Can you still afford to rent in Madison?

Families, young professionals aren't mincing words
Can you still afford to rent in Madison?

Madison families and young professionals aren’t mincing words. They say the city’s rental market is “a nightmare,” “verging on highly unaffordable” and turning into “an absolute [expletive] housing crisis.”

When Jeanette Dainty found out her family of four had to move because the landlord was selling their two-flat house, she expected the hunt for new rental housing to be “a little frustrating.”

“We know that Madison is going through some changes and that housing options are pretty tight right now,” says the 46-year-old mother of two.

In preparing to leave the south-side Bram’s Addition neighborhood where they lived for six years, Dainty first made a short list of requirements for her family’s next home. They needed a new rental with at least two bedrooms that allowed pets — a dog, a cat and a gecko — and was located within the Madison Metropolitan School District. If possible, the place would have a garage as well.

Next, she and her partner set a budget between $1,300 and $1,500 a month for rent and began house hunting.

“We started checking Craigslist and looking around online, doing all of the usual stuff you’re supposed to do,” she says. “I was thinking it would take about a week to find a new place.”

She was wrong. Like others seeking local housing, she learned that in Madison, it takes much longer than a week to find an affordable place to rent.

In total, Dainty’s quest, which began in early February, took three months and included a slew of challenges, a roller coaster of broken promises from landlords and a few con artists listing properties online that they didn’t own or that didn’t exist.

Toward the end of her struggle to secure housing, Dainty says she suffered through a late-night panic attack and a breakdown at work. She eventually moved her family into her parents’ RV camper for three weeks before finally — and only by chance — finding a house that met their needs and budget.

A friend of Dainty’s, a real estate agent, told her about a two-flat house in the neighborhood of Bay Creek she had just sold. “I reached out to the [new owner who] said she was going to fix up the place and put it up for rent in August,” explains Dainty, who works for an online retail company. “But after hearing our story, she pushed all of her plans forward so we could move in.”

In mid-May, Dainty and her family moved into their new home. It doesn’t have a garage, but there is a shed. “I’m just so happy to have a bathtub I can call my own,” Dainty says.

After her experience and talking with friends about their difficulties, Dainty doesn’t mince words when she describes the state of Madison’s rental market: “It’s an absolute [expletive] housing crisis.”

Too Few VacanciesCan you still afford to rent in Madison?

The challenges Dainty and other renters are facing are well known and widespread, says Matthew Wachter, manager of the Office of Real Estate Services, a part of the city’s Economic Development Division.

“We have a fairly low [rental] vacancy rate of around 3%,” he says. “Five percent is considered a healthy vacancy rate in the United States and we’ve been stuck between 2% and 3% for many years.”
Wachter notes that Madison’s housing data are more accurate and up-to-date than that of other municipalities because the city can pull quarterly multifamily unit vacancy rates from Madison Gas and Electric Co., while other cities rely on other measures with far wider gaps, like U.S. Census data.

Not surprisingly, low vacancy rates have an adverse impact on some renters. “It means that there are more people chasing the units that are available,” explains Wachter, who has studied the city’s housing market on and off for a decade. “That has a couple of effects — one being that landlords can be more picky in who they rent to. So people with lower incomes or poor rental history … those are the ones who are squeezed out and have a harder time finding units to rent.”

Additionally, a low rental vacancy rate also “shifts the economic balance of power between landlord and tenant toward the landlord, so they can charge more,” he says. “And rents have gone up.”

According to ABODO, a national apartment listing service started and headquartered in Madison, apartments in the area “range from $550 for a studio to $3,000-plus for a two-bedroom luxury apartment.”

As of early July, ABODO’s website listed the average monthly rent in the city at more than $900 for a studio apartment, about $1,135 for a one-bedroom, more than $1,400 for a two-bedroom and almost $1,900 for three-bedroom rentals. These rates were roughly the same last year as rental costs across the state and country remained flat throughout 2018.

But that has not been the case in the past. Since 2011, when ABODO first started collecting data, rent for a one-bedroom apartment has increased from a median of $723 to its current $1,165 per month — a jump of $442 or almost 38% in eight years. Two-bedroom rentals that were $1,071 a month in 2011 are now going for $1,453 — an increase of $382, or 26%.

Millennial and Senior Demand
While the increase in rent is unfortunate for renters, it’s not unexpected. There’s simply more demand for the current amount of rental housing stock.

“There is a lot of pressure on rental properties in Madison right now,” says Sam Radbil, ABODO’s senior communications manager. “Millennials are renting apartments for longer periods of time than the generations that came before them, housing inventory is tighter, the housing crash has scared a lot of potential homeowners [and] baby boomers are downsizing and looking for a more convenient lifestyle in trendier areas of the city.”

“All of these factors are causing a high demand for apartments, which leads to increased rent prices,” he continues. “With homeownership rates falling, it makes sense for landlords to continue to raise pricing on their rental units, especially in markets with tighter inventory.”

Radbil adds that there is one group that usually doesn’t have any trouble finding housing: college students. “Campus housing has really developed throughout the past few years, so students have more control as more options are available to them for renting,” he says.

