Affordable housing in Waukesha County? It's a difficult goal indeed, study says

WAUKESHA - Along busy stretches of boulevard roads, apartment complexes made up of decades-old fourplex brick buildings stand out in the city of Waukesha, the home of the highest concentration of affordable housing in Waukesha County.

In both Waukesha and Oconomowoc, there is plenty of older owner-occupied housing stock that is more affordable than new construction and traditionally has helped serve the needs of first-time home buyers and those on limited incomes.

And, still, that's not enough, not even for these cities.

Apartment prices have steadily risen in Waukesha, but even more dramatically in the city of Brookfield. Homes, even century-old ones, have jumped in value everywhere in the Milwaukee metropolitan area, driving up mortgage costs in the process.

Someone noticed.

In a study report released July 13, Wisconsin Policy Forum took a turn to spell out just how unaffordable housing has become throughout the county, concluding that, at the very least, the issue deserves public attention and policy shifts that work to reverse a growing trend.

"For many years, Waukesha County’s relatively high housing costs have created substantial challenges for low- and moderate-income households seeking a home or apartment," the organization said in its introduction to the study. "Recent economic changes generated by the COVID-19 pandemic and other factors have exacerbated those difficulties, causing the cost of renting, buying, and building homes to increase sharply and elevating housing affordability to one of the most prominent public policy issues both locally and nationally."

Study uses Waukesha, Oconomowoc, Brookfield and Sussex data

Wisconsin Policy Forum, the five-year-old nonpartisan entity that emerged from the combination of the Milwaukee-based Public Policy Forum and the Madison-based Wisconsin Taxpayers Alliance, dug deep into the topic with the help of four Waukesha County communities and other agencies.

"We consider this issue both from a countywide perspective and through a narrower lens using four municipalities (the cities of Brookfield, Oconomowoc, and Waukesha and the village of Sussex) as case studies," officials said in the study.

Focusing on those four communities also showed a wide-ranging variance, Wisconsin Police Forum officials noted in one summary. Waukesha has a lower homeownership rate (57.8%) than the county overall (76%), "but also a much more diverse market than the other three selected municipalities, with more rental and multi-family housing and more units with two bedrooms or fewer, which provides options for a wider range of household sizes and incomes. Brookfield has the least diverse housing market among the selected municipalities," they noted.

While touching on racial divides and income comparisons, the study primarily tries to examine why housing costs are what they are.

Several factors — including housing vacancies, the relatively low number of rental units, and the presence of large lots that drive up housing costs — influence the price of housing in all four communities, but the particulars of those factors is what sets them apart.

Key points in study seek data-driven answers

But that's only a sampling of the data and factors included in the 53-page study. More broadly, the study keyed on four questions:

• How do the incomes of those who live or work in Waukesha County compare with housing prices in both the rental and owner-occupied housing markets?

• To what extent has affordable housing been built in Waukesha County in the past decade, where has it been built, how has it been financed, and what populations has it targeted?

• What barriers may be impeding housing affordability and the development of new affordable and workforce housing in Waukesha County and are local government policies limiting the supply?

• Are there best practices for improving housing affordability that leaders in Waukesha County and its municipalities could consider?

To find the answers, Wisconsin Policy Forum used lots of data — from the U.S. Census Bureau, U.S. Department of Housing and Urban Development, U.S. Bureau of Labor Statistics, Wisconsin Housing and Economic Development Authority (WHEDA), Wisconsin Department of Administration, and Wisconsin Realtors Association — and then looked at local ordinances and housing initiatives.

The effort includes interviews with local government officials and compared the data with similar counties elsewhere and affordable housing policies nationally.

Rental units are priced ever higher in county

The affordable housing data includes home ownership, but, for most residents, the rise in home prices (a median value of $306,000 in 2021) and the lack of availability in homes for sale against demand isn't exactly news. It's the rental market that carries some surprising numbers.

The median gross monthly rent cost reached $1,147 in Waukesha County in 2021. That was nearly $200 more costly than two other metro counties, Washington and Ozaukee, and $211 more than Milwaukee County median rents, according to data collected by Wisconsin Policy Forum.

Among the four communities that were the focus of the study, the numbers carried a more shocking top end: Brookfield's median rent in 2021 stood at $1,595, compared to $1,088 in Sussex, $1,050 in Oconomowoc and $1,032 in Waukesha.

"A detailed breakdown reveals that more than one-third of the rental units in Brookfield (34.9%)charged gross rents of $2,000 or higher, while the same was true for less than 5% of the units in theother select municipalities. This may be driven, in part, by an influx of luxury apartmentsbuilt in Brookfield during the last decade," the study report said.

What's more, the monthly rental price hikes from 2010 to 2021 ballooned higher in Waukesha County ($278), than in Washington ($197), Ozaukee ($191) and Milwaukee ($184) counties, with Brookfield's rental price increases again outpacing every else at $345. (Sussex had the smallest change, at $207.)

