable Housing Initiatives: Donate to or volunteer with organizations that build or provide affordable housing, such as Habitat for Humanity or local housing non-profits. These organizations often need financial support, materials, and labor to create housing solutions.
3. Engage in Local Housing Advocacy: Join or start a local housing advocacy group to influence municipal policies on affordable housing. Attend city council meetings, participate in public forums, and collaborate with other activists to push for zoning changes and increased funding for affordable housing projects.
4. Provide Direct Assistance: Contribute to emergency rental assistance programs that help families avoid eviction. Many local organizations and community action agencies run programs that offer short-term financial assistance to cover rent and utility payments.
5. Educate Yourself and Others: Learn about the housing crisis and share your knowledge. Use social media, community meetings, and educational workshops to raise awareness about the issues low-income families face and how broader systemic changes can address these problems.
6. Support Tenant Rights: Advocate for stronger tenant protection laws, such as rent control, eviction protections, and the right to counsel for tenants facing eviction. Stronger legal protections can help prevent unjust evictions and ensure more stable housing for vulnerable families.
7. Promote Economic Stability: Support programs and policies that enhance economic stability for low-income families, such as increased minimum wage, access to childcare, and job training programs. Economic stability is closely linked to housing stability.
8. Foster Community Support: Create or participate in community networks that provide mutual aid and support. This can include offering temporary housing, sharing resources, and organizing community drives for essential items like food, clothing, and household goods.
9. Volunteer with Legal Aid Organizations: Many low-income families face legal challenges related to housing, such as evictions or disputes with landlords. Volunteering with or donating to legal aid organizations can help provide these families with the legal support they need to secure their housing rights.
10. Encourage Inclusive Development: Advocate for inclusive development practices that consider the needs of low-income families. This includes pushing for mixed-income housing developments and ensuring that new housing projects include a certain percentage of affordable units.

By taking these actions, you can contribute to improving housing stability and affordability for low-income families, ultimately fostering stronger, more resilient communities.

Do you agree or disagree with the proposed solutions for improving housing stability? Discuss in the comments!

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