In addition to younger folks renting longer and retired residents shifting from ownership to rental, Madison’s longstanding population growth rate also has an impact.

“We’ve always had very steady growth [of about] 1% per year,” says Wachter.

According to the U.S. Census, Madison’s population was 208,000 in 2000 and jumped to about 233,000 in 2010. The latest estimate, released in May, counted just over 258,000 city residents.

Although the city was growing, if you “look back at 2000-2005, we were actually losing renters because homeownership was so popular,” says Wachter. But through the 2007-2009 Great Recession, city growth sped up and almost all of the additional households were renters.

In recent years, new housing development has erupted around the city but has mostly been concentrated downtown to fill a specific need: those who want and can afford relatively expensive new apartments.

“What’s been happening in the background, beyond adding large numbers of people … you need to look at who we’re adding — [it’s] a lot of younger rental households and a lot of that is higher income,” Wachter says. “There has been an influx of relatively high-income renters and that is the new demand that the market is having to meet. So there’s this high-income group of people choosing to rent and developers are meeting that demand with higher-end supply.”

That new rental supply includes many $1,200- or $1,500-per-month one-bedroom apartments, which is technically affordable to the city’s median one-person household. “If you make $65,000 a year, you can afford those units,” explains Wachter. “So, the market is doing a good job with that.”

There’s also another factor at play — the cost to build has increased. “Construction costs have just gone up so much in recent years that it’s just sort of mathematically impossible for developers to deliver new construction units that are affordable to low- and moderate-income renters,” Wachter says.

Low-Wage Renter WoesCan you still afford to rent in Madison?

As a full-time barista and part-time college student, Thomas Jones certainly fits into the low-to-moderate-income bracket. When his roommate moved to Florida last March, Jones was unable to cover the $1,200 monthly rent on their two-bedroom apartment near East Towne Mall. So he moved his furniture into a storage locker and has been sleeping on the couch of a friend ever since.

Also a legislative intern in the Capitol, Jones has been looking for a one-bedroom downtown, but he hasn’t found much that fits his ideal $800-a-month budget. He says many landlords are simply unresponsive.

“It’s been a nightmare,” says the 23-year-old. “We have all of these new high-rise [apartment buildings] going up, but those are ridiculously expensive.”

One option Jones briefly considered was a basement studio apartment that was $875 a month, “but they wanted another $160 for parking, so that’s almost $1,000 [a month] before utilities,” he says. “I’m not going to pay $1,000 a month for a studio. I can’t.”

When Jones, originally from Green Bay, moved here in 2014, he found a one-bedroom spot downtown for $700. “I recently looked at that same apartment again and now it’s almost $900 for the same unit,” he says. “It feels like landlords can just charge whatever they want because everything is so sought after — and people will pay it.”

Jones hopes he can stop sleeping on his friend’s couch come fall, when he has plans to move into a two-bedroom apartment with a roommate. He was told the downtown apartment will be available and within his budget, but he’s leery. “We’ve started looking for new places again, though, just to be on the safe side,” he says.

Concern From the New MayorCan you still afford to rent in Madison?

Mayor Satya Rhodes-Conway first rented a room in a duplex and then a one-bedroom apartment for a couple of years when she first moved to Madison in the early 2000s, before buying her house in the Eken Park neighborhood in 2006.

Although she never had the difficulties finding housing that Dainty and Jones experienced, she knows that the city’s current rental market is “tight [and] verging on highly unaffordable.”
“Many of our rental households are housing-cost burdened,” meaning individuals and families spend more than 30% of their income on rent, she says. “That’s very problematic.”

For decades, the federal government has warned against households — particularly families — becoming cost-burdened by rent because they then have difficulty affording necessities such as food, clothing, transportation and medical care. While estimates vary, most show that at least 50% of Madison renters are currently cost-burdened, a 10% jump since 2000.

The mayor notes that outside of zoning and building inspections, the city’s role in the rental market is “relatively limited on existing housing stock.”

But, Rhodes-Conway adds, the city has played a “big role in the real estate development process and the creation of new rental housing” through the Affordable Housing Fund.

“We have been using that to leverage tax credits from the state to produce affordable housing,” she says. Since its implementation by former Mayor Paul Soglin in 2014, this fund has been used to aid in the production of more than 1,000 affordable housing units for low-income residents around the city, including projects like Maple Grove Commons on the south side, Pinney Lane Apartments on the far east side and Tennyson Ridge on the north side.

Rhodes-Conway says she’ll be looking to continue that successful program while also exploring new options.

“My priority is the production of what folks might call workforce housing, rather than luxury units,” she says, adding that she wants to see “where we can incentivize the creation of affordability. We need to continue to add units.”

A couple of options might be to create new collaborations and partnerships, “particularly with the private sector,” she continues. “We have to broaden the conversation about who can help. There are interesting solutions, particularly on the workforce side, [such as] examples around the country of places that have employer-assisted housing. We’ve begun conversations locally with folks in the private sector about how they can support financing for workforce housing.”

Rhodes-Conway may also be looking at new co-op models to help ease the stress of a tight rental market. “I’m also interested in the role of cooperative housing, which has a long and proud history in Madison, but not one that’s fully at scale,” she says. “So is there an opportunity to scale up and make something available to a broader segment of the population?”

