In a recent study by the University of Michigan, researchers have found that the pandemic-era expansion of the Child Tax Credit significantly improved housing affordability for families with low incomes. This research sheds light on how crucial financial support can be in stabilizing living conditions for vulnerable households.
Conducted by Natasha Pilkauskas and Katherine Michelmore, associate professors of public policy, along with Nicole Kovski, a former U-M postdoctoral fellow now at the University of Wisconsin, the study revealed some compelling insights.
Child Tax Credit Expansion Study Findings
Families who received the monthly credit were notably less likely to owe past-due rent or mortgage payments. Furthermore, they were less likely to face the need to move due to financial constraints.
The Child Tax Credit not only alleviated financial burdens but also enabled parents to achieve residential independence from partners they were living with. This financial relief contributed to a reduction in household crowding by decreasing the number of people residing in a single household.
The study zeroed in on families most affected by these reforms—those with very low incomes, a group of particular interest to policymakers. Despite previous research highlighting the impact of economic need and housing affordability on living arrangements, this is the first study to estimate the effects of the Child Tax Credit on these dynamics.
- Reduced past-due rent or mortgage payments
- Decreased need to move due to unaffordable housing
- Increased residential independence
- Lowered household crowding
This research underscores the importance of financial support measures in enhancing the stability and quality of life for low-income families. The findings provide valuable insights for policymakers aiming to design effective economic relief programs.
In March 2021, Congress passed a temporary expansion of the Child Tax Credit aimed at mitigating the adverse impacts of the COVID-19 pandemic on families with children. This expansion saw the benefit increase from $2,000 to $3,600 per child under age 6, and to $3,000 per child aged 6–17. Additionally, eligibility was extended to families with no earnings, offering significant relief during a critical time.
The Impact of the Child Tax Credit Expansion
The reforms had a profound impact, with approximately 26 million children gaining credit eligibility or receiving higher benefits. Notably, nearly all of these children resided in low-income households, highlighting the importance of this support during the pandemic.
Temporary Support: A Lifeline for Families
From July to December 2021, half of the credit was disbursed as a monthly payment, providing consistent financial assistance to families in need. This monthly distribution was crucial in helping families manage their expenses during an uncertain time.
The Reversion to Pre-2021 Levels
Despite the evident benefits, lawmakers were unable to secure enough support to make these changes permanent. As of January 2022, the Child Tax Credit reverted to its pre-2021 version, which included restrictions that left more than a quarter of the poorest children in the U.S. ineligible for the full credit.
This rollback highlights a significant gap in support for the most vulnerable families, underscoring the need for continued advocacy and legislative efforts to provide sustainable financial relief for all children.
Examining national data from a sample of parents who received Supplemental Nutrition Assistance Program benefits, researchers discovered significant impacts of the monthly credit on housing affordability.
The effects were notably more pronounced for lower earners compared to higher earners. Further analyses by race and ethnicity revealed that the credit improved housing affordability more for Black and Hispanic families than for their white counterparts.
Impact of Monthly Child Tax Credit on Housing Affordability
“Our findings suggest the monthly child tax credit helped low-income parents afford their housing,” said Pilkauskas. “We know that stable housing is very important for children, and the evidence from our research indicates the credit enabled families to pay their rent and stay in their homes.”
Insights from the Research
Michelmore added that they initially hypothesized the credit might reduce instances of doubling up—where a child lives with other adults beyond their parents or parent’s partner. However, the data showed no evidence supporting this hypothesis. Instead, she noted that parents were less likely to live with a co-resident partner. Summing up:
- The monthly child tax credit had a greater impact on housing affordability for lower earners.
- The credit significantly benefited Black and Hispanic households more than white households.
- Stable housing is crucial for children, and the credit helped families maintain their homes.
- There was no reduction in households doubling up, but there was a decrease in parents living with a co-resident partner.
These insights underline the importance of financial support measures like the monthly child tax credit in enhancing housing stability for low-income families, particularly among minority communities.
“We believe this occurs when couples separate but continue living together due to financial reasons,” she explained. “Once parents received the credit, they could afford to live independently.”
Factors Limiting Firm Conclusions
The researchers warn that several factors prevented them from drawing absolute conclusions from their study. Notably:
- The monthly child tax credit was provided for only six months.
- Families who perceived the benefit as temporary might have been less inclined to change their living arrangements.
- The credit was given out during a period of high inflation, which likely led to an underestimation of its effects.
Challenges of the Distribution Period
Additionally, the expanded credit was distributed during a pandemic, and soon after the government introduced other forms of stimulus. These circumstances make it harder to generalize the results.
Policy Implications
Michelmore noted that their findings could be valuable for policymakers in the near future. The expansions to the Child Tax Credit implemented in 2018 are set to expire in 2025, prompting discussions on how to reform the credit.
To read more about the topic visit the website where the research article can be found: https://read.dukeupress.edu/demography/article/61/4/1069/389197/The-Effects-of-the-2021-Child-Tax-Credit-on