How to actually solve Madison’s housing crisis

We don’t have to settle for half-measures and market-driven solutions.
A photo shows the Quisling Terrace apartment building in downtown Madison from a slight angle. The photo is mostly taken up with a multi-story facade of tan and off-white bricks, with windows, curved corners, and a covered balcony visible on one floor. In the right-hand portion of the photo, an adjoining facade of the same building is visible, as are clouds in a bright blue sky.
The Quisling Terrace apartment building in downtown Madison. Photo by Warren LeMay on Flickr.

We don’t have to settle for half-measures and market-driven solutions.

Local debates about Madison’s housing crisis were reignited by the proposed Johnson and Bassett high-rise development in downtown Madison. The developer, Core Spaces, proposed demolishing 68 units of “naturally affordable” student housing in order to build 232 luxury student housing units. The Common Council initially rejected the project on a 13-6 vote, before reversing course just two weeks later and approving it 17-2.

Frankly, this entire saga made everyone involved look pretty clueless, but it was productive in two important ways. First, it brought the severe limits of Madison’s current housing strategy into stark relief. Mayor Satya Rhodes-Conway’s “Housing Forward” plan includes many good ideas, but it also consists largely of vague political buzzwords and incrementalist solutions that are clearly unequal to the scale and urgency of one of Madison’s most pressing problems. It states that we must build 10,000 housing units every five years to keep pace with projected demand, but it provides no realistic plan for how to achieve this goal, much less how we can provide enough housing for 115,000 additional residents by 2050. It offers no clear path to building the 16,540 new affordable housing units that are needed just to meet current demand in Dane County. At a time when UW-Madison is enrolling thousands of additional students, it is silent on how to house those students. It offers no hope for aspiring homeowners unable to afford Madison’s median home sale price of $400,000, which is on track to reach $1 million by 2040. It offers no answers to the students who will be displaced by the Johnson and Bassett development, and proposes only inadequate half-measures for combating gentrification, displacement, and racial and economic segregation.

Second, the Johnson and Bassett development has also sparked a renewed public debate about housing affordability in Madison. Alders Juliana Bennett and MGR Govindarajan called for a housing “revolution,” while Alder Regina Vidaver responded with several specific suggestions as to what she thinks “revolutionary” pro-housing reforms could look like. Alder Tag Evers also wrote that “we need to see our city’s housing crisis as a local emergency,” and argued that “the city must expand its investments in affordable housing.”

We do need to face some legal realities: Wisconsin state law currently “preempts,” or bans, many local housing policies, including rent control, mandatory inclusionary zoning (i.e., legally requiring large housing developments to include a certain percentage of affordable units), local taxes and fees, and even routine rental inspection programs. Madison area officials have sometimes cited these preemption laws as an excuse for a lack of serious action on housing. However, while these preemption laws must be dismantled in the long term, Madison residents cannot afford to sit around waiting for the political environment in Wisconsin to fundamentally change. We need to sail through these political headwinds, and stop using preemption as an excuse for inaction.

Madisonians need permanently affordable housing right now. Across the US, construction rates are the highest they have been in decades and the number of cost-burdened households is still growing. Housing is a human right, and our goal should not be to rely solely on the slowly-grinding gears of supply-side economics to reduce housing price increases to an “acceptable” level. We must commit to a serious plan to provide a truly affordable city for everyone.

We can achieve that goal. We created this problem, and therefore we have the capacity to solve it. And the solution is actually fairly simple: We need enough funding to build the housing Madison needs, and the ability to actually build that housing wherever possible.

How do we fully fund housing?

Let’s start with the low-hanging fruit: 

Mayor Satya Rhodes-Conway recently proposed increasing the City of Madison’s investment in affordable housing to $20 million in 2024, a 60 percent increase over the 2023 City budget— every member of the Common Council should support this badly-needed funding increase. The City must also dramatically increase the paltry $1 million land banking fund that it uses to buy land. A good start would be earmarking $10 million in the 2024 City budget specifically for buying land for future affordable housing development. These funding increases are all well within the City’s current bonding capacity.

The City’s 2019 Equitable Development Report is a fantastic source of information and ideas for raising revenue for affordable housing, many of which haven’t been implemented. The City could fund affordable housing by creating Tax Increment Financing (TIF) districts for specific developments or parts of Madison. In fact, TIF has already been used to fund affordable housing at local developments like Union Corners and developments near the former Oscar Mayer property, but the rules for when TIF can be used to subsidize affordable housing should be loosened to increase access to this pot of money for more affordable housing developers. The City could also provide new revenue streams for affordable housing by charging developers linkage or impact fees like Los Angeles, Medford, OR, Boulder, CO, and Cambridge, MA.

