Tax Legislation Holds Promise of Assistance for DC Residents Struggling with High Housing Expenses

November 15th, 2011 | by Ed Lazere

DCFPI will be testifying this Wednesday in support of legislation that would ease housing burdens for thousands of DC residents affected by gentrification and its impact on their property taxes or rent. 

The hearing is on legislation to modernize a tax credit — known as “Schedule H” —  that is intended to help lower- income residents facing high property tax bills.  Schedule H has been around for 35 years, but while times have changed, the credit has not.  The rules are now so restrictive and complex that very few DC households actually get help from Schedule H.  That would change if the legislation introduced by councilmembers Jack Evans, Michael Brown and Phil Mendelson is adopted.  

The property tax is tied to what your home is worth —  not what you earn — which means there can be times when someone’s property taxes are high relative to their income.  Think about a retiree whose home is in the middle of a gentrifying neighborhood, or a homeowner who lost her job and is having trouble paying bills.  

Property taxes affect renters, too, since landlords pass on their expenses to tenants through the rents they charge.  Given DC’s incredibly high and rising rents, property taxes add to the challenges low-income residents face paying rent each month. 

Schedule H is supposed to help both homeowners and renters by offering a tax credit of up to $750 when property taxes are high relative to income.  (Under Schedule H rules, 15 percent of rent is considered a property tax equivalent.)   But the credit’s design has been neglected for decades and simply doesn’t work well now.  The income eligibility limit was set at $20,000 almost 35 years ago and has not been adjusted once since then.  There’s a requirement that two people sharing housing must combine their income when applying, which means that a young parent who moves in with her mother cannot get Schedule H if she and mom earn as little as $10,000 each. 

The legislation would address these and other problems with Schedule H.  It would raise the income eligibility level to $50,000 —  and adjust for inflation annually after that —  and it would allow adults living together to apply for Schedule H based just on their income.  It would increase the maximum credit —  which also has not been adjusted since the 1970s —  to $1,000. 

The price tag for these changes is significant.  But as the District climbs out of the recession — and as gentrification and rising rents continue — taking steps to help residents struggling with property tax bills should be a priority.

One Response to “Tax Legislation Holds Promise of Assistance for DC Residents Struggling with High Housing Expenses”

  1. njp says:

    Why is this necessary in light of the fact that longtime homeowners in gentrifying neighborhoods already receive the benefit of the homestead deduction, which limits the growth of their tax bills to no more than 10%/yr. You’ve got folks paying $500 a year living next door to ones paying $5,000. And the liability is even less if the longtime homeowner is a senior citizen and thus entitled to have their tax rate cut in half. This reflexive liberalism rather than good policy. And knocking $700 off the tax bill of a landlord is going to have very little relative impact on the rent they charge. Stop blaming gentrification for causing displacement — most studies of what’s happening here readily refute that notion.