Doug Holtz starts his workday at 8 a.m. He manages underwriting for Madison, Wisconsin’s community radio station, WORT. On the first Monday in April, Holtz had been at his desk in the basement of the station for about an hour when an email came in from his landlady, telling him that she wasn’t going to renew his lease. This is the third time in 10 years that Holtz has been forced to move, and over that decade, his rent has doubled.
“I’ve paid my rent early every month. I’ve never had a rental payment be late . . . in any of these three apartments. Never had a noise complaint. Nothing.” Still, Holtz says, his exemplary conduct hasn’t translated into stable or affordable housing.
“I’ve been a model tenant, yet I still get treated like dirt, totally like dirt, which is because these people have enough money to treat me like dirt, and so they do,” he says.
Holtz, who is 56, earns $45,000 a year and is paying $1,380 a month in rent at his current home. That’s nearly $300 more than what the city points to as “affordable” for people earning salaries like his. The news that he will have to find a new place to live within the next three months—and that the new home will likely be much more expensive to rent—has prompted panic attacks and sleepless nights.
“I make too much money for affordable housing, and I make too little for unaffordable housing. I’m in that gap in between,” Holtz laments. “What am I supposed to do? Eat oatmeal for the rest of my life?”
Holtz isn’t alone in his frustration. Nearly half of all renters in Madison qualify as rent burdened or severely rent burdened. Holtz fits the former category, which means he is paying more than 30 percent of his income on rent. In a severely rent burdened household, rent eats up more than half the income. This situation has worsened over the last several years in Madison, which earlier this year saw the highest year-over-year percentage rent increases among the top 100 U.S. cities, according to Apartmentlist.com. Madison renters are also experiencing surging competition for limited housing from an influx of newer, wealthier residents. As with Austin and San Francisco, Madison’s affordability issues tie into its growing tech sectors.
Those factors, along with the relatively low wages of non-tech jobs within the city, are pushing natives like Holtz out of Madison.
Housing for Whom?
Housing is being built in Madison, though. A lot of it, and at a pretty rapid clip.
The city has issued more than 18,000 new housing permits since 2013, most for market-rate units. A large percentage of those units have been built in the city’s downtown area, which sits between two bodies of water, forcing development upward. Multiple high-rise buildings have gone up there over the last decade, and today, cranes dot the skyline and some streets have taken on a canyon-like feel.
Even so, Madison’s supply of rental units still lags compared to demand. The city is attracting thousands of new residents each year, with the population projected to grow by a staggering 42 percent in the next 30 years. The demand for market-rate housing from households earning more than the city’s $70,000 area median income, and the limited affordable housing options for those earning less, make it difficult for folks like Holtz to compete for an apartment. There’s a shortage of new, more luxury housing for renters earning higher incomes—say around the $100,000-plus range—and “these households ‘underconsume’ (rent-down) within the housing market, which means units they rent are incredibly affordable to them,” according to Madison’s 2022 Housing Snapshot Report. In effect, they’re taking these more affordable market-rate units away from lower-earning renters.
Affordable housing is being built, but at a much slower clip. From 2013 to 2022, the city has supported via its Affordable Housing Fund almost 2,000 affordable housing units, about 1,500 of which have been built or are currently under construction. Most of the affordable housing efforts have prioritized households that earn 50 to 80 percent of area median income—creating what the city calls a surplus of housing for that income level. Take for example a 550-unit affordable housing project that was recently approved on the site of a decommissioned Oscar Mayer processing facility on the city’s East Side. The development aims to serve households earning $40,000 to $90,000 per year.
But someone working full-time as a laborer with the city’s convention center would earn just under $34,000 annually, too little to meet the lower threshold for that development. While this position sits near the bottom end of the city’s wages, it illustrates the challenge low-income residents face.
But perhaps the biggest challenge is addressing the housing needs of extremely low-income residents, those who earn 30 percent of the area median income, or $24,250 for an individual. According to the city, there’s a shortfall of more than 11,000 units for folks in this income bracket. Data from Madison’s Affordable Housing Fund shows that only 13 percent of the affordable units recommended for approval in 2022 targeted this demographic.
Justice Castañeda is a Madison native and former Marine who now runs Common Wealth Development, a community development organization that offers low-income housing. “We need to focus and aggressively pursue housing for people who earn under $40,000, and we need to do that in spades, and that should be the top priority, and that should be the way that we talk about it and we should say that,” says Castañeda, who critiqued the city’s approach of pushing new housing development for all income levels, including those able to afford market-rate units.
