Madison is experiencing a building boom. But how many apartments will be affordable?
Nearly half of locals spend more than 30% of their income on rent
MADISON, Wis.– The city’s skyline is changing. Madison is in the middle of a major building boom: its biggest in history, according to city planners.
More than 4,600 new apartment units were approved in just the past year. To put that in perspective, there are 600 units between the three existing high-rises on East Washington.
But as buildings go up, rent prices often follow. Madison planners are working to make sure these new projects offer affordable options, too.
“We expect that housing costs will continue to go up in Madison. There’s nothing we can really do about that,” acknowledged Heather Stouder, a planner for the city of Madison. “But what we can do, as a city, is not only ensure a mix of housing types, but also of income and rent levels.”
Stouder explained that Madison is a majority-renter city, where current data shows about 45% of renters are ‘cost-burdened,’ meaning they spend more than 30% of their income on rent. At first glance, the buildings under construction may appear more of the same: high density, large-scale projects, often labeled as ‘luxury.’
“A healthy portion of new construction is income-restricted for 30 to 40 years,” Stouder said, adding that large complexes could help slow the price surge.
“We hope by facilitating the construction of more housing, we can slow the rise in rents,” she said.
In Madison, rent prices are not only high because of demand, but limited availability.
“A healthy vacancy rate is about 5%,” explained Stouder. “You want to have 5% of your apartments empty to make it a fairer marketplace for housing.”
Currently, many complexes don’t have any available units. Vacancy rate data was thrown off a bit during the pandemic, but in 2019, Madison still averaged below the 5% benchmark.
Stouder hopes the ongoing building boom will help renters find more affordable homes in the heart of the city.
“We can’t require developers build affordable housing,” Stouder noted. “But we can encourage it and help fund it.”
One way the city does that is through tax credits.
These tax credits are provided through a highly competitive process facilitated by the WHEDA (Wisconsin Housing and Economic Development Authority.) Madison’s ‘Affordable Housing Fund’ also helps support the construction of affordable options and has given $214 million in tax credits to support 1,457 new, income-restricted housing units since 2014.
Still, Stouder believes the city needs more affordable options.
“I’d estimate that close to 10% of recently-approved apartment units are income-restricted, so they will retain affordability for households with low and moderate income levels for the next 30-40 years,” she said, adding that income-restricted units are meant to support households making anywhere from 30-80% of the median income in Madison.
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