by Henry Redman, Wisconsin Examiner
May 19, 2023
To address its growing shortage of affordable housing, Wisconsin needs to build 120,000 additional rental units, Elmer Moore Jr., CEO of the Wisconsin Housing and Economic Development Authority (WHEDA), told an Assembly committee at a public hearing Thursday.
In an effort to encourage the massive increase in construction of affordable and workforce housing that is required to close that gap, a bipartisan group of legislators introduced a package of bills last week that would provide low or zero interest loans for several types of housing projects and take steps toward making it easier for developments to be approved at the local level.
The set of four bills establishes programs meant to increase the state’s housing stock but does not include any appropriations to fund those programs. Rep. Robert Brooks (R-Saukville), the chair of the Assembly Committee on Housing and Real Estate and an author of all of the bills, said at Thursday’s hearing that he was hoping the budget-writing Joint Finance Committee would allocate up to $850 million for the programs in the bill package.
Bipartisan compromise
The legislation represents negotiations between the two parties in the Legislature, WHEDA, the League of Wisconsin Municipalities and interest groups such as the Wisconsin Realtors Association.
At an informational hearing in March, Brooks said the negotiations depended on finding the right balance between the “carrot and the stick” that would encourage local governments to increase housing construction while supplementing programs already in place.
In his testimony Thursday, he emphasized bipartisan interest in the effort.
“I think this closely aligns with some of the governor’s initiatives,” Brooks said at Thursday’s hearing. “What really was important was not trying to step over the governor, but work with the governor here. We want to work in partnership with the governor. We want this to pass.”
Tom Larson, executive vice president of the Wisconsin Realtors Association, told the Wisconsin Examiner he believes the right balance between all the relevant groups has been struck.
“We got a lot of input from local governments and other groups and we feel good about what we were able to reach a compromise on,” Larson said. “So hopefully this is the right formula, combination to get strong bipartisan support in the Legislature.”
Rep. Jodi Emerson (D-Eau Claire), one of the first Democrats to sign on to the package, told the Wisconsin Examiner she believes the way these bills came together is the way the Legislature should always work.
“This is really Rep. Brooks’ baby, he’s been working on this for a really long time, [but] this is what we’re supposed to be doing,” she says. “This is how I think everybody wants us to be doing things. There’s some bills that are really good in there and I’m really happy to be a part of these. I know that he has had a whole bunch of people together doing this, the realtors, builders, the league.”
“Anytime you’re doing negotiations, I think that means not everybody is thrilled with the bill, which probably means we hit a sweet spot of probably where it should be,” she adds. “If everybody’s like, moderately pleased, that’s a good thing.”
Several of the bills in the package include provisions aimed at bringing down the cost of housing developments and making sure that the housing needs in every part of the state are met.
In the bills that establish loan programs through WHEDA, one of the first requirements for a project to qualify for a loan is that the local government must have taken steps to attempt to lower the cost of constructing a building in that community. Those steps could include reducing the minimum lot size so a developer can build three homes on one piece of land instead of two or getting rid of parking requirements that can make project costs increase.
In each of the loan programs, the bills include a set aside to make sure that 30% of the available funds go to communities of less than 10,000 people. A few of the programs also include a provision that at least 25% of the funds go toward senior housing — with the idea that if the state’s seniors can move out of their long-time single family homes into a unit that is cheaper and more easily accessible, that opens up single family homes for younger families.
Main Street Rehab
The first of the bills, AB 265, would establish a revolving loan program for rehabilitating vacant or underutilized units on the second and third floors of retail spaces. Known as the “Main Street rehab” bill, Larson said the ability to add affordable units here and there might seem like a small step, but in the aggregate could have a large effect on the state’s housing stock and make progress toward making the downtown areas of the state’s smaller towns more vibrant.
“This is talking about reinvigorating our communities,” Larson said. He estimated that each dollar spent on the loans could return $3 in increased taxes, “because the properties are going to be more valuable in many cases. You’re turning a vacant property into one that’s being occupied and more heavily utilized. You’re generating sales taxes on the materials. You’re generating income taxes on the wages. And then you have people that are living in the communities that are going to shop at the stores, they’re going to frequent the restaurants and bars.”
Kurt Paulsen, a professor of Urban Planning at UW-Madison, told the Examiner these types of projects are an efficient way to spend public money to increase housing availability.
“These rehab loan programs are tremendously efficient in terms of use of public dollars,” he said. “It’s cheaper to rehab older housing than a new unit. We still need to build lots of new units. Housing is always a ‘both and’ project. It’ll be interesting to watch how this works. A municipality could use this combined with TIF, combined with a Main Street grant program and really revitalize some of these older Main Streets.”
