Chad Pelishek is standing over a conference room table at Sheboygan City Hall.
Laying out a series of large-format city maps, the director of planning and development takes his ball point pen and circles 277 acres of city-owned farmland that he and other local leaders hope can solve the city’s housing crisis.
A few blocks away, Brian Doudna, executive director of the Sheboygan County Economic Development Corp., is preparing to meet with students from the University of Wisconsin-Madison School of Business who have been working with the nonprofit to help analyze roughly two dozen sites that could one day host hundreds of affordable single-family homes.
Like other areas in Wisconsin, and across the U.S., the Sheboygan area has struggled in recent years to develop enough single-family homes to serve the needs of its workforce.
What makes the Sheboygan area different is its local efforts to confront the problem – not through clever planning or tax incentives but through millions of dollars in public and private funds.
The City of Sheboygan’s recent expenditure of $3.67 million to purchase the bulk of 277 acres it plans to develop south of the city on soon-to-be annexed farmland is just one example of that effort.
But perhaps most surprising is the Sheboygan County Economic Development Corp.’s Forward Fund, which has had area companies Johnsonville LLC, Kohler Co., Masters Gallery Foods Inc. and Sargento Foods Inc. collectively donate $8 million to help the nonprofit finance the development of workforce housing across Sheboygan County.
The goal is to use the dollars, and another $8 million the SCEDC plans to raise in the coming years, to develop 600 entry-level homes – homes that will help attract families and people to fill 2,500 vacant positions at companies across the county, according to SCEDC.
Without adequate available housing, companies are struggling to attract people to move to the area to fill their open positions.
It’s a unique approach but one that economic development and real estate experts in the region say may be the only way to solve a workforce housing crisis that’s been roughly 14 years in the making.[caption id="attachment_548957" align="alignnone" width="1280"] Sheboygan Planning and Development Director Chad Pelishek points to one of the city’s many “town islands,” which are properties surrounded by city land but still part of a neighboring township. Because the city has little developable land within its borders it is annexing 277 acres from the Town of Wilson for single-family housing development.[/caption]
When Doudna and partners sat down last summer to study the issue, what they found was a county in need of housing of all kinds, but especially affordable single-family homes.
While the occupancy rate for apartments across the county was topping 96% in the city of Sheboygan and at nearly 100% in other areas, there were less than 11 days of inventory (the amount of time it takes to sell all of the homes on the market at a given time) available for single-family houses under $250,000 county-wide. Inventory for homes at $250,000 and above was just over 20 days.
Essentially, if listings stopped cold, there would only be an 11-day supply of houses under $250,000 and 20-day supply of houses over $250,000. And once those 20 days were up, there would be no other homes to buy.
Knowing a balanced housing market will typically have 120 to 160 days of inventory, the SCEDC realized that the county’s housing inventory was extremely tight and difficult for buyers to access.
While the organization had been very active over the past five years landing new apartment developments, SCEDC officials and its corporate partners decided to do something to help create affordable, single-family homes. Those homes could attract future and current employees at Sargento, Kohler, Masters Gallery, Johnsonville or any other employer, and the companies could grow their workforces and the communities they call home.
“We are about building roots,” Doudna said. “We want to make sure we provide the lifestyle that people want and have companies that are growing and continuing to invest in the county. It is our job as the economic development corporation to come up with housing solutions that make it viable for families to be successful.”
That’s a sentiment the founding benefactors of the Forward Fund share. All four companies were founded in Sheboygan County and still maintain their headquarters there today.
“We all want to continue to grow, and we are family-owned businesses,” said Louie Gentine, chief executive officer of Plymouth-based Sargento Foods. “This is where we have grown up. We have a great appreciation for what this area has offered, and we have a desire to continue to see our communities flourish. Having strong businesses in the area is one of those things that helps a community flourish.”
The idea is that by incentivizing the development of affordable single-family homes, the SCEDC will help build a stronger workforce for area manufacturers, while also drawing people to the area who are interested in putting down roots, Gentine added.
“This is an investment in the community,” he said.[caption id="attachment_548959" align="alignnone" width="1280"] Chad Pelishek points to 277 acres of farmland in the Town of Wilson that the city has purchased to help speed the development of single-family homes.[/caption]
The lost decade
The housing crunch in Sheboygan County, and across the nation, has its roots in the Great Recession of 2008.
On a slide titled, “Our Lost Decade of Housing,” Doudna points directly to the year where housing construction in the county hit rock bottom and never really rebounded: 2011. In a valley between the “highs” of 2004 – where single-family home building in Sheboygan County topped 400 units per year – and the precipitous dip that followed, there’s a note that reads: “Annually 200+ homes never built.” The slide seems to indicate some movement in 2019, with about 150 homes being built, but that increase didn’t do much to address the ongoing demand for homes in the county.
