Real Estate Spotlight: Report: Wisconsin faces severe workforce housing shortage

A house under construction.
A house under construction.

Last updated on October 18th, 2019 at 02:12 pm

A shortage in workforce housing exists throughout Wisconsin, including in the southeastern part of the state.

This is according to new research conducted by a University of Wisconsin-Madison professor and backed by the Wisconsin Realtors Association. To remedy the issue, WRA officials call for more housing to be built, a reinvestment in older housing stock and regulatory changes at the state and local levels.

The report outlines the main causes of the shortage and the effects seen throughout the state. According to the report, the state isn’t seeing enough homes being built, construction costs are rising faster than inflation and incomes and land-use regulations, such as minimum lot sizes and excessive parking requirements, are further driving up the cost of housing.

As a result, Wisconsin is seeing declining homeownership and, compared with its neighbors, the state has the highest rate of extreme rental cost burden for lower-income families and the second-highest such rate for lower-income homeowners.

“It’s probably been the top issue for the residential single-family real estate industry over the last several years,” said Tom Larson, WRA senior vice president of legal and public affairs. “And that’s regardless of where you go. Whether it’s the northern part of the state or southeastern part of the state, they’re having inventory issues.”

Indeed, month after month realtors groups like WRA and the Greater Milwaukee Association of Realtors have found very small inventories of homes for sale. GMAR found an inventory level (how long it would take to sell all of the homes on the market at a given time) of 2.3 months in August in metro Milwaukee, the same as August 2018. That’s very much a seller’s market. An inventory level of about 6 months is generally considered a balanced market, while an inventory higher than that is considered a buyer’s market.

The workforce housing report also points out that Wisconsin builders are creating about 75% fewer lots and 55% fewer new housing units than pre-Great Recession averages. Dane County saw the highest rates of “underproduction” of housing. From 2006-‘17, the county saw a roughly 36,300 increase in households but a growth of roughly 25,100 housing units. The result was about 11,200 units worth of underproduction.

“There’s an overall shortage of every type of housing,” said Kurt Paulsen, UW-Madison professor of urban and regional planning and the study’s author. “When there is an overall shortage of every type of housing, the squeeze gets worse for people on the lower end of the income scale.”

For the purposes of this study, Paulsen defined workforce housing as housing that is “affordable” for renting families who earn up to 60% of an area’s median income and for owning families who earn up to 120% of an area’s median income.

The report measured housing affordability using two indices. The first index gauges affordability for entry-level housing. According to this index, entry-level housing is barely affordable for the seven counties that make up southeastern Wisconsin (Kenosha, Milwaukee, Ozaukee, Racine, Walworth, Washington and Waukesha).

The second index measures rental affordability. It determined rental units in Washington County were affordable. Ozaukee, Waukesha and Walworth counties were barely affordable; and Kenosha, Milwaukee and Racine counties were not affordable.

The report also found a clear gap between rising costs to live or rent versus median incomes. From 2000-‘17, the median household income in Wisconsin grew 35%, while the median house price grew 59%.

From 2007 to 2017, median rental rates in Wisconsin grew 21.7% while median income in the state rose 17.3%.

Potential solutions to the issue focus on five key goals: Building more housing, increasing housing choice through diverse stock, strengthening homeownership, reinvesting in older housing, and making housing a priority.

Paulsen said many of them are based on reforms being made in other states, such as Utah and Oregon, and tailoring them to Wisconsin.

“There are lots of things bubbling up in other states that we can learn from,” he said.

Among the number of ideas are: construction of more “missing middle” housing types, such as duplexes and townhomes; additional incentives to reduce workforce housing costs; coordinated housing programs; and expedited permitting and development-approval processes at the state and local levels.

Larson said local regulations have the biggest impact on housing developments. He said local governments can look to change things such as their regulations, fees and approval timelines, to “sweeten the pot”
for developers.

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Alex Zank
Alex Zank covers commercial and residential real estate for BizTimes. Alex previously worked for Farm Equipment magazine and also covered statewide construction news at The Daily Reporter. He graduated from the University of Wisconsin-Eau Claire, where he studied journalism, political science and economics. Having grown up in rural western Wisconsin, Alex loves all things outdoors, including camping, hiking, four-wheeling and hunting.