Market forces and low wages combine to create big gaps in affordable housing in Wisconsin
Stacey Burkhart is a community leader.
She is the head of SAGE Green Bay, an organization that promotes the arts in the region, and owner of Eight Trees Co., where she makes stuffed animals with clothes that have special value for the customer. In addition to planning events and connecting artists to SAGE Green Bay, Burkhart is an advocate for fair compensation for artists and community building. She is passionate about the arts, her work for the community and is accessible and present for her three children.
Despite her leadership, Burkhart struggled to find affordable housing in the very community she served as she moved on to life as a single mother of three.
Burkhart began his search for a two- or three-bedroom apartment or house on the Internet. She was looking for something that would have enough space for her 6 year old twins, a third 8 year old child and her dog. It was difficult to find anything to rent for less than $ 900 a month, and qualifying for a mortgage that would cover the cost of purchasing a suitable home was difficult.
“Not only was my income too low, but in addition to being self-employed, apart from using my Annex C for my taxes – there was no proof that my income was sustainable. I wasn’t getting a salary from a corporate job, ”Burkhart said.
While the math isn’t straightforward, Burkhart estimates that she earns around $ 12 an hour as a freelance.
“I kept hitting one roadblock after another so I put everything on hold,” Burkhart said. “I literally conceded that I wasn’t going to be able to find housing and still be able to keep running my business, yet still be able to volunteer like I did, and, you know, I just gave up. “
In December, she got lucky when a friend told her about opening an affordable apartment – 3 bedrooms for $ 800 a month in Pulaski. Someone this friend knew had just bought the building. She moved into the apartment in April.
“But if my friend hadn’t known about my situation, I wouldn’t have found this place because I really believe the only reason I walked into this house was because it was never marketed.” , said Burkhart.
Burkhart is far from the only person facing stiff competition for the limited number of low-cost housing on the market.
In northeastern Wisconsin, individuals and households with low and low incomes face daunting challenges in finding affordable homes and apartments.
Some have very low incomes, but most are known as ALICE households, which stands for Asset Limited, Income Constrained and Employed. These are working families struggling to find housing at a price that still leaves enough money for food, transportation, childcare and other household expenses. In Brown, Outagamie and Winnebago counties, about a third of all households struggle to meet their basic expenses, according to United Way’s ALICE 2020 report.
This tight real estate market begs the question: how did we get here? And if there is so much demand for affordable housing and people willing to pay for it, why aren’t developers providing more of this type of housing?
How serious is the shortage?
There is a shortage of more than 119,000 rental units in Wisconsin, according to data organized by the National Low Income Housing Coalition.
Northeastern Wisconsin is no exception to this shortage:
- Green Bay will have to build up to 310 rental units per year to meet the demand for housing projected by 2040, and faces a particularly acute need on the low end of the rental cost, according to a study commissioned by the Green Bay Redevelopment Authority.
- Appleton Consolidated Plan 2020-2024 on housing indicates a shortage of one and two bedroom apartments. Only 625 units were available at an affordable rate to households earning 30% of the median family income in the Appleton area. There are 3,525 households in the Appleton area in this income bracket.
- Door County had a gap of 470 apartments for households who wanted to move to Door County but could not find suitable housing, according to a 2019 housing analysis commissioned by the Door County Economic Development Corporation.
- And parts of northeastern Wisconsin need to replace obsolete housing. In Marinette County, for example, a Bay-Lake Regional Planning Commission 2017-2018 study – the most recent study by the commission – indicates that more than one in three homes was built in 1939 or before.
How would you define “affordable”?
Nonprofits, advocates, and government generally consider housing affordable if it costs a third of a person’s income.
The federal government considers a household as “frequented by the costs” when the percentage of income they pay for housing exceeds 30%. Households that pay more than that for rent or a mortgage usually struggle to make ends meet and may end up having to choose between paying rent and covering other living expenses.
In addition to 30% as a generally considered financial burden threshold, some rental companies follow a similar guideline when selecting tenants. They require applicants to earn at least three times the monthly rent and have proof of income.
“I saw a two bedroom duplex in Green Bay for $ 825 (per month) and then he said your income had to be three times the monthly rent,” Burkhart said as an example of how difficult it is to qualify to rent. a flat.
In doing the math, she estimates that a tenant should earn at least $ 15 an hour and work full time to rent that apartment.
So if a two bedroom costs about $ 800 per month, then a three bedroom would cost about $ 1,200, and a tenant would need an income of about $ 3,600 per month, or a salary of about $ 22. , $ 50 per hour.
“And that’s about what I saw, it was like that $ 1,200 for a three bedroom,” she said. “Certainly not.”
A typical Wisconsin household needs to earn an annual income of $ 35,913 to afford a two-bedroom rental home at HUD’s Fair Market Rent, a rent slightly below the average of all rents paid in an area, according to the National Low Income Housing Coalition. Fair market rent is calculated using data from the American Community Survey from the US Census Bureau and is used to determine the amount paid by Section 8 Housing Vouchers – housing assistance available to low-income families, seniors, and people with disabilities.
If so many people need housing, why won’t developers build more housing units?
Economy 101: If there is a demand for something, suppliers will meet that demand. There are paying buyers, after all.
But this is not the case for the lower end of the housing market. Despite the demand for affordable housing and buyers willing to pay for it, developers are not standing up to meet this demand.
Cheryl Detrick, President and CEO of NEWCAP, explains that the reason is simple: developers find it too expensive and unprofitable to build low-cost housing.
NEWCAP helps households achieve economic stability in 10 counties in northeastern Wisconsin. Detrick worked in the construction industry and NEWCAP owns a construction business.
She says she also understands that homeowners and developers want to maximize their money and sell higher rent homes because there is less risk for a landlord.
“So it’s easier for a developer to build mid-range and high-end rental housing than it is to build on the low-end,” Detrick said. “Because at the bottom of the ladder you start to deal with employment and credit issues and a certain fluidity that you don’t have as much in the mid and high end.”
However, she noted, there is a benefit to the community in figuring out how to provide affordable housing and how to help homeowners manage these risks and cost challenges.
Tax credits could help offset the costs, but there is strong competition for such credits.
With the cost of construction skyrocketing, it’s costly to build homes and keep rent affordable.
“The only way to do that and build affordable housing is to get tax credits to offset the cost,” Detrick said. “Because you won’t earn enough rent to make a mortgage.”
Such tax credits exist, but only partially meet the need, said attorney Scott Schnurer of Legal Action Wisconsin. Wisconsin lawsuit is a non-profit law firm serving low income clients. This includes free civil legal services for clients with housing law and housing conditions cases.
“It’s an opportunity that can be used, but we just don’t see it enough in any of our communities,” Schnurer said.
Here is an example of how it works at a Marinette site, where NEWCAP is building 45 affordable apartments.
The cost of the construction, Detrick said, without any additions, is around $ 7.5 million. Housing tax credits for low-income people by the Wisconsin Housing and Economic Development Authority grossed $ 6.2 million. The rest was financed by a mortgage small enough to allow NEWCAP to keep rents affordable.
“So if I didn’t get the tax credits, it would be financially impossible for us to build the building and house low income people. And very low income would be almost an impossibility,” Detrick said.
One solution on the supply side of the housing market, Detrick said, is to expand available tax credits that for years have only been able to fund a portion of requests for help.
WHEDA received funding requests valued at $ 61 million, exceeding the $ 31.9 million available agency through state and federal programs in 2020.
This year has been similar, with $ 35 million in available tax credits and $ 57 million in claims.