Apr 4, 2021

Workforce housing has been a discussion topic in Waunakee for several years, prompting first a Housing Task Force to undertake a nearly year-long study and the reengagement of a Community Development Authority to implement the task force’s recommendations.

Along the way came a proposal to build a 50-unit workforce apartment complex on West Main Street that is still under consideration by the village board.

Many municipalities struggle with the issue of providing affordable housing for workers in today’s market, and in Dane County, solving the problem has been identified as key to alleviating economic instability. After years of work by a number of Dane County key players, nearly $12 million was raised to aid in the development of workforce-housing projects in the Madison area.

In May, the first project to receive funding from the Economic Stability Council will be built in the City of Middleton. Another in Fitchburg is slated for completion in 2022.

Several years ago, the United Way of Dane County formed an Economic Stability Council composed of representatives from several major corporations, Dane County, the City of Madison, UW-Health and nonprofits to tackle poverty.

Rich Lynch, of JH Findorff & Sons was the chair.

“It was a great organization and was going to do great work, but it was one of those, ‘Gosh, are we really changing the curve here, or will we be doing the same thing in 10 years?’” Lynch remembered.

When Lynch chaired the United Way’s board of directors at the time, Renee Moe, United Way’s president and CEO asked him to begin thinking about solving poverty in a new way.

Lynch put a council together. It included Waunakee resident Lorrie Heinemann, president of the Madison Development Corporation, a nonprofit that owns and manages affordable housing units in the Madison area, along with representatives from CUNA Mutual, Oscar Rennebohm Foundation, MG&E, City of Madison and Dane County, Madison Community Foundation, American Family Insurance, J.H. Findorff & Son, UBS Wealth Management, UW Health and United Way.

Both Heinemann and Lynch remember UW-Madison Chancellor Rebecca Blank speaking to the council and suggesting they focus on one area.

“We went around and around on poverty,” Lynch said, focusing on early education, job creation and housing.

The council members landed on the idea that when housing is affordable, without a burdensome cost and close to the workplace, quality of life is improved. They found that the No. 1 economic stability issue for Dane County employees is the lack of affordable housing close to work, Lynch said.

The Madison Development Corporation was tasked with starting the Dane Workforce Housing Fund. Lynch reached out to major Dane County employers to invest.

“The employers knew that their employees – nurses, teachers, customer service people – could not afford to live in Dane County or in the region,” Heinemann said.

By Sept. 30, 2020, the fund had surpassed the $10 million goal, and in November, reached $11.8 million, to fill financing gaps developers face with workforce housing projects. The goal is to aid in the development of 500 units of workforce housing. Heinemann and two other MBAs at Madison Development Corporation vet the proposals.

Heinemann noted that workforce housing targets individuals making 40 to 80 percent of the average median income.

“That’s what Middleton and Madison and much of the United States is talking about, where you have a missing middle,” Heinemann said.

Households that pay more than 30 percent of the earners’ wages are considered cost burdened.

For a household earning $50,000, an affordable rent is $1,000 per month.

Workforce housing projects

So far, the Dane Workforce Housing Fund, LLC, has provided two loans equaling $2.9 million of the $11.8 million raised. A $900,000 loan was granted to the Wisconsin Housing Preservation Corporation, a nonprofit to assist with Kestrel, a 39-unit apartment building planned at 6818 University Ave. in Middleton. It will include 14 studios, 21 one-bedroom and four two-bedroom units. Eight of the units will be leased at prices for those earning 50 percent of the average median income; 31 will be leased at a rate of 80 percent of the median income.

JT Klein received a $2 million loan from the Dane Workforce Housing Fund to assist with the 116-unit Limestone Ridge in Fitchburg. Seventy-eight units will be one-bedrooms, 21 will be two-bedroom and 17 will be three-bedroom units.

Fifty-five will of the leases will be priced for those earning 50 percent of the average median income, 16 priced at 60 percent and 29 at 70 percent. That project is anticipated to be completed in January of 2022.

Sustaining affordability

During discussions about workforce housing in Waunakee, some have questioned how the affordability can be sustained. In some cases, housing built to be affordable is sold at market rate.

Developers who receive loans from the Dane Workforce Housing Fund enter into a land use restriction agreement to ensure the units remain affordable for 15 years.

“In a perfect world, what could happen [afterwards], is the developer has an opportunity to refinance, and the project may have appreciated in value,” Lynch said.

Or the developer could take a return and then bring in other investors, he added. Acknowledging that a building could be sold off and the units then leased at market rate, Lynch said that outcome would be disappointing.

The goal is to lend money to developers who understand the market and the income requirement, and then monitor the average median income to keep the rents in line.

Heinemann said when nonprofits develop housing, they have no investors to pay returns to. And nonprofits make payments in lieu of taxes. There is less of an incentive to sell off the property.

Wages have not kept pace with housing prices in the United States, even in some places where the minimum wage has been raised to $15 per hour.

“Getting people to $15 an hour is a great goal; $15 an hour is $30,000 a year,” Lynch said adding that finding rents at 30 percent of $30,000 a year is “a stretch.”

His hope is the Legislature begins to look at housing from its end.

“The point is, we’re trying to work from the housing side and we hope it also comes from the other side,” Lynch said.