And renters are a notable minority in Waukesha County, where homeownership rates differ even substantially by municipality. In Brookfield, more than four in five households own their homes. In Waukesha, the number is a little more than half. In the county as a whole, it's about three in four.

Similarly, only about half of Waukesha's housing stock are standalone single-family homes, compared to nearly two-thirds in Oconomowoc and Sussex and more than three-quarters in Brookfield. Given the prices of single-family homes, that plays into the affordability question.

What is the cause of higher housing costs?

With data showing a steep rise in housing costs, this is where the "policy" aspect of the study takes hold. There is the general conclusion, that housing production overall has not kept up with demand, and the specific concern, that housing projects aimed at lower-income residents has not materialized.

"Development activity influences housing affordability in multiple ways," the study report said. "Since the onset of the pandemic, the housing market’s limited supply has garnered a great deal of attention as a prime factor in rising home listing and rental prices in Wisconsin and nationally. While that is partially due to fewer owners listing their homes for sale, ... sluggish housing production is another factor."

Wisconsin Policy Forum compared data as far back as the mid-1990s, when residential developments in the county were flourishing, and noted the tremendous dip from 2009 to 2011 as the result of the Great Recession, when new development tanked in general.

In 1994, 3,621 housing units gained permits in the county, led mostly by the city of Waukesha. In 2009, only 433 new units got permits. In 2022, the number of new units permitted totaled 1,372. While Brookfield has added a substantial number of multi-family housing units in recent years, they have been almost exclusively for high-end, "luxury" apartments, according to the data.

The cost of construction is a factor as well, but developers proposing housing projects in Waukesha County have not sought tax credits in recent years aimed at reducing those costs for affordable housing, the study said.

"Just three such developments (two in the city of Waukesha and one in Muskego) totaling 176 affordable units have been developed in Waukesha County over the last 11 years with the support of 9% federal or 4% state housing tax credits," it stated, noting figures tracked by the Wisconsin Housing and Economic Development Authority. "By comparison, 71 developments totaling 4,162 affordable units have been supported by (low-income housing tax credits) in Milwaukee County during the same period."

Minimum lot sizes is a factor as well. Larger lots add to the total cost of a free-standing home.

The study noted that between 2018 and 2022, the average size of new lots created for subdivisions was twice as large in Waukesha County (0.67 acres) than in Dane County (0.31 acres). On the high end, not surprisingly, was Brookfield, which requires minimum lots sizes of 22,500 square feet (about a half-acre) in its least restrictive residential zone, compared to 8,000 square feet in Waukesha, 7,200 square feet in Sussex and no minimum size in Oconomowoc.

The study also pointed to comments collected from interviews with planning officials in each of the communities. Those comments acknowledged that the political pushback housing proposals often get in existing residential neighborhoods, particularly when affordable housing is proposed to be added, is a factor that short-circuits some plans.

What should be done, and how, to address the issue?

Some of the data focused on residents' incomes. That topic alone could be a focus of a study, but for purposes of the affordable housing study, the information is used to drive home the point that housing cost increases are exceeding the rise in incomes. Those factors pushed the study to examine what can be done to keep housing costs down.

For home ownership, one policy factor controlled by the communities is the size of lots, according to local and national sources cited in the study. Reduction in the minimum lot size would result in lower housing prices.

In addition to the use of tax credits to decrease out-of-pocket construction costs of affordable housing, the study suggests the use of tax-increment financing — which aids developers by allowing future tax dollars generated by property improvements in a project area to be used for certain development costs — could also be implemented more readily to pay for infrastructure costs upfront.

State law now allows surplus dollars generated in TIF districts anywhere in a community to be used for affordable housing initiatives, something Waukesha has considered in recent years.

Zoning changes, particularly those aimed affordable housing, would help, too. Increasing density in residential zones and allowing more residential properties in commercial districts are two examples, the study suggested among other policy points.

The study includes numerous other factors and potential strategies.

But it also includes an acknowledgement that none of this comes easily, at least in the collective view of local officials included in the study.

"There is no 'silver bullet' to address housing affordability," the study said, based on those comments. "Many factors contribute to high housing costs, including some that are largely beyond local control (e.g. interest rates, building materials) and some tied to quality of life that communities want to preserve (e.g. school district quality, which attracts many families to the county but also may make the housing market more competitive, potentially raising costs). To the extent that local action can help to improve housing affordability and facilitate workforce housing development, multiple strategies are needed."

Contact Jim Riccioli at (262) 446-6635 or james.riccioli@jrn.com. Follow him on Twitter at @jariccioli.

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This article originally appeared on Milwaukee Journal Sentinel: Affordable housing in Waukesha County is a difficult goal, study says