A new report shows growth in new construction has slowed in the 12 years since state policymakers set property tax limits on local governments that were linked to growth in new construction.
The report, titled “Changing Patterns of New Construction,” explored trends across the state by looking at factors that increase or diminish growth. It’s the first of a two-part series from the Wisconsin Policy Forum, with the second to be released next month focusing on municipal finances and services.
In exploring construction growth rates, the report found 60 percent of the fastest-growing cities and villages had access to a four-lane highway, and 42 percent of those with at least 1.5 percent growth between 2012 and 2017 created at least one tax incremental district since 2011.
It found that the statewide rate of new construction was 2.8 percent in 2006, when the levy limits were put in place. In the five years before that, the rate was between 2.5 and 2.8 percent on average.
By 2008, the report shows the new construction rate had fallen below 2 percent. Three years later, it had fallen to 0.7 percent. It shows annual growth in new construction has gone up slowly since then, but the 1.6 percent statewide growth rate last year was well below growth rates for the previous decade.
According to the report, significant variations exist across cities and counties statewide, and most municipalities are below the state average. Less than 20 percent of municipalities in the state had 2 percent growth in 2017, while 28 percent had over 1.5 percent growth.
The report shows the drop in new construction coincided with the state entering into recession in 2008. Other reports from the Bureau of Labor Statistics show the construction industry losing workers during that time, and fewer new homes being built.
Report authors say municipalities have been protected by floors in the levy limit law. Between 2006 and 2007, cities and counties with new construction rates under 2 percent could still increase levies by up that amount.
That floor was then changed to 3.86 percent in 2008, back to 2 percent in 2009, and to 3 percent in 2010 and 2011, report authors say. The floor has been eliminated since 2012, so levies can only be increased up to the rate of new construction for that county or municipality, with some exceptions.
See the report here: http://wistax.org/publication/Changes-new-construction
See a BLS report on the recession’s impact: http://www.bls.gov/opub/mlr/2011/04/art4full.pdf
–By Alex Moe