My old notes say:
The housing allowance is included in the EITC and Child Tax Credit definitions of earned income. See Internal Revenue Code § Sec. 24(d)(1) and Sec. 32(c)(2)(A)(ii).
Employees are treated somewhat differently than self-employed individuals. Sec. 32(c)(2)(A)(i) provides that wages, salaries, tips and other EMPLOYEE compensation are considered to be earned income, but only if the amounts are includible in gross income. However, Sec. 32(c)(2)(A)(ii) provides that the amount of earnings from self-employment under Sec. 1402 are automatically included in earned income for EITC and CTC purposes -- even if the amounts are not included in gross income. So there you have it -- self-employed persons who have non-taxable SE earnings are required to include such earnings in the definition of earned income for EITC and CTC purposes.
Has this changed or been rescinded? I don't think my Lacerte software is taking this into consideration and is leaving off the Housing Allowance from "earned income" for purposes of calculating the EITC and the CTC.