Residential construction in Madison is struggling to keep housing affordable for its expanding population, a city planning official says.
Matt Wachter, director of planning and community and economic development for the city, recently discussed affordable housing efforts during a meeting of the Rotary Club of Madison.
Madison’s annual population growth rate rose to near 2% during the pandemic years of 2019 to 2021, he said, doubling its typical rate of 1% growth seen for the previous 60 years or so.
“Overwhelmingly we’re importing people aged 18 to 30, coming to work at Epic, at Exact Sciences … This is a natural renter population,” he said. “So a lot of this pressure is falling onto our rental market.”
To meet the housing demand of an additional 2,200 or so households per year, “we need to add that many units,” he said. But most years, Madison is only just hitting that number or falling below it, with the exception of 2021 when many projects that were previously delayed during the pandemic got started, driving the number of building permits above 3,500.
“So, we are barely able to keep up on the construction side with our growth as a community,” Wachter said.
As a result of demand outstripping supply, the city’s vacancy rate stays between 2% and 3%, one of the lowest among major U.S. cities, he said. That trend results in people who are financially unstable being “squeezed out” of the market, even as rental prices are driven upward.
On a per-square-foot basis, rent has risen from under $1.45 in 2018 to above $1.75 this year, according to Wachter.
“If you make 80% or more of our median income, the market can deliver housing for you without too much problem,” he said. “If you’re making 50% to 60% of our median income, there might be existing older housing stock … that serves you. But .. if you’re making 30% of our median income, the market just can’t deliver for you.”
Even when taking students out of the equation — since they typically don’t earn any money but still pay rent — “we still have a very significant problem” with housing affordability, he said.
In hopes of addressing these concerns, the city has undertaken several projects, including creating the Affordable Housing Fund that’s grown to $20 million in funding, establishing a land banking fund, adding “height bonuses” to reward developers creating large affordable housing buildings and more.
Nicole Solheim, vice president of development for the nonprofit Cinnaire and plan commissioner for the city’s Plan Commission, said the land banking fund has been “really important” for ensuring the long process for advancing an affordable housing project can be brought to fruition.
“If the city can, you know, hold onto land and give us that flexibility, that’s really helpful,” she said during the Rotary meeting.
Over the past 10 years, Madison has gone from building 10 to 15 new affordable housing units per year to up to 300 units per year due Affordable Housing Fund developments, Wachter said.
“In a decade, we’ve delivered roughly 2,000 units of affordable housing and we have a lot more in the pipeline just in the last year or two,” he said. “And this housing is really all over the city, but where it mostly is, we’re putting it along transit routes so people who live in these properties have access to our new bus rapid transit system.”
While the effects of rising interest rates and supply chain shocks are outside the scope of local control, he noted elements of the city’s regulatory environment “make it harder or slower to build things.” Solheim highlighted efforts to improve that environment for those looking to create more affordable housing.
The city has altered its zoning rules to allow for more types of housing and mixed-use developments, as well as supporting more “accessory dwelling units” — small, independent residential units located on the same lot as a separate single-family home.
Solheim spotlighted efforts to improve equity in the planning process for various Madison neighborhoods, which guarantees select areas are guaranteed to have an updated plan every 10 years.
“One thing on its own is not going to solve our affordable housing crisis,” she said. “Together, they will have an impact. It’s about allowing incremental density throughout our entire city, including in single-family neighborhoods.”
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