With a boom in housing development in downtown Madison, apartments like the Hub, City View and the Domain are raising concerns for some about affordability for students.
Ald. Mike Verveer, District 4, said he thinks the main reason for the increase in apartment construction is the low interest rates for developers to construct both student and non-student housing downtown. In addition, he said private studies have shown developers that the city still has a strong apartment market due to its low vacancy rate.
According to Madison Gas and Electric, the vacancy rate for housing in downtown Madison is 3 percent. Mary Carbine, director of the Business Improvement District, said that is still only half of what would be optimal for the city.
“With the low rate citywide, there’s some overlap between demand for students and young professionals in similar types of housing and locations,” Carbine said. “We’re thrilled with the additional higher density housing in the downtown, that’s going to really help the central downtown as a retail district.”
Once construction is completed for the apartments downtown, Verveer said he expects competition between landlords to pick up, leading to a decrease in rent and improved maintenance of the units themselves.
However, Verveer said he is frustrated that most of the new apartments do not have any affordable housing set aside for tenants that cannot afford the high level units.
“I know a lot of people are concerned, myself included, that we’re losing as opposed to gaining affordable housing,” Verveer said.
Verveer said the low vacancy has made the market look desirable to developers from outside of Madison as well. Core Campus Development from Chicago is building the Hub in Madison and has other Hubs at the University of Arizona and the University of South Carolina, among other locations.
Scott Stager, senior vice president of Property Management at Core Campus, said State Street was picked as a prime location based on the promising market in Madison.
“The whole process started with interest in the market in general due to positive metrics we seek when looking to develop. We couldn’t be more thrilled with the location that we were able to obtain,” Stager said.
Verveer said apartments like the Hub are moving forward without any apparent concerns for affordability for students, even considering the high levels of amenities included.
Besides students, a large number of tenants in the downtown are employees of the software company Epic, which is located in Verona. Verveer said many refer to young professionals as “the Epic generation,” and part of the housing boom is due to the all of the jobs Epic has added over the past several years.
While construction on many of these buildings begins to wrap up, Carbine said it is still hard to tell what kind of demand there will be for housing once the apartments are completed and fully leased.
“We have to see how the market reacts once all the new apartments are absorbed and maybe the demand will continue,” Carbine said. “Maybe there’ll be an effect throughout the demand as people reshuffle their living choices and possibly open up more opportunities. We just don’t know yet.”