On Thursday, the Madison Housing Strategy Committee will discuss the latest draft of the city’s 2016 Biennial Housing Report. It outlines housing challenges and trends in Madison, including an emphasis on lifestyle preferences, continuing challenges with income inequality and progress for affordable housing.
“We focus on trends in supply and demand, with a special focus on affordability, and the variety of housing options that are available,” said Matt Wachter, the city's housing initiatives specialist and author of the report.
The Housing Strategy Committee was created in 2012, and releases reports every two years detailing the state of housing in Madison with subsequent recommendations. Chapters on topics like homelessness, market rate ownership and senior housing are released as they are finished every few months. The final report combines these chapters and updates all data, Wachter said.
The report states that Madison has seen a steady, 1 percent growth in the number of households in each of the last 30 years, which the report traces to a strong local job market and high quality of life. This leads to “durable, but not explosive” housing demand.
But over the years, there have been “significant shifts in who the city is adding as well as how they want to live,” the report said.
These shifts are partially due to two major trends identified in the report: the housing effects of income inequality and housing choices made according to lifestyle preferences like location and nearby shopping venues, rather than solely economic factors.
Income inequality has had several effects on the housing market, including concentrated pockets of poverty and increasing difficulty for individuals in the lower and middle-classes to own homes, the report said.
It’s also led to stagnation in middle-class household growth. Middle income households are defined as those making between $50,000 and $100,000 a year.
After the recession in 2007, household growth grew from the top and bottom of the income spectrum, with the middle class showing little growth. This was true nationally as well as locally. It wasn’t until national unemployment rates returned to below 5 percent that Madison finally began to see a middle-class household rebound in 2015 and 2016, Wachter said.
Wachter said he is continually surprised by the huge market demand for apartment buildings.
“We’ve added over 15,000 households since 2007 and virtually all of them are renters,” he said. “It’s really hard for our rental market to absorb that many people. That’s why we’ve seen our vacancy rates stuck at historic lows.”
“We keep building, but people keep on coming here,” Wachter said. “That’s a reflection of the strength of our economy.”
But this growth tends to be concentrated in the downtown areas and along major transportation corridors, like Park Street, University Avenue and East Washington Avenue, Wachter said.
“We’ve seen a lot of growth and a lot of recovery, it’s not evenly distributed across the city,” he said. “A lot of the city has not seen explosive growth of apartments ... that’s partially a function of where people say they want to be.”
According to the report, a major Madison trend is that people tend to want to be in amenity-rich neighborhoods that suit their lifestyle. Households value nearby shopping, entertainment and convenience amenities, bringing high property values to these areas. The influx of high-end apartments downtown is an example of this trend, Wachter said.
This means many new rental properties are constructed to meet high-income household needs, leaving fewer options for low-income households, the report said.
These income inequality and lifestyle trends lead to challenges for housing. The report lists high housing and rental prices, low vacancy, less accessible home ownership for low-income buyers and low middle-class household growth as some of these challenges .
To meet these challenges, the committee recommends diversifying housing options and prices, especially in neighborhoods that are amenity and transit-rich, improving the quality of amenity and transit-poor neighborhoods.
Madison has made some progress in recent years to improve the housing market for low-income populations, Wachter said.
“We’re doing a lot of things, especially on the affordable housing side, that are starting to bear fruit,” Wachter said.
The Rethke Project was funded by an Affordable Housing Fund, a $20 initiative created in in 2014 by Paul Soglin following a report from the Housing Strategy Committee.
The fund helps create affordable housing in accessible locations and permanent supportive housing initiatives for the homeless. It encourages developers to pursue Section 42 tax credits for affordable housing, and its goal of the fund is to create 1000 affordable apartments over five years. This may not seem like much, but it’s a dramatic increase over the 700 to 800 current units of affordable housing, Watcher said.
“The result of that has been hundreds of units that are under construction or that have been approved and are waiting for springtime to get underway,” Wachter said.
While renting options have expanded, there hasn’t been as much growth in home ownership, Wachter said. The lower rates of construction on single family homes and condos in the area have created a more difficult market for first-time home buyers.
On Thursday, the committee with discuss the last chapter to be included in the full report, which covers in student housing. The committee will evaluate the data and make recommendations, Wachter said. The full report should be released in January.
“It’s never going out and inventing a new program or new strategy. We’re looking across the country at what the best practices are an applying a lot of them,” he said.