Milwaukee's Department of City Development on Tuesday unveiled a highly-anticipated update to its tax incremental financing (TIF) guidelines that includes language specifically for workforce housing projects and projects converting existing commercial buildings to residential uses.
Amid inflated development costs — largely due to rising construction costs, higher interest rates and limited access to capital — Milwaukee-area developers have been putting pressure on the city to update its TIF policy.
Previously, the city generally only awarded TIF to housing projects that were affordable for those making less than 60% of the area median income (AMI), or for commercial projects that include job creation or attracting business to the city.
Developers have said that policy is outdated and leads to the development of only two types of housing: high end apartment projects that are not subsidized but are too expensive for most Milwaukeeans and have limited demand, some would say, or heavily subsidized apartment developments for lower income residents that also require competitive tax credits and other financing sources.
That leaves a gap in development of what's known as "missing middle" or "workforce" housing.
“The clamor for us to make public our guidelines is something we’ve wanted to listen to," Commissioner of City Development Lafayette Crump said. "No one should have the impression we haven’t been working directly with individual developers to talk about getting their projects done. Now, everyone knows what those guidelines are.”
Details of updated TIF guidelines
Under its updated guidelines, the city will consider TIF for development of apartments affordable for households with incomes at 60%-100% AMI, according to city documents.
The length of the TIF district will be dependent on the percentage of units rent-restricted to 100% AMI or less. For instance, projects with 20% of its total units in the workforce housing designation are eligible for a six-year district, while projects with 100% of its units in the workforce housing designation are eligible for a 20-year district.
Rents for these units would be restricted via a Land Use Restriction Agreement (LURA) or related document to an average of 60%-100% AMI for a minimum of 20 years or the life of the TID, whichever is longer.
DCD outlined several priorities it has for projects to be considered for TIF:
- Conversion of obsolete commercial, or industrial buildings into residential properties in the downtown area.
- Advancing Connec+ing MKE Downtown Plan 2040 goals to add 15,000 new housing units and provide housing choice for all income levels downtown.
- Projects located in neighborhoods where there is currently a lack of available housing opportunities attainable to individuals earning 60%-100% AMI.
- Projects that provide outdoor space for residents, particularly if not within 1/3 mile of a public park, recreational trail, or the Milwaukee Riverwalk System.
- Projects of at least 50 units.
- Density of at least 150 units per acre for new construction in the downtown area.
- Availability of varied housing types and affordability throughout the city.
Projects requesting TIF assistance involving the adaptive reuse of commercial buildings for housing should involve the reuse of large commercial buildings which are at least 50% vacant (based on leasable square footage) and/or are at risk of becoming vacant without a significant investment.
Developer trade group says it's not enough
However,
NAIOP-Wisconsin, a commercial real estate development association that has been working for more than a year to put an expanded TIF policy together for the city of Milwaukee, says the city needs to further back up its guidelines with ordinances to give the private sector more certainty.
"We applaud the Department of City Development for sharing our belief that city approval and investment in workforce housing is critical to address the housing crisis we are currently experiencing," NAIOP said in a statement. "Unfortunately guidelines are not a policy and don't provide the certainty that developers and investors need to push forward on many of these vital projects. We look forward to continuing our work with city leaders in hopes of adopting a policy that will alleviate the uncertainty and bring more housing to Milwaukee."
Developers have asked for a policy in which a project meeting certain criteria would automatically receive certain incentives. Milwaukee has long used tax incremental financing to support housing projects, but it hadn't had a clear policy for what it takes to qualify.
“The question of whether this is policy or guidelines is truly semantics," Crump said. "We have made it very clear what projects we will support.”
Projects that could be contenders for new TIF guidelines
The workforce housing and conversion TIF policies, along with the affordable housing policy, are for either the creation of a new TIF district or an amendment to one of the city's existing districts, the policy says.
In any instance, developers must demonstrate that the project would not be economically viable without the city’s assistance and that they have leveraged other financing sources to help fill any apparent project financing gap.
Among the most vocal developers in support of a workforce housing TIF policy has been
Tim Gokhman, managing director of Milwaukee-based
New Land Enterprises.
Gokhman has said that the firm's two stalled apartment proposals in Walker's Point,
the 82-unit VIA and
65-unit Forma, could move forward if a workforce housing TIF was available.
Likewise, the development team comprised of
Klein Development and developer and investor
John Vassallo that is planning to
convert the 100 East office building downtown into apartments has been in discussion with DCD for TIF for that project, local Ald. Bob Bauman has said.
Crump declined to share specific projects that are contenders for TIF under these new guidelines, but said he expects proposals to advance "in the near future."
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