How Can We Provide More Affordable, Workforce Housing in the Fox Valley?

 Housing Crisis in the Fox Valley

We have a terrible housing crisis all over our country. Affordable, workforce housing is scarce and expensive. Many hardworking people are burdened by the excessive cost of housing when they can afford it at all. Affordable, workforce housing is also scarce where I live in Wisconsin’s Fox Valley, even though housing in Wisconsin is less expensive than in some other states. 

Federal guidelines recommend that households spend no more than 30% of their incomes on housing. Those that have to spend more than that are considered “cost burdened” because housing takes up such a large part of their income that they struggle to pay for other things like food or clothing, and they struggle to save anything.  According to a study published in 2019, nearly 20% of Appleton households and 23% of Green Bay households were considered cost burdened, and the situation has only gotten worse since then. 

An article in the Post-Crescent discussed the reasons why affordable housing is scarce in our community.

Paulsen [a professor of urban planning in Madison] said a good rule of thumb to determine how much a household should spend on a conventional mortgage is to multiply its income by three. So, to afford one of McHugh's cheapest and smallest homes, at $264,900, a household would need to earn around $88,000 a year. [McHugh is a builder in the Fox Valley.] 

The "sweet spot" for workforce housing in the Appleton area would be homes between $180,000 and $225,000, Paulsen said. All you have to do is look at the listings to realize there is virtually nothing in that price range," Paulsen said. "And if it is available, it goes really quickly....

It's also nearly impossible to build a new home within that price range….

This is Wrong and It Hurts Us All

This is wrong. It is unjust. Hardworking people who live in our community should not be struggling just to afford places to live. Buying a house is part of the American Dream. Buying a house is a step in a family's struggle to build wealth. A lack of decent affordable places to live gives the lie to the American Dream and feeds the feeling that many people have that our system is rigged against them. 

That is not all. The suffering that is being inflicted on our working people is also hurting the Fox Valley as a whole because the lack of affordable, workforce housing makes our communities less attractive as places to work and to establish businesses.

We Don’t Want to Lose Our Economic Advantage

We in the Fox Valley should think about ways to solve our housing problem because our low cost of living has in recent years been one of our main strengths in the competition to attract jobs and workers. If we want our communities to grow and prosper, we should look for ways to keep our cost of living low. One of the things we can do is to make sure that we have plenty of affordable, workforce housing, and in order to do that effectively, we should first understand the reasons why affordable housing has become so scarce and so expensive. Affordable housing has become scarce and expensive because we face a reduced supply of housing and an increased demand for it at the same time.

Why the Supply of Housing is Low

The reasons for the high cost of housing fall into two groups: market-based causes and non-market-based causes.

Market-Based Causes

The low supply originated in the crash of 2008. Because of the crash, the average number of houses built per year dropped drastically and has not yet fully recovered. The pandemic exacerbated the problem because the combination of low interest rates and quarantine requirements led lots of people to buy new homes, thus taking them off the market.

The inflation of recent years exacerbated the problem still further by raising the cost of building materials. In addition, many baby boomers have decided to continue to live in their homes rather than selling them to downsize into apartments or moving into assisted living.

Finally, many houses have been bought by investment groups. They often can pay cash and can afford to pay slightly higher prices than individuals. So, the investment groups have an advantage in the market, and their investment programs have limited the supply of housing available to individuals.

Non-Market-Based Causes

The housing market is not an entirely free market. It is heavily affected by government actions including zoning laws, building regulations and the rules governing government programs like veterans’ programs or the FHA that provide inexpensive mortgages. The housing market is also affected by rules and covenants designed by developers for the subdivisions they develop. Developers may specify that houses must have a minimum size in square feet or that certain kinds of building materials must be used. Such restrictions raise the cost of building houses. In addition, developers may specify a certain minimum lot size that limits the number of houses that can be built in a subdivision.

The Rental Market

Finally, we should note that the high cost and low supply of housing for sale has put pressure on the rental market, too. People who cannot buy places to live must rent them, and so, the scarcity of affordable housing for sale has driven up rents all over the United States. Moreover, all the things that have limited the supply of housing for sale have also limited the supply of rental housing.

Why the Demand for Housing is High

All of the limitations on the supply of housing have crashed into the demand created by the millennial generation’s reaching their prime home-buying years. The millennial generation is the largest since the baby-boom, and their desire to buy houses has created a tremendous demand just when the supply has been limited by the factors mentioned above.

Approaches to Solutions

In order to make available more of the housing that we need, the actions of governments must increase the supply of affordable, workforce housing on the market. The most direct approach would be to build public housing, but that would be expensive, and it would take a long time. Fortunately, there are other approaches that rely on creating incentives for private builders and on reducing or modifying existing regulations.

 State and local governments are well positioned to take action to increase the supply of housing. Some of the actions suggested below would be actions of local governments, and some would be actions of our state government. In addition, the state may act to facilitate local solutions. The list of solutions suggested here is not intended to be exhaustive. I hope that the ideas presented will stimulate our leaders to think creatively about solutions.

Incentivize construction of affordable new homes

Various levels of government can provide incentives for the construction of affordable housing by ingenious use of the tax system. A city or a school district could for example offer property tax rebates for to developers or builders of houses that are built on small lots or are built as manufactured houses. In addition, loans could be made available at attractive interest rates to builders of workforce housing or to buyers of such houses. In setting up such programs, we should be careful to avoid the errors that were made by the FHA that made such inexpensive financing unavailable to black people and contributed to the gap in rates of home ownership between black people and white people today.

A city could also invest in “housing parks” just as it now invests in industrial parks, and it could invite builders to build affordable, workforce housing in the parks. A housing park would be a subdivision that is deliberately planned to provide affordable, workforce housing. A city would in effect become the developer of the housing park subdivision and would invite builders to purchase lots and build houses just as would be done in a privately developed subdivision. The city could issue bonds to finance the purchase of the land, and the bonds would be paid off from the sale of the lots and from the property taxes that the new houses would generate.

Lift condo lending restrictions

Condos are less expensive than free-standing houses, but the rules governing the financing of condos are particularly cumbersome. The rules could be simplified, and that would create a bigger supply of condos. A city could also encourage the building of condos in our housing parks by setting aside land for them. Moreover, if the city were the "sponsor," (developer), the financing would be easier.

Focus on manufactured housing

Manufactured housing is much cheaper than housing constructed by traditional methods. The production of manufactured housing has fallen considerably since the nineteen-nineties, and if it were revived, houses could be produced much more cheaply.

Improve financing for existing homes

Today, a bank will generally lend money for the purchase of an existing house only on the basis of its current value, but a person may wish to buy a house and rehabilitate it. If a loan could be arranged to cover the cost of the rehabilitation as well as the existing value, that would make it easier for people who want to put in “sweat equity” to buy houses and fix them up. The effect would be to increase the supply of affordable housing in our community.

Lift or Modify Zoning Restrictions and Development Covenants

Zoning restrictions effectively prevent affordable housing from being built in many neighborhoods, and changing the restrictions is difficult because of NIMBYism. Nevertheless, we should explore loosening our zoning restrictions on a case-by-case basis in order to increase the supply of affordable housing.

In the development of new subdivisions, we should discourage building covenants that make the construction of affordable housing difficult or impossible.