Given the steadily increasing price of land and, compared to the 2000s, a considerably smaller pool of home builders able to produce the kind of affordable homes the county needs, the SCEDC and its corporate partners realized that the only way to solve the problem was to put some real money behind it.[caption id="attachment_548960" align="alignnone" width="1280"] ABOVE: A construction worker battles wind and rain on the Stonebrook Crossing development where Werner Homes is building a 134-plat subdivision on the southern edge of Sheboygan. The subdivision is the first single-family home development the city has seen in 15 years.[/caption]
With the $8 million already available in the Forward Fund, the SCEDC has spent the past few months fine-tuning its plans and reviewing available sites and housing developments it wants to see created from its investment.
The plan to is use the bulk of the money for property acquisition to help home builders construct more affordable homes by reducing a major cost factor: the price of land itself. Once it has some development sites available, the SCEDC will work with homebuilders to design houses that manufacturing workers earning between $21 and $25 per hour can afford.
“We will recruit developers, and we will look at different options for making the cost affordable,” Doudna said. “A lot of the lots that you see in subdivisions today are 80- to 100-foot-wide lots. We will be looking at smaller lots with higher density, and a lot of the homes will likely be smaller, too. We are not talking tiny homes, but we are talking compact, value-engineered floor plans.”
The investment is necessary to support the county’s growing economy, Doudna said, noting some employers have turned to bringing in temporary workers and housing them in hotels to meet production needs.
“We don’t have time to waste. We have companies that are growing, and with each passing month that we are not filling the housing need, our overall economy gets weaker,” he said.
Although the dollars in the Forward Fund will be “flexible,” the SCEDC and its partners will be very clear on the “deliverables,” meaning the cost and quality of the homes that are constructed.
“At the end of the day, if we are involved in a housing development, we will have the brands of our municipalities and the companies that are part of this Forward Fund at stake every single day,” Doudna said.
The organization hopes to issue requests for proposals soon, with the goal of having new homes on the market sometime next year.[caption id="attachment_548961" align="alignnone" width="1280"] The historic Sheboygan Theatre (Stefanie H. Weill Center for The Performing Arts) can be seen in the background on a rainy day on Eighth Street in downtown Sheboygan.[/caption]
In the city of Sheboygan, which has a handful of large employers and is only 3 miles from Kohler’s production plant in the village of Kohler, officials have been working to address the community’s housing needs for decades.
They’ve redoubled those efforts recently with the purchase of 197 acres of farmland on the city’s southern edge. The land will be added to 80 acres the city purchased more than 20 years ago to create a total of 277 acres of land for residential development. The plan is to work with developers, much in the same way as the SCEDC, to ensure that a large portion of the land is filled with entry-level homes.
Located at the northeast corner of Moenning and Stahl roads, the farmland is in the town of Wilson, but the seller, farmer Dave Gartman, wanted to sell the property to the City of Sheboygan. The city is currently in the process of annexing the land.
The purchase price for the land was $3.67 million, but the city will pay for it in annual installments over the next five years. Some of that money will come from the city’s affordable housing fund and some from money remaining in the accounts of now-closed tax incremental financing districts.
Once the land is annexed to the city, it will create a master plan for the entire property – one that calls for lots of smaller, affordable homes as well as a few larger, more expensive options.
“We have a couple of single-family developers from the Milwaukee area that are putting together some proposed plans and some financial analysis to see what that looks like and what the costs can be,” Pelishek said.
Knowing it would need more land for housing, the city had conversations with Gartman for more than 20 years before moving forward with a purchase agreement earlier this year, Pelishek said.
And the deal couldn’t have come at a more critical time. A recent affordable housing study revealed the municipality needs to create another 1,000 single-family housing units in the next five years.
“We have huge workforce issues,” Pelishek said. “What we are hearing from employers is that once they recruit employees and bring them here, they can’t find a place to live. As a municipality, we have no control over construction costs – they are what they are – but if we can help keep the cost of the land down, or the lot creation, and at least give some incentive there, that is one way for municipalities to help.”[caption id="attachment_548958" align="alignnone" width="1280"] A graph from a Sheboygan County Economic Development Corporation presentation shows how the city lost roughly a decade’s worth of new-home building following the Great Recession.[/caption]
This isn’t the first time Sheboygan has played the role of housing developer. The 134-plat Stonebrook Crossing – the first housing subdivision to be constructed within the city limits since 2008 – is being built on land the city sold to Sheboygan-based Werner Homes back in 2007. Located just west of the Gartman farm off Moenning Road, construction of the first houses began earlier this year.
Back in the early 1990s, the city purchased land on its northern edge to help facilitate the development of needed homes in the region. In that case, however, the city put in the road and utility infrastructure first and then sold off individual lots to an assortment of builders.
“It was a similar issue,” Pelishek said. “The city was having a hard time recruiting developers of single-family homes to invest here, and the city thought, ‘Why couldn’t we be creative and act as a developer?’”
The challenge then was the city’s location, and it’s one that remains today.
“I like to call us the ‘in-betweener’ because we are in between two large markets (Milwaukee and Green Bay). We’re not close enough to glob onto one of them, so we are really our own market,” Pelishek said. “But our county population is only 115,000, so it is difficult to compete with these larger markets.”
