The pandemic-era expansion of the Child Tax Credit (CTC) provided significant financial relief to low-income families, and according to a recent study from the University of Michigan, it also played a crucial role in improving housing stability.
Conducted by public policy experts Natasha Pilkauskas, Katherine Michelmore, and Nicole Kovski, the research highlights how essential financial support can be in stabilizing the living conditions of vulnerable households.
Key Findings
The study found that families receiving the monthly Child Tax Credit were less likely to struggle with past-due rent or mortgage payments and were more likely to avoid the need to move due to financial difficulties.
The expanded credit, which increased from $2,000 to $3,600 per child under six and to $3,000 per child aged 6–17, provided much-needed relief during a period of economic uncertainty.
Reduced Financial Burdens
The CTC’s expansion during the pandemic helped alleviate financial burdens that would have otherwise forced many families into precarious housing situations.
Families were not only able to keep up with rent and mortgage payments but also saw an improvement in their overall housing stability.
This financial boost reduced the need for families to live with others out of necessity, lowering the instances of household crowding.
Increased Residential Independence
One of the most notable findings was that the Child Tax Credit enabled parents to achieve residential independence. Before the credit, many parents were forced to live with a partner or others due to financial constraints.
The monthly payments allowed some of these families to afford to live separately, thereby decreasing the number of people living in a single household.
Targeting the Most Vulnerable
The study particularly focused on families with very low incomes, who were among the most affected by these reforms.
While previous research has explored the link between economic need and housing affordability, this study is the first to estimate the direct effects of the Child Tax Credit on housing dynamics.
The findings suggest that the CTC played a significant role in stabilizing housing for these vulnerable families.
The Impact of the Expansion
Broad Reach and Benefits
The 2021 expansion of the Child Tax Credit, passed by Congress in March 2021, had a profound impact on millions of families. Approximately 26 million children benefited from the credit, with nearly all of them residing in low-income households.
The monthly distribution of half the credit between July and December 2021 provided consistent financial support during a critical time, helping families manage their expenses amid the ongoing pandemic.
Housing Affordability Gains
The study’s data shows that the impact of the Child Tax Credit on housing affordability was particularly pronounced among lower earners.
Black and Hispanic families saw more significant improvements in housing stability compared to their white counterparts, highlighting the credit’s role in reducing racial disparities in housing security.
Ongoing Challenges
Despite these benefits, the expanded Child Tax Credit was temporary. As of January 2022, the credit reverted to its pre-2021 levels, which did not extend the same level of support to the poorest families.
This rollback left more than a quarter of the poorest children ineligible for the full credit, underscoring the need for continued legislative efforts to provide sustainable financial relief.
Insights from the Research
Varied Impacts on Housing Arrangements
While the credit improved overall housing affordability, the researchers found no significant evidence that it reduced instances of “doubling up,” where a child lives with adults other than their parents or a parent’s partner.
Instead, the credit enabled some parents to live independently from a partner they were previously living with due to financial necessity.
This shift indicates that the credit helped families achieve greater residential independence rather than merely reducing crowding.
Factors Limiting Conclusions
The study’s conclusions are somewhat limited by the short duration of the expanded credit—only six months—and the context of its distribution during a period of high inflation and other government stimulus measures.
These factors likely influenced how families used the credit, possibly underestimating its long-term effects on housing stability.
Policy Implications
The findings from this study have important implications for policymakers, especially as discussions continue around the potential reform of the Child Tax Credit.
The temporary nature of the 2021 expansion and its subsequent rollback highlight the need for more permanent solutions to support low-income families.
As the expansions to the Child Tax Credit from 2018 are set to expire in 2025, these insights could prove valuable in shaping future policy decisions aimed at improving economic stability and housing security for vulnerable households.
The research underscores the critical role that financial support measures like the Child Tax Credit play in enhancing the quality of life for low-income families. By providing consistent financial assistance, such programs can help prevent housing instability and promote better living conditions for children across the country.
FAQs
How did the Child Tax Credit improve housing stability?
It reduced past-due rent, enabled residential independence, and decreased crowding.
Who benefited most from the Child Tax Credit?
Low-income families, particularly Black and Hispanic households.
Did the Child Tax Credit affect household crowding?
No, but it reduced parents living with partners out of financial necessity.
Why was the expanded Child Tax Credit temporary?
It was part of pandemic relief efforts but reverted to pre-2021 levels in 2022.
What are the policy implications of this study?
The study highlights the need for permanent financial support for low-income families.