The above ideas for increasing local affordable housing funding may seem ambitious, but they are still dwarfed by the sheer scale of the Madison area’s affordable housing shortage. Building affordable housing at the scale, speed, and quality that Madison needs will likely require hundreds of millions of dollars in public funding. 

Many of Madison’s peer communities across the nation have approved large local housing bonds by referendum in recent years: $130 million in Ann Arbor, $600 million from two separate bonds in Austin, $150 million over the past five years in Charlotte, and $911 million from two bonds in Portland, OR, to name just a few. In Madison, a referendum like this has not yet been attempted. Interestingly enough, in Wisconsin, a state where municipalities are severely financially restricted, borrowing is not subject to levy limits. So the Common Council can vote to make significant investments in affordable housing without needing to go to referendum.

Of course, the way these local housing funds are spent will be even more important than the amount of funding itself. They should be used for public land acquisition (i.e. land banking) for future affordable housing development (as was done in Austin and Portland), especially near major public transit routes. It should also fund public housing development (see Portland and Ann Arbor), private affordable housing development (see Denver, Austin, and Charlotte), permanent supportive housing (see Ann Arbor and Austin), and of course increased local government staff capacity to make all this happen. 

One idea brought up by Olivia Williams, executive director at Madison Area Community Land Trust, is based on an initiative in Montgomery County, Maryland, where public bond financing is being invested directly into private, mixed-income housing projects, paying directly for affordable units and cutting out the need for for-profit equity investors. In most private developments, rich investors provide cash up-front to make a project work financially. The problem is, most investors expect around 15% returns on their investment. Where do those returns come from? High rents! Reduce the interest rate, and you can reduce the rents. Montgomery County has found that if they work out partnerships with developers to provide the “equity” investment at low interest rates (via bond financing), the buildings can sustain cash flow even if a portion of units are set aside for low incomes, fetching lower rents. The principal and interest on the public financing can be paid back through revenues from rent, but without the wealthy equity investors pocketing their outlandish return on investments.

Taking this idea to the next level, the City could leverage low-interest debt to develop social housing: 100% publicly-owned, permanently affordable, mixed-income rental housing that is common in Europe and South America (most notably in Vienna, Austria). The mixed-income nature of social housing allows for “cross-subsidization,” where higher-priced units allow for some units to be reserved for very low-income people. Social housing pays for itself, so that all costs of financing, developing, and managing the housing are carried by the rent, but no private firm seeks profit from the rents. Social housing is generally high-quality, available to a wide share of the population, and allows tenants to remain in their homes permanently, even if their income increases. As advocates have noted, this provides stability and economic opportunity while avoiding the social stigma and concentration of poverty often associated with public housing in the United States. Seattle voters recently approved the creation of a Seattle Social Housing Developer that can use public funds. Madison could follow suit by developing 100% City-financed, City-owned social housing developments.

This City should also distribute public funds to private housing developers to subsidize affordable units in a variety of housing types. But to make sure dollars invested in affordability have lasting impact, it is also important that Madison commit to permanently affordable housing. Williams said this could be done through funding contracts with affordable housing developers to be sure that units remain affordable beyond the minimum of 15-to-40 years. The City could also support the expansion of the local community land trust (CLT), a non-profit organization that sells homes to low-income families at permanently affordable prices. The Madison Area Community Land Trust (MACLT) (where Williams is executive director) has been in operation since 1991, and developed 62 subsidized homes to date, which have served over 120 families, effectively doubling the impact of subsidy dollars through re-sales of the homes over time. (Full disclosure: I sit on MACLT’s Board of Directors.) To jumpstart more expansive growth of CLT units, Madison could emulate efforts in Indianapolis and Asheville. Those cities have dedicated upwards of $1 million for operations of a CLT, so that the nonprofit can increase its capacity to provide permanently affordable housing. Madison could also replicate San Francisco’s Small Sites Program, which provides public funding for CLTs and other nonprofit housing providers to buy, maintain, and rent-control “naturally affordable” housing that is at risk of demolition or gentrification to make sure their affordability lasts in perpetuity.

And where do we build it?

Even if we have the resources to build the housing Madison needs, we need to actually put that housing somewhere, but if every angry neighbor gets their way, no affordable housing will ever be built. This is not a theoretical problem—Alder Marsha Rummel described the Union Corners project as “terrifying” when it was proposed in 2014, and in recent years many low- and mixed-income housing proposals have been strongly opposed, delayed, scaled down, and rejected in Madison and surrounding communities like Middleton, Fitchburg, and McFarland. Other cities have run into a major gap between funding and implementation. For instance, Los Angeles has dedicated an astounding $1.2 billion to affordable, supportive housing, but has struggled to actually spend it because local residents have successfully blocked and delayed many projects.

Madison should continue allowing taller apartment buildings to be built in already higher-density areas near downtown. A series of pro-density permitting reforms in Seattle, Denver, and Minneapolis have contributed to real rent declines in those cities. For example, rents for one- and two-bedroom apartments in Minneapolis are cheaper now than they were in 2018 even without adjusting for inflation, and three-bedroom apartments are also cheaper in real dollars. 

