By Amy Shircel
Executive Summary:
This policy memo addresses problems and solutions surrounding Wisconsin’s workforce housing crisis. A background on the state of Wisconsin’s population and housing market will lay out the scope of the issue, followed by an issue analysis of how a lack of workforce housing ultimately inhibits Wisconsin’s economic competitiveness. Lack of workforce housing harms both large and small stakeholders; including individual employees, large businesses, and Wisconsin’s overall ability to retain workers to meet business needs. I examine the pros and cons of the policy options of expediting Wisconsin’s housing approval process and reducing zoning restrictions, as well as allowing statewide Inclusionary Zoning. Finally, I make a policy recommendation to expand 2017 Wisconsin Act 176 to create a special housing renovation tax credit, in combination with an expedited housing approval process.
Background Summary:
In the years 1994 through 2004, before the crash of the housing market and the Recession that followed, Wisconsin issued about 36,000 housing building permits per year (Paulsen 2019). Housing costs have now exceeded pre-housing crisis levels, depicted in the figure below (Paulsen 2019).
With the end of the Great Recession, the number of available jobs increased by 8.2%, attracting a large influx of workers to our state (Paulsen 2019). Since the end of the Recession, the population in Wisconsin has risen steadily, and has increased by 2.2% from 2010 to 2018, with a net increase of 126,286 people (U.S. Census Bureau 2019).
As a result of this constant population growth, the housing supply has not been able to keep up with the ever-expanding workforce, leading to a workforce housing gap in Wisconsin: the economy is growing, while the housing stock is falling behind. Workforce housing is housing that is affordable to households earning between 60 to 120 percent of the area median income (National Association of Realtors). Workforce housing is typically considered housing for public employees such as teachers, firefighters, garbage men, and police officers, “who are integral to a community, yet who often cannot afford to live in the communities they serve”(National Association of Realtors). Workforce housing also encompasses service workers, construction workers, retail workers, and young professionals.
Throughout the state for the last 10 years, housing construction is on a slow decline, while employment is on a steep incline, engendering a deficit of housing for employees. In the 20 largest counties, there was a net underproduction of nearly 20,000 housing units, shown in the figure below (Paulsen 2019).
Clearly, a lack of housing is not confined to the borders of large, urban cities. In 2018, Sheboygan, Wisconsin had 3,000 jobs to fill, but not enough houses to fill these job openings (Mitchell 2018). One man in Sheboygan reported looking for housing for his family for over a year with no success, and as a result, has commuted from North Carolina to Wisconsin every week for work, while also strenuously looking for a place to live (Michell 2018). Sheboygan County is desperate for the construction of more workforce housing: “people would be moving to Sheboygan for work, but our population growth is stunted by our lack of housing,” said Dane Checolinski, director of the Sheboygan County Economic Development Corps (Hess 2017).
This pattern of need for workforce housing is mirrored in Dane County, Milwaukee County, Walworth County, and throughout the state. Employees are either forced to live far from their place of work, to pay unfair prices for housing, or to leave Wisconsin’s workforce all together (Paulsen 2019). Clearly, there is a need for bold bipartisan action from politicians and legislators across the state to address this ongoing and economically destructive housing crisis.
Problem/ Issue Analysis:
Workforce housing is defined as the supply of housing in a community that meets the needs of the workforce in that community, and can include a variety of housing types, sizes, prices, and locations (Paulsen 2019). Madison’s mayor, Satya Rhodes-Conway, emphasizes that workforce housing IS affordable housing, so when housing is not affordable, employers and businesses feel a harsh blow (Rhodes-Conway 2019). Mayor Rhodes-Conway goes on to explain that when cities lack adequate affordable housing, it suppresses economic growth, and creates a ripple effect across the entire state: “This is not just a Madison problem”, she stresses, making evident that the need for state-wide bipartisan action is crucial for economic prosperity.
