As part of the 2023-25 Wisconsin state budget signed into law by Gov. Tony Evers on July 5, 2023, Wisconsin lawmakers invested $525 million in new initiatives aimed at addressing the state’s housing inventory shortage. Specifically, the state’s new housing initiatives seek to increase housing inventory and affordability throughout the state through a series of regulatory reforms, local government incentives and low-interest loan programs. In addition to increasing housing inventory, the housing initiative is aimed at addressing the state’s workforce housing shortage, repurposing underutilized spaces, revitalizing local communities, and growing the state’s economy.

This article provides an overview of why the state legislation was enacted, a description of the new laws, and a discussion of the desired impacts on the availability and affordability of housing in Wisconsin.

Why the state’s investment in housing was necessary 

While many states throughout the country are experiencing low housing inventories, Wisconsin’s housing shortage is particularly bad. Since 2010, Wisconsin has produced on average 10,000 fewer single-family housing units every year than were built in the prior decade. According to a recent study by Forward Analytics, Wisconsin needs to build up to 227,000 new housing units in the next decade to adequately address the housing inventory shortage. As most REALTORS^® can attest, this shortage has resulted in limited inventory of available housing, increased prices and rents, and challenges for individuals and families seeking suitable and affordable homes.

In addition, much of Wisconsin’s existing housing stock is older and is in need of repair or updates to be more energy efficient. The median age of Wisconsin’s single-family housing stock is 45 years, while the national average is 39 years. Over 57% of Wisconsin’s single-family homes were built before 1980. The current older housing stock is often occupied by seniors who are on fixed incomes and incapable of making necessary repairs. With interest rates rising over the last 18 months, first-time homebuyers or buyers interested in older housing stock are overwhelmed by the financial burden of the repairs needed in these properties, typically making them financially out of reach.

Finally, housing affordability and new construction costs are a growing concern. Since 2020, single-family construction costs have increased 36.2%, and multifamily construction costs have increased 35.2%. Housing costs have increased for numerous reasons, including escalations in labor and material costs as well as rising interest rates. However, government regulation is also a big contributor to higher housing costs. According to recent studies, government regulations — for zoning, fees and approval process, for example — add approximately $88,500 to the average cost of a new home. Moreover, the approval process for new residential development is time-consuming, with the average development in Wisconsin taking approximately 14 months to be approved. New infrastructure costs along with large minimum lot sizes add significant costs to new housing. New infrastructure for a residential lot, which includes roads, sewer, water and sidewalks, costs approximately $1,200 to $1,500 per foot of lot frontage. For example, if a community requires residential lots to have a minimum width of 130 feet, the infrastructure costs for the lots would be $156,000 to $195,000. 

New state housing initiatives 

To address the housing inventory shortage and the growing housing affordability issues, Wisconsin lawmakers enacted into law a comprehensive package of housing initiatives aimed at increasing housing supply and lowering the cost to build new housing units. While each of the housing bills had different authors, Rep. Rob Brooks (R-Saukville) and Sen. Romaine Quinn (R-Cameron), who are both REALTORS^® and each chair of the housing committees in the Assembly and Senate respectively, spearheaded these legislative initiatives and helped build strong bipartisan support throughout the legislative process. Ultimately, each of the bills in the housing package passed both houses with either unanimous or almost-unanimous support. Moreover, the $525 million invested in the housing loan programs, which also received unanimous support from the legislature’s state budget writing committee, was the state’s largest investment in housing ever. 

New state housing loan programs

The package includes four different revolving loan programs focusing on various components of the housing sector for which financing is currently difficult or unavailable: 

1. Infrastructure for new housing.
2. The rehabilitation of main street housing.
3. The conversion of vacant commercial space to housing.
4. The rehabilitation of older housing.

While each has a different focus and specific eligibility requirements, the revolving loan programs have numerous similarities and common elements as described below. 

Similar revolving loan programs

Workforce housing and/or senior housing: Each of the loan programs can be used only for the creation or rehabilitation of workforce housing and/or senior housing. Under the new laws, “workforce housing” is defined as housing that costs no more than 30% of (a) 100% of the area median income of the county where the property is located if the housing is rented, or (b) 140% of