However, local policymakers must also recognize the limitations of this approach. Zoning changes, without a serious investment in affordability, will serve those in higher income brackets more than those at the bottom. For example, in Seattle, rents decreased for high-income renters downtown, with average monthly rents declining by $100, but only declining by $50 in the rest of the City. As evidenced by the Johnson and Bassett development, market-rate high-rise development can lead to gentrification and displacement of vulnerable residents in the absence of on-site affordable housing and robust tenant protections. We can do better in Madison.

A great place to start would be to follow the lead of Cambridge, Massachusetts by creating a 100% Affordable Housing Overlay. Approved in 2020, this city-wide zoning overlay district essentially allows affordable housing developments of up to four stories to be built “by-right” in any neighborhood in Cambridge, provided that 100% of the units in the development in question are affordable to families earning up to 100% of the Area Median Income. This means that 100% affordable housing developments can be automatically issued the necessary permits by city staff after a brief design consultation, rather than a lengthy, costly, and politically fraught process of public hearings and approvals. In fact, Cambridge allows six to seven stories of affordable housing to be built by-right in higher-density areas. This has reduced affordable housing development costs by 10% to 15%, and there are currently 616 affordable apartments under development that were made possible by the Affordable Housing Overlay.

The City of Madison recently took a step in the right direction by approving the Transit Oriented Development Overlay districts, which essentially allow every residential lot near the new Bus Rapid Transit (BRT) routes to go up one step in density. For instance, neighborhoods that currently only allow single-family homes would begin to allow duplexes, while blocks where apartment buildings are currently limited to three stories in height would see that limit increased to four stories. However, the TOD Overlay upzoning was generally limited to areas within a quarter-mile of BRT routes—combined with various other exceptions, this meant that these zoning changes only applied to about 14% of the city. Until 2023, 75% of Madison neighborhoods were reserved solely for single-family homes, but even after the TOD Overlay reforms, a majority of Madison’s residential areas are still exclusively single-family, severely limiting the amount of housing that can be built in Madison, and limiting a lot of land use to the most exclusionary of housing options—detached single-family homes.

The TOD Overlay upzoning should instead be expanded to cover every neighborhood in Madison. In fact, Madison could go a step further by following the lead of Minneapolis and the State of Oregon by allowing three to four housing units to be built by-right on every lot in every residential neighborhood. This means that a duplex, triplex, fourplex, or accessory dwelling unit (ADU) could be built on any lot with nothing more than a simple permit issued by city staff. While such a policy change would not change things immediately, in the long run it would allow thousands more “missing middle” housing units to be built in Madison than would be permissible or politically feasible under current zoning policies.

If Madison can get some truly visionary local leadership, these pro-housing zoning reforms could be paired with voluntary developer commitments to include a certain amount of affordable units in new housing developments. After a lengthy public process, Seattle reached such a “Grand Bargain” with developers in 2015, legally circumventing Washington’s state preemption of inclusionary zoning.

Quantity and quality

There is not only a lack of affordable housing in Madison—there is also a lack of quality affordable housing, and tenants’ rights must be a cornerstone of any local housing strategy. While the frequent abuses renters face in Madison could be significantly reduced if a much larger share of Madison renters lived in stable, permanently affordable public or social housing, our local governments should be doing much more to protect tenants. 

Local activist groups like Madison Tenant Power have argued that the City of Madison should pass a Tenants’ Bill of Rights which includes a Right to Counsel for those facing evictions, as other local governments have done. The City must also protect those rights by increasing funding for organizations like Legal Action Wisconsin and the Tenant Resource Center, providing legal counsel for at-risk tenants facing eviction, and increasing the capacity of local residential code enforcement.

These policies are bold and ambitious, and they would certainly be controversial. But unlike the current half-measures our local elected officials are proposing, they are equal to the task of actually solving Madison’s massive housing crisis. If implemented, these policies would prevent gentrification, displacement, and racial segregation by allowing housing of all types and price points in every neighborhood. They would reduce economic and racial inequality by providing stable, affordable housing to those who need it most. By allowing more people of all incomes to live close to jobs and services, they would reduce carbon emissions, traffic congestion, and infrastructure expenses while preserving countless acres of wetlands, forests, and farmland that would otherwise be lost to endless suburban sprawl. A truly progressive community would happily embrace policies that achieve these vital goals.

We need to fully fund affordable housing, and the ability to actually build that housing wherever possible. And to be clear, both of those needs are equally important, and we must do both at the same time. Local housing advocates, policymakers, and residents need to stop splitting hairs and pointing fingers, find common ground, and build a local movement to implement the real housing solutions that Madison desperately needs.

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