Wisconsin is home to many large business headquarters that require more workforce housing. For example, Sheboygan County is home to Kohler Co., which employs about 8,000 workers, most of them native to Sheboygan County, and planners for the construction of Foxconn Technology Company in Racine, which will employ about 13,000 people, have expressed the need for more workforce housing to staff their facilities (Romell 2019). Housing growth has not kept pace with need, the price for decent housing is increasing more rapidly than incomes, and the existing housing stock is aging, becoming inadequate and unsuitable for potential renters and buyers (Paulsen 2019). Restrictive zoning regulations, such as minimum lot sizes, excessive parking requirements, and long approval processes also impede affordable housing creation (Paulsen 2019). In Wisconsin, it has become extraordinarily difficult for businesses to recruit and retain employees, sharply decreasing the state’s economic competitiveness (Paulsen 2019).
Options:
Expedite approval processes and reduce zoning restrictions at state levels: The state of Wisconsin in general is restrictive when it comes to zoning and land-use regulations, which in turn raises the overall costs of housing (Paulsen 2019). A study conducted by the National Association of Home Builders found that strict zoning regulations can “drive up the cost of single-family homes by at least 24 percent, and multifamily housing by 30 percent” (Paulsen 2019). Additionally, when building proposals are made to local municipalities, the approval process often takes years to be completed because delays cause cost overruns with contractors, which leads to developers charging more for housing (Paulsen 2019). In turn, the price of new housing units increases.
Wisconsin should pass a law requiring local governments to make an approval decision on housing proposals within 90 days of their proposal to local authorities, which will increase the supply of housing in a shorter period of time, and also facilitate the construction of affordable units for Wisconsin’s increasing workforce population. However, expediting the process may not always translate into meaningful time savings for developers (Inclusionary Housing 2018). Our government is intentionally slow in nature; and local and state governments can only move so quickly (Harrington 2019). With limited staff resources, there is a limit to how quickly housing permits can be approved.
Allow Inclusionary Zoning: Local Inclusionary Zoning (IZ) laws create affordable housing by requiring new housing developments to have a certain percentage of units sold/rented at affordable prices to provide housing to low-income residents that would be otherwise unable to afford it (Murphy 2008). IZ policies have the potential to produce great numbers of affordable housing units by requiring developers to generate new low income housing within each development built. However, IZ was eventually outlawed in Wisconsin, as it was interpreted as a form of rent control (Lubell 2016). Inclusionary Zoning laws throughout Wisconsin could provide affordable housing units for prospective employees and lessen the impacts of the workforce housing crisis. However, other studies have shown that IZ legislation has been found to weaken economic incentives for developers to build new units, decreasing housing supply and increasing housing prices, which could inhibit new workforce housing creation in Wisconsin (Lubell 2016).
Recommendation:
Expand Affordable Housing Tax Credit (Act 176). Wisconsin has a significant amount of existing housing stock that has the potential to provide affordable workforce housing for places that cannot create supply of housing to meet the demand. However, most of the existing housing stock is outdated and in need of improvement: over 60 percent of Wisconsin’s single-family structures were built before 1980 and are in need of substantial repair, modernization or energy-efficient investments (Paulsen 2019).
Wisconsin Act 176, passed by the Wisconsin State Legislature in 2017, creates income and franchise tax credits for the development of low income housing (Wisconsin State Legislature 2017). The Legislature should consider amending Wisconsin Act 176 to create a distinct pool of tax credits that will go specifically towards renovation, preservation, and improvement of existing single and multi-family units throughout the state. Supply-driven public and private housing development often fails to provide adequate quantity and quality housing, so it is important to emphasize the importance of existing housing to combat Wisconsin’s housing crisis (Gurran 2018). These conversions could allow single family units to become two-flat units, three flat units, or duplexes, increasing the amount of housing available.