The region’s unique location – an hour north of Milwaukee and an hour south of Green Bay – makes it hard to recruit manufacturing workers from larger metro areas, Louie Gentine said. While Sargento has a plant in Hilbert, which is about 35 minutes south of Green Bay, its plants in Plymouth and Kiel are still an hour from either city. The company employs about 1,800 people in manufacturing roles, and 600 of them work in the Plymouth plant.
“If they can drive here that’s great, and we have people who will commute, but for the most part, in manufacturing, our available pool of labor comes from a 20-mile radius of Plymouth,” Gentine said.
“Anyone living beyond that 20-mile radius of Plymouth has to see there is available housing nearby before they will apply for manufacturing jobs at the plant,” he said. “Typically, you are not getting someone interested in driving 50 minutes or an hour for a manufacturing job.”
A focused investment in affordable housing is something Sheboygan County has needed since the Great Recession, said Michael Suprick, CEO of Johnsonville. The company employs 1,425 people in and around Sheboygan Falls, where it’s headquartered. Of those, 1,000 employees work in manufacturing and the rest in office-type roles.
“I would say that housing has been affecting Sheboygan County for probably 15 years, if not a little longer,” Suprick said. “It really started in the office environment, with companies like Acuity and Kohler and even Johnsonville and Sargento. At that time, we didn’t have enough apartments. So, the SCEDC put together a plan to attract apartment developers. Now, we have plenty of apartment buildings, but they are at a much different price point than someone with a standard manufacturing job would want to spend.”
Once those apartments came on the market, Suprick said, the community started seeing the same scarcity problem with single-family homes. It was that situation, and conversations around it, that spurred the creation of the Forward Fund.
“When I look at Louie (Gentine), and Jeff Gentine, who runs Masters Gallery, and the Kohler family and our family, one of the things we have in common is that we just really love our community,” he said. “We have the utmost respect for our employees, and we have a passion for our businesses. We are all family-owned, and we are all planning to be here for as long as we possibly can.”
“And one of the things that I also believe we are absolutely in-sync on is that if we don’t have a vibrant community with people who want to be here and with the (benefit) of belonging to a community that housing brings, we will end up with a more transient workforce than we want. And a transient workforce doesn’t build a strong community,” Suprick added.
By building houses with garages, yards and sidewalks – and making them affordable, or as close to $200,000 as possible – the Forward Fund effort will make possible a lifestyle that has been “a little bit out of reach” for manufacturing workers, Suprick said.
“For us as manufacturers, we just decided we’ve got to do something,” Suprick said. “We are not necessarily trying to bring people in from Mississippi or Alabama or Texas. We are saying that there are a lot of people within an hour or a couple hours’ drive from here that we would love to have join the workforce.”
Can it work?
In speaking with BizTimes Milwaukee, a real estate agent, a professor of economics and a Sheboygan-area homebuilder all said that private or public sector efforts to lower the cost of land acquisition and infrastructure might be the only way to ensure contractors can construct affordable, entry-level homes in the market.
The April home sales report by the Greater Milwaukee Association of Realtors shows home prices were up 11% across the seven-county region, which includes Milwaukee, Kenosha, Racine, Walworth, Washington, Ozaukee and Waukesha. The average median home price across all seven counties that month was $350,943.
“The systemic problem with the (housing) market is the lack of new construction of single-family houses and condominiums, and the over-production of apartments,” Mike Ruzicka, president of GMAR, wrote in the report. “That bottleneck combined with the demographic surge of millennial and Gen Z buyers, low interest rates … and a growing economy have all contributed to a historically tight market.”
David Clark, executive associate dean and professor of economics at Marquette University, has made a study of local and regional housing markets as well as household migration behavior. He said the strategies being employed in Sheboygan County could work elsewhere in the state.
“A lot of times this is done in areas (like the Silicon Valley) where the cost of living is so high that there would be no way for those workers to find housing in close proximity to where they work,” Clark said. “But if your existing housing stock is too low to support growth, then really the only option is to add to that housing stock by subsidizing it for the development of rental housing.”
Ask Ross Werner, vice president of Werner Homes, about constructing entry-level homes, and he’ll put it to you straight.
“The economics of building a home these days is that you really can’t build a house for $250,000. With labor and materials costs, that price point is hard to hit,” Werner said, adding the only way developers can deliver homes under $250,000 is if they get help lowering the cost of the land, infrastructure or both.
It’s a reality that has GMAR eager to see companies and communities in other counties follow Sheboygan’s lead.
“I think it is absolutely tremendous, and I hope it is a model (for other communities),” Ruzicka said of Sheboygan’s efforts. “We have been on a big kick this year to let local governments know that workforce housing is desperately needed. Companies with really good wages are just dying for people, so this is great way to pool assets across several different employers to (draw people to the area). I hope companies in Racine, Waukesha and Washington counties all do the same thing.”