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Region, state battle shortage of affordable housing

Posted on Feb 27, 2020 :: Insight Insider
Jessica Thiel
Posted by , Insight on Business Staff Writer

One need look no further than Abraham Maslow’s Hierarchy of Needs to understand why housing is a critical part of well-being. Shelter sits alongside other physiological needs such as food, water and sleep at the base of Maslow’s pyramid.

Stability comes with having a safe and affordable place to call your own, says Patrick Leifker, housing administrator for the Brown County Housing Authority. Critical components such as shelter, education and a reliable form of transportation can help people chart a path to gainful employment and create security for kids and families.

“That’s really kind of the first step in terms of getting on the path to self-sufficiency. When you have a roof over your head, you’re able to focus your time, energy and additional resources (elsewhere),” he says.

The Brown County Housing Authority oversees the county’s Housing Choice Voucher Program, and the nonprofit agency Integrated Community Solutions serves as administrator for the program. The housing authority also issues housing revenue bonds and can provide down payment and closing assistance to qualified potential home buyers.

Around 56 percent of the Brown County Housing Authority’s clients include a head of household who’s elderly or disabled, 41 percent with minors living within the unit and 31 percent who are a head of household who’s not elderly or disabled and has some earned income.

Between 2006 and 2017, in comparison to growth in households, Brown County under-produced by more than 1,500 housing units. This causes strain and creates a supply-and-demand issue, Leifker says.

From low-income housing to workforce housing, the state and region face a shortage of options.

In December, the Wisconsin Economic Development Association presented the results of a special report entitled “Falling Behind: Addressing Wisconsin’s workforce housing shortage to strengthen families, communities and our economy.” Funded by the Wisconsin Realtors Association, it documents the workforce housing shortage, explains the main causes and consequences and outlines policy solutions.

The report found causes of the shortage include failing to build enough homes to keep up with population and income growth, high construction costs and outdated land use regulations. As a result of these conditions, ownership and rental costs are rising faster than income, and home ownership and affordability are declining.

A multifaceted problem

In his career as a banker, Joaquín Altoro spent nearly three decades studying the ingredients for successful communities. Gov. Tony Evers recently appointed Altoro as CEO and executive director of the Wisconsin Housing and Economic Development Authority.

Since 1972, WHEDA has provided low-cost financing for housing and small business development. Altoro says while the organization has already delivered impressive impact, he wants to help lead it to become more efficient and innovative.

“I truly believe that those in the state of Wisconsin … deserve safe, affordable housing,” he says. “If we are going to be ready for the challenges that are forward, we need to make sure we have an organization that’s worked very hard on its efficiencies and is also ready for more output.”

Altoro and his team have traveled throughout the state talking to leaders and groups. The takeaway: Each community has its own set of difficulties and needs.

For example, rural communities face the challenges of lower population density, difficulty attracting developers and limited access to resources such as tax increment financing and philanthropic dollars. Urban areas, on the other hand, have more density, but there’s more competition among developers.

In addition to traveling throughout the state, Altoro has met with housing finance authorities in other states. He’s learned other directors and states face many of the same challenges and opportunities as Wisconsin.

Wisconsin is among 17 states that have created a state housing tax credit program. In 2019, Wisconsin allocated almost $25 million in federal housing tax credits and about $7.3 million in state credits, leading to about 35 developments and creating around 2,300 housing units.

When it comes to offering affordable housing, several barriers arise. A “perfect storm” is making it difficult to complete housing projects, including high constructions costs, lack of workers and funding gaps, Altoro says.

“If you were to look at all the different pots of money for tax credits that we use to build a building, you still end up with a gap,” he says.

To help address that, WHEDA prides itself on leveraging the money it commits to projects, seeking funds from sources such as state, local and federal governments, grants, philanthropy dollars and TIF districts.

One barrier Altoro sees beginning to ease is the attitude of NIMBY — Not in My Backyard — when it comes to determining locations for affordable housing developments. To define affordability, communities assess median income to determine who would live in affordable developments.

“Sometimes there’s this real big disconnect between people thinking who might be moving here to the actual folks who might be living there,” Altoro says.

It’s an issue Leifker has seen arise with the Brown County Housing Authority. He says it can be difficult to find landlords who are willing to participate with the county’s programs. To address that, the Housing and Urban Development department has been conducting research and devising strategies.

Some organizations have found success with defining source of income requirements. This means landlords can’t discriminate against people based on the source of income for housing, such as taking advantage of the housing authority’s Housing Choice Voucher Program.

To help tackle the deficit, Altoro says stakeholders, from local, state and federal governments to employers to health care systems, need to come together to create solutions. Health care systems increasingly identify safe and affordable housing as a social determinant of health, and employers recognize they need to get involved because it’s a factor in attracting and retaining workers.

“Businesses have to be comfortable that they’re not the only ones at the table. We’re bringing all the players to the table,” he says.

 

Beyond tax credits

While WHEDA issues state and federal housing tax credits, obtaining them involves an extremely competitive process. The organization issued a press release in January stating that demand for developers seeking credits for state projects outstrips the federal allocations.

Joel Oliver, vice president of development for Green Street Development, says that led his company to look at other avenues when it came to financing options for its Sheboygan workforce housing development project, The Oscar.

“Really, what we saw was the tax credit program … is a great program. It solves a lot, no questions about it. But the program in general is stretched very thin. It’s very competitive,” Oliver says.

When St. Louis-based Green Street began looking at diversifying outside Missouri, it chose Wisconsin and Colorado based on relationships, experiences and proximity. Green Street eventually zeroed in on Sheboygan and ended up missing a WHEDA tax credit for its development project by two points.

Oliver says despite that, it’s turned out well, as it led to refocusing the company’s efforts on the concept of workforce housing. Slated to be built on the site of the former VanDerVart Concrete Co., the $45 million, four-building, 248-unit project would deliver a mix of one-, two- and three-bedroom options as well as 16,500 square feet of commercial and retail space.

As for rent, Green Street aims to hold at least a 10 percent advantage to all other new market-rate developments. Oliver says the company hopes to see the project complete before winter 2021.

Indianapolis-based KCG Companies also turned its sights to Sheboygan when seeking a location for its workforce housing project, Badger State Lofts, which is being constructed on the site of a former tannery.

Matt Gilhooly, vice president of operations for KCG, says along with being home to many large employers, Sheboygan has invested a lot in downtown development and its innovation district project. It saw many synergies and has received the support of the city along the way.

KCG did obtain a Low-Income Housing Tax Credit for its $28 million, 149-unit apartment project. It’s slated for completion by this summer and will offer one-, two-, three- and four-bedroom layouts.

The cutoff for affordable housing is generally 60 percent of area median income, Gilhooly says. KCG plans to offer a mix available at 50, 60 and 70 percent of the area median income.

While developing workforce housing can be more of a “headache” than market-rate housing, Gilhooly says it’s worth it.

“I think anyone you’d ask … would tell you it’s all that much more rewarding knowing that you are going through a little work on the front end to provide those opportunities to folks who otherwise don’t have them,” he says.