The program would allow WHEDA to provide a loan of up to $20,000 to update a second or third floor unit that is at least 40 years old and has not been significantly improved in 30 years. The bill also includes a requirement that the renovated unit must remain workforce housing — meaning rent doesn’t exceed a certain ratio of that county’s median income — for at least 10 years after the rehabilitation.
The projects the loans are aimed at also don’t include significant aesthetic upgrades in an attempt to turn these units into luxury housing. The money is aimed at making the units safe and livable through work on the HVAC, electrical or plumbing systems, repairing walls, ceilings and floors or removing lead paint and asbestos. Brooks, at the Thursday hearing, said, “it’s important to know we’re not trying to gentrify.”
The “Shopko Bill”
Another piece of the package, AB 268, includes much larger loans aimed at turning unused commercial spaces into housing, which Emerson called the “Shopko bill” because communities across the state could use this program to convert the vacant box stores that used to hold their local Shopko into housing.
How many empty Shopkos are there around our state?” she said. “Let’s use that footprint to have a big apartment complex or something.”
The funds would also be available for projects that convert or demolish a vacant office building to create housing — allowing municipalities that have seen the need for office space decline since the COVID-19 pandemic.
These types of projects can offer important opportunities for increasing housing, yet also come with significant expenses because of the need for significant changes to floor plans and the added plumbing required to turn a floor that used to be one open office space into several apartment units with their own kitchens and bathrooms.
Under the program, loans of up to $1 million will be available for projects so long as the new development includes at least 16 housing units. The same requirements for the local community to reduce costs and 10 year workforce housing rent cost apply.
Single-family renovation
AB 267, would, according to legislators, “supercharge” WHEDA’s existing loan program for the renovation of aging single-family homes.
The program would allow homeowners whose annual income is less than 120% of the area median income to receive a loan of up to $50,000 to make structural improvements to a home that is at least 40 years old. The bill is specifically aimed at helping younger people buy homes they can afford without having to spend tens of thousands of dollars they don’t have on repairs.
“This is going to help some of our younger generation get into houses that need some repair,” Emerson said at the hearing.
Infrastructure costs
The final loan program in the package, AB 264, would allow developers building workforce or senior housing to apply for a WHEDA loan to help cover the cost of constructing a building’s related infrastructure. In most projects, a developer is responsible for building the roads and extending the sewer and water systems to the new development but when the project is complete, ownership of those systems is transferred to the municipal government.
Rep. David Armstrong (R-Rice Lake), who is also the executive director of the Barron County Economic Development Corporation, said the infrastructure costs associated with a development can add more than $55,000 per lot on a project.
By Right Zoning
Despite the massive shortage of housing across the state, big and small communities in Wisconsin have killed housing projects because of local pressure on the permit approval process. The goal of AB 266, the “anti-NIMBY” bill, is to make it harder for proposed developments that meet all of a municipality’s rules and ordinances to die because of local political pressure.
Under the bill, if a proposed development meets the criteria the municipality has laid out in its zoning rules, ordinances and comprehensive plan, the local plan commission and city council must approve the project.
Rep. Scott Krug (R-Nekoosa), a real estate agent in the Wisconsin Rapids area, said that the housing shortage is so bad in his part of the state that Wisconsin Rapids, a town of more than 18,000 people, currently has just six homes for sale. He said at the hearing that if communities want to promote more housing construction, they need to be forced to follow the rules they previously set.
“So this bill sets that standard, saying, ‘Hey, communities, if you’re going to make those decisions, you just need to stick with the decision,’” Krug said. “If you’ve got rules in place or your comprehensive plan in place, you need to follow those rules.”
The politics of housing can create strange alliances. Conservatives can embrace zoning reform out of a desire to reduce government regulations while progressives might support the same reform out of a desire to be more welcoming. Because of that convergence, a zoning bill authored by Sen. Duey Stroebel (R-Saukville), one of the most conservative members of the Legislature, is being touted by the group Madison is For People, a pro-housing group in the city.
“The housing crisis in Madison and statewide has reached historic levels,” Mary Pustejovsky, a member of the group’s steering committee, told the Examiner. “We need all the tools in the toolbox to address it. I’m encouraged by the package of bills proposed as a first step in addressing the issue. In particular, [AB 266] is promising. We need more “by right” approval for projects when they meet all code, zoning, and comprehensive plan requirements. Allowing for subjective reviews causes delays that increase the cost of housing for everyone.”
Wisconsin Examiner is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Wisconsin Examiner maintains editorial independence. Contact Editor Ruth Conniff for questions: [email protected]. Follow Wisconsin Examiner on Facebook and Twitter.
