The affordable housing shortage has deep roots, no easy solutions
By Nusaiba Mizan
Green Bay Gazette
GREEN BAY – Stacey Burkhart is a community leader.
She is the head of SAGE Green Bay, an organization that promotes the arts in the area, and the owner of Eight Trees Co., where she makes stuffed animals with clothes that have special value to the customer.
In addition to planning events and connecting artists at 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 involvement, Burkhart struggled to find a place to live in the very community she served as she moved on to life as a single mother of three.
Burkhart began her search for a two- or three-bedroom apartment on the internet, looking for something that would have enough space for her 6-year-old twins, a third 8-year-old, and her dog.
It was difficult to find anything for less than $ 900 per month, and qualifying to rent was difficult.
“Not only was my income too low, but being self-employed – other than using my Schedule C for my taxes – did not exist as proof that my income was viable. 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 while still being able to continue my business, while still being 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 – three bedrooms for $ 800 a month in Pulaski.
Someone her 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,” Burkhart said.
Burkhart is far from the only person facing stiff competition for the limited number of low-cost housing on the market.
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 housing 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’s Consolidated Housing Plan 2020-2024 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 that 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 Corp.
• Areas of northeastern Wisconsin need to replace dilapidated housing. In Marinette County, for example, a 2017-18 study by the Bay-Lake Regional Planning Commission – the commission’s most recent study – indicates that more than one in three homes were 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 to be “burdened with costs” when the percentage of income it pays 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.
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 is helping households achieve economic stability in 10 counties in northeastern Wisconsin.
Detrick worked in the construction industry and NEWCAP owns a construction business.
She said she also understands that landlords 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 scale 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 said 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
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 take out a mortgage. “
Such tax credits exist, but only partially meet the need, said attorney Scott Schnurer of Legal Action Wisconsin.
Legal Action Wisconsin 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.
Low-rental housing tax credits offered by the Wisconsin Housing and Economic Development Authority brought in $ 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 accommodate low-income people. And a very low income would be almost impossible, ”said Detrick.
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 has received funding requests worth $ 61 million, exceeding the agency’s $ 31.9 million available through state and federal programs in 2020.
This year has been similar, with $ 35 million in available tax credits and $ 57 million in claims.
A less likely solution: increase wages
Another potential solution is to increase people’s incomes so that they can pay higher rent, Detrick said.
That would solve the ability to pay problem of the equation.
The increase in the minimum wage has long been slaughtered at the state and federal levels.
And Wisconsin state law prohibits local governments from raising wages, so this can only be done by state and federal governments.
While some neighboring Midwestern states have raised their minimum wages, Wisconsin remains at the federal minimum of $ 7.25 an hour, which was last increased in July 2009.
Twelve years later, this $ 7.25 does not have the same weight as in 2009.
According to the US Bureau of Labor Statistics Consumer Price Index inflation calculator, a worker would have to earn $ 8.97 per hour to have the same purchasing power as $ 7.25 per hour. hour in 2009.
The calculator uses the Consumer Price Index which tracks the monthly changes in the prices consumers pay.
The price index also takes into account sub-categories such as food, housing and household energy.
The cost of living is accelerating, with inflation rising at the fastest rate in more than a decade as the national economy recovers from the coronavirus pandemic.
Prices rose 4.2% from April 2020 to 2021, according to the most recent Bureau of Labor Statistics report, not seasonally adjusted.
This is the largest price increase since 4.9% since the period between September 2007 and September 2008.
“That’s the other answer to that,” Detrick said. “You can do it on the rental side, or you can do it on the income side, or you try to do both. “
This story was produced by the NEW News Lab, a newsroom collaboration that focuses on issues of importance to Northeastern Wisconsin.
Editor’s Note: To read Part 1 of the series, CLICK HERE.