Recent federal changes have expanded housing tax credit programs that drive low-income rental developments in Milwaukee, but rising costs are holding back affordable housing growth in Wisconsin’s largest city.
That’s one conclusion from the Wisconsin Policy Forum’s latest report, which explores the impact of shifting federal housing policy on Milwaukee County.
Authors note the One Big Beautiful Bill Act “significantly expanded” federal housing tax credit programs, providing more support for affordable housing production at a time when county residents are facing major housing cost challenges.
But the changes to the Low-Income Housing Tax Credit programs “do not guarantee a major increase” in affordable housing in the Milwaukee area, according to the Forum. That’s because related costs are rising and the fact that tax credits rarely cover the full cost of the project.
“Rising construction and operating costs, growing reliance on additional gap funding, and the erosion of other federal housing resources raise questions about the extent to which these changes will ultimately support development of more units,” authors wrote.
These federal tax credits, which can be claimed over a 10-year period, are awarded by state housing agencies to developers, who usually sell them to private investors for upfront equity, according to the report. That reduces the amount of debt needed to finance projects and allows for lower rents.
Property owners in return must reserve a minimum of 20% of units for households that earn less than 50% of the county median income — or 40% for households below 60% of the median — for 30 years, the report shows.
The Wisconsin Housing and Economic Development Authority administers both the federal 9% and 4% housing tax credit programs in the state. Since 2016, about $262 million in these tax credits have been awarded in Wisconsin.
About half of WHEDA’s available tax credits are set aside for projects located anywhere in the state, and developers applying for credits in Milwaukee County are typically competing within this pool. The rest of the tax credits go to projects in rural and small urban areas.
In addition to the rising cost constraints, future production of affordable housing in Milwaukee County depends greatly on how the state’s expanded resources are divided up, authors note. The report details how this support has varied year by year, ranging from 43.4% of tax credits going to housing projects in Milwaukee County in 2021, to just 6.3% in 2025.
“While the federal changes create real opportunities to finance more affordable housing, the actual number of units built will depend on state allocation decisions and broader economic and market conditions,” authors wrote.
The report was commissioned by the Community Development Alliance, which aims to achieve “racial equity in housing” through various initiatives.
See the full report.
