The City of Madison has allocated $9.85 million from its Affordable Housing Fund to support the addition of four new affordable housing projects.
The four projects include the Merchant Place Senior Apartments on the West Side, East Washington and 7th Ave. on the East Side, CORE on Dryden and United Residences on the North Side, according to the Wisconsin State Journal.
Director of Madison’s Community Development Division Jim O’Keefe discussed what the term “affordable housing” means.
“When we use that term, we’re talking about housing that is to serve households earning at or below 60% of the county’s median income,” O’Keefe said.
In Dane County, for a single person, 60% of the county’s median income is about $53,000 and for a three-person household, it’s about $68,000, O’Keefe said.
Additionally, the Community Development Division insists to developers that at least 20% of new units be set aside for even lower income households earning around 30% of the county’s median income, O’Keefe said.
For a single person, 30% of the county’s median income is about $27,000, and for a three-person household, it’s about $34,000, O’Keefe said.
The Community Development Division is committed to ensuring developers adhere to the city’s tenant selection policies, O’Keefe said.
“We want to make sure that they aren’t excluding households that may have more difficulty getting housing,” O’Keefe said. “We ask them to work with tenants that have a history of eviction, bad credit or criminal involvement. We don’t want people in those situations to be categorically excluded from housing.”
University of Wisconsin professor of urban planning and expert on affordable housing Kurt Paulsen said the city plans to invest in affordable housing with an emphasis on proximity to transit, grocery stores and schools. Also, they plan to leverage the Federal Housing Credits with the city’s funds.
Federal Housing Tax Credits, allocated by WHEDA, are used to fill the monetary gap in value for developers making affordable housing, Paulsen said. A housing developer will apply for tax credits and state their plans for the building. They then apply to a competitive program that runs once a year. If they are granted the tax credits, the developers then sell the credits to an investor and use the proceeds to build the development, Paulsen said.
Additionally, any development project that receives city funding is required by the Community Development Division to keep their units affordable for a minimum of 40 years, O’Keefe added.
Any affordable housing development in Dane County would have been impossible if not for the Low Income Federal Tax Credit Program, O’Keefe said.
But, the tax credits aren’t enough to fill the gap in equity, which is where the City of Madison steps in with the Affordable Housing Fund. This process is commonly referred to as gap financing, Paulsen said.
“You really cannot build new affordable housing without some large subsidy program, and the Low Income Housing Tax Credit is the largest supply side subsidy program,” Paulsen said.
Leveraging Low Income Federal Tax Credits with the Affordable Housing Fund has been central to the city’s strategy, and will continue to be, Paulsen said.
Additionally, for the first time the Affordable Housing Fund is being used to fund maintenance and preservation of existing affordable housing outside of the tax credit program, Paulsen said.
“Madison is about as innovative and dynamic as any other city in the country, and they are maximizing all of the tools they have,” Paulsen said. “But, there are just a limited number of tools in the toolbox.”
District 8 Alder MGR Govindarajan discussed who the Affordable Housing Fund serves to benefit, and who is excluded from benefitting.
“We use this fund to provide senior housing, low income housing, transitionary housing, housing for people experiencing homelessness and then heading out of homelessness, and families.” MGR said. “Students are not qualified for this 98% of the time, but this fund allows us to invest in the remainder of Madison’s community.”
The Low Income Housing Tax Credit program does not allow undergraduate students under the age of 26 to live in their units unless their parents are the renters. In terms of federal policy and taxes, undergraduate students under the age of 26 are considered adult dependent children, meaning they cannot independently receive federal benefits, Paulsen said.
There are exceptions to this, including if the student is married and has formed their own independent household, has a child, is disabled or is a veteran, Paulsen said.
The Affordable Housing Fund has existed since 2015, and the mayor and city council have been consistently increasing its budget over time, MGR said. But, the fund was never intended to serve UW students.
The City of Madison has introduced other policies intended to benefit students, including the density height bonus, which encourages developers to provide affordable housing by allowing them to exceed the city’s height limitations by two stories in return for a 40% discount for students, according to Madison Commons.
Madison’s Affordable Housing Fund has supported 32 projects across the city and over 2,700 new rental units, 2,150 of which are considered affordable housing, O’Keefe said.
Across the four new projects will be approximately 275 new rental units, including 167 for those with lower incomes, according to the Wisconsin State Journal.