In combination with amending Act 176, legislators should consider authoring bills that require an expedited approval process of 90 days for any construction or renovation proposals for affordable units. This shortened approval process should significantly increase the amount of housing that becomes available to Wisconsin’s workforce, while also ensuring a streamlined process that does not engender a rise in housing prices due to years waiting for approval. The combination of these actions would ensure Wisconsin employees have a place to live, boost the numbers of Wisconsin’s workforce, help businesses expand, and elevate statewide economic competitiveness.
Conclusion:
Workforce housing is economic development because a home is where a job goes to sleep at night (Paulsen 2019). Clearly, counties around the state, including Sheboygan, Milwaukee, and Dane County, have demonstrated a need for increased workforce housing. Wisconsin has a responsibility to its citizens to act as comprehensively as possible in addressing this crisis to help meet Wisconsin’s growing population. In order to foster economic growth and create an equitable city for Wisconsin’s present and future workforce, leaders must push for bipartisan action to increase workforce housing throughout the state.
Works Cited
Gurran, N., Rowley, S., Milligan, V., Randolph, B., Phibbs, P., Gilbert, C., James, A., Troy, L. and van den Nouwelant, R. (2018). Inquiry into increasing affordable housing supply: Evidence-based principles and strategies for Australian policy and practice. AHURI Final Report 300, Australian Housing and Urban Research Institute Limited, Melbourne, http://www.ahuri.edu.au/research/final-reports/300, doi: 10.18408/ahuri-7313001.
Harrington, Eileen. “Lecture in Political Science 272.” University of Wisconsin-Madison: 2019.
Hess, C. (2017, June 26). “Sheboygan wants hundreds of spec homes and condos built for growing workforce”. BizTimes: Milwaukee Business News. Retrieved from https://biztimes.com/sheboygan-wants-hundreds-of-spec-homes-and-condos-built-for-growing-workforce/
Inclusionary Housing. (2018, January 3). “Expedited Processing”. Retrieved November 30, 2019, from https://inclusionaryhousing.org/designing-a-policy/land-dedication-incentives/expedited-processing/.
Lubell, J. (2016). Preserving and Expanding Affordability in Neighborhoods Experiencing Rising Rents and Property Values. Cityscape 18, no. 3 (2016): 131-150. https://www.jstor.org/stable/26328276?seq=1
Mitchell, R. (2018, August 8). “Sheboygan leaders addressing housing shortage”. Retrieved November 27, 2019, from https://www.tmj4.com/news/local-news/sheboygan-county-leaders-work-to-address-housing-shortage.
Murphy, B. J. Inclusionary Zoning Ordinance Evaluation Study, (2008). Madison, WI.
National Association of Realtors. Workforce Housing Overview. https://www.nar.realtor/home_from_work.nsf/files/PG%20Module%201.pdf/$FILE/PG%20Module%201.pdf
Paulsen, K. (2019). Falling Behind. Madison, WI: Wisconsin Realtors Association: 2019. https://www.wra.org/Legislative/Special_Reports/WRA_2019_Workforce_Housing_Report__Falling_Behind/
Rhodes-Conway, Satya. “Lecture in Political Science 272.” University of Wisconsin-Madison: 2019.
Romell, R. (2019, March 13). “Kohler Co. will end engine manufacturing in Sheboygan County, but employees will be offered other jobs”. Milwaukee Journal Sentinel. Retrieved from https://www.jsonline.com/story/money/business/2019/03/13/kohler-co-end-engine-manufacturing-sheboygan-county/3147374002/
“U.S. Census Bureau QuickFacts: Wisconsin”. (n.d.). Retrieved November 27, 2019, from https://www.census.gov/quickfacts/fact/table/WI/PST120218#PST120218.
Wisconsin State Legislature, Wisconsin State Legislature (2018). Retrieved from https://docs.legis.wisconsin.gov/2017/related/acts/176.
“Workforce Housing Overview,” 1–14. Accessed April 5, 2020. https://www.nar.realtor/home_from_work.nsf/files/PG Module 1.pdf/$FILE/PG Module 1.pdf.