As it stands, the city does provide financing to private developers who build affordable housing through its Affordable Housing Fund. And according to Linette Rhodes, who supervises community development grants for Madison, “we are trying to use other mechanisms, like [tax-increment financing], to support the growth of affordable units.”
But things like inclusionary zoning, which would require developers to build below-market rate housing units in new construction projects, and rent control, which could curb the high rent increases Madisonians are facing, are not options the city can take. Wisconsin bans municipalities from setting rent regulations, and it prohibits inclusionary zoning. This complicates matters for local policymakers who are trying to solve Madison’s housing conundrum. Nonetheless, Castañeda says, “Cities say they don’t have control, but they don’t leverage the power they have.” He acknowledged that it’s not as simple as pressing a button to solve the problem saying that the city’s challenge is developing a sustained course of action. Still, he wondered whether Madison is not leveraging all its options because of fears that questioning development would appear contrary to the idea that the city needs all the housing it can get regardless of what the rent is.
Faced with restrictions on zoning, municipalities like Madison often turn to Low-Income Housing Tax Credits to help bolster affordability. In exchange for developing affordable rental housing, these tax credits enable investors to lower their tax liability over the credits’ roughly 10-year life span.
Some experts, however, say the tool is being overused. “LIHTC, because it’s the only game in town, everybody tries to fit every policy objective onto it,” says Dr. Kurt Paulsen, an urban planning professor at the University of Wisconsin-Madison who studies affordable housing financing.
“One of the policy arguments in favor of [low-income housing tax credits],” Paulsen explains, “is that you’re offloading property management and tenant selection to a private-sector entity.” But he notes that a private business “may not have the same social intention as a city” and so might select tenants with somewhat higher incomes or less blemished credit records, disregarding people with more challenging histories. Those people, however, are often a city’s most vulnerable population.
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One reason tax credits fall short when it comes to ensuring housing for lower-income residents is that the state allocates federal tax credits and has to distribute them to cities across the state, creating competition for a limited resource. Those credits come together with other sources of funding, including the city’s own affordable housing development fund, to piece together project financing.
Another reason is that low-income housing just doesn’t make as much money for the developers.
“Permanent supportive housing sub 30 percent AMI for people at risk of homelessness—very hard to do with [low-income housing tax credits],” Paulsen acknowledges. He estimates that over the 10-year lifetime of a tax credit on a 50-unit building, the cost difference between a two-bedroom unit renting at 60 percent of AMI and one at 30 percent of AMI amounts to roughly $3 million.
“So, I always tell people, for the same two-bedroom unit, the difference between a 60 percent AMI unit and a 30 percent AMI unit is that you have to put up much more tax credits upfront,” Paulsen says.
Searching in Vain for an Apartment
For Holtz, losing his lease means having to search for a new home in an extremely tight market. The rental vacancy rate currently sits at 2.5 percent, half what is considered healthy.
“I went on a couple of apartment-hunting sites, and there’s nothing. There’s really nothing,” Holtz says. “Where I’m living now, to find something comparable would be over $2,000 a month, and I don’t have over $2,000 a month.”
Holtz is not low-income, yet his dilemma highlights the housing challenges facing a broad swath of Madisonians. As a result, some housing advocates are pushing the city to consider new approaches. Dr. Olivia Williams, who runs the Madison Area Community Land Trust, is one of them. One strategy she endorses would have the city get more creative with the way it finances affordable housing projects.
“What we could do is use our bonding authority to basically borrow and produce social housing that might be mixed income and cross-subsidized units between high-income units and low-income units,” Williams says. “That model theoretically can pencil out and work, especially because . . . a city can borrow at much lower rates than a bank would require, especially right now.”
The city is looking at opportunities such as land banking, says Rhodes, which would set aside city-owned land for future housing development.
New Markets Tax Credits represent another potential tool for the city. Another possible lever comes from a controversial Obama-era program, Rental Assistance Demonstration, or RAD, which gives public housing authorities the ability to make use of private financing to preserve and repair aging buildings and units. The program is a workaround for the 30-year gap in federal funding for public housing.
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Holtz’s future remains uncertain, but he may have a way out. Last year a driver ran a red light and blindsided Holtz’s car. The accident left him with broken ribs and a totaled car, but he hopes that the settlement will come through before his lease expires at the end of June. If it does, Holtz says he will try to qualify for a minimum downpayment as a first-time homebuyer.
“I’m hoping for the universe to provide that out because other than that, I don’t see a lot of options, other than pitching a tent in my kid’s backyard.”