The mayor says she welcomes new ideas because rising rents and a lack of affordable housing is a problem that needs attention now.

“It’s a very high priority … that we remain a city where working families can afford to live. We have to remain a city that’s accessible to everyone, for the success of our economy,” she says. “We need teachers, firefighters, nurses, baristas and clerks — all people need to be able to live in Madison.”

Two Major ProblemsCan you still afford to rent in Madison?

Looking back, Dainty still can’t believe the trouble she went through to find a house for her small family. She says the difficulties she faced certainly weren’t due to a lack of effort or flexibility. “We looked everywhere — as far west as Allied [Drive] and Nakoma [Trail] and as far south as McKee Road in Fitchburg,” she says, adding that her two sons go to Cherokee Middle School and West High School. “We tried and tried to find a place.”

Friends suggested she and her partner purchase a home, but “we didn’t want to buy a house and be locked in to that. We’re not sure how long we’ll live in Madison,” says Dainty, who previously owned a home with her ex-husband. “We’re renters, we want to rent — it shouldn’t have been this hard or this stressful.”

Dainty says that her months-long struggle to find housing boils down to two major problems with the Madison rental market: availability and affordability.

“Options are slim. Really slim. Ridiculously slim,” she says. “For curiosity’s sake, I looked at some other places [outside of our budget] and started seeing apartments for $2,000 and $3,000 a month and more — who can afford that?”

Steven Potter is a Madison-based reporter.

Taking Action in the Face of Eviction
Black women come to each other’s aid when no one else will.

Lisa Peyton-Caire doesn’t need a city agency to tell her that evictions are more common in Madison’s black neighborhoods than others.

“I see it everyday,” she says.

So when a draft of the city of Madison’s “Analysis of Impediments to Fair Housing Choice” was released in April, and it noted “disproportionately higher levels of eviction in neighborhoods with higher populations of persons of color,” she wasn’t surprised.

“Housing insecurity is this looming challenge,” she says, adding that black women in particular “feel like they’re walking on eggshells just to get and keep housing.”

Peyton-Caire knows firsthand about the problems these households face through her Foundation for Black Women’s Wellness and because she’s part of a small network of black women working behind the scenes to stop evictions and help keep families in their homes.

She says that women from black households “frequently come to us with housing issues, either on the verge of eviction or having had been evicted or having trouble finding affordable housing.”

When someone in the network of helpers hears about a threatened or recent eviction, the women help by reaching out to local nonprofits, social service agencies and support groups. Unfortunately, those groups receive more demands for support than they can meet.

“We’re presently working with at least three families directly to attempt to help them find stable housing,” Peyton-Caire says. “Sometimes the process can take months.”

“Often,” she continues, “we can’t connect the women quickly enough with a resource [and] very few organizations provide immediate emergency cash assistance [or] emergency housing.” In those cases, the network’s members raise the funds themselves, either by soliciting direct donations from others or using online websites like GoFundMe. “Sometimes, we go into our own purses to temporarily aid them with money for a hotel, food and gas.”

Peyton-Caire says that most black families facing eviction find themselves in trouble because of limited employment opportunities.

“[Some of these women] are working two to three jobs to make one living wage … one day you’re stable and the next day something happens — a major life event, an illness, you lose a job, a downsizing, your car breaks down — and you fall behind on rent,” she says. “Then it’s a domino effect that can lead to eviction.”

When women seeking help find Peyton-Caire or the others in the eviction prevention and assistance network, it’s usually through word-of-mouth, aided by social media.

“It’s black women helping black women — it’s the way it’s been for centuries,” she says. “It’s an inherent part of our culture to be resourceful and creating our own types of networks and systems of support.”

Not a Homebuyer’s Market
Just like renting, the cost of homeownership is on the rise in Madison.

For the sixth year in a row, the value of a single-family home in the city has spiked — most recently jumping another 5.7% over last year — to a new record average of almost $301,000.

This compounds the already difficult situation that local would-be buyers find themselves in. First off, this is a highly competitive seller’s market in which homes often receive multiple offers at thousands of dollars over the asking price.

And there are other challenges to making the leap from renting to owning, says Kurt Paulsen, a University of Wisconsin–Madison associate professor of urban and regional planning.

“The main way that renting and ownership are connected is that because the entry-level price of a starter home is so high and because rents are so high, that makes [it] a double whammy for an entry-level homeowner because you have to save a lot for a down payment,” he says. “It’s hard to save a lot when your rents are high.”

But that’s not the end of the story.

Paulsen says it’s harder for young, first-time homebuyers to get a mortgage than it was before 2008 when the subprime mortgage crisis occurred, causing the recession. Because of this, federal mortgage rules changed and banks started looking more closely at borrowers’ ability to repay. “What that means now is that the credit box is much tighter,” he says.

All of this is impacting younger would-be buyers more than others.

“We’ve seen homeownership decline across the board, but it’s a particularly hard hit for people aged 25 to 34,” says Paulsen, adding, “so there’s that fundamental element of the American dream that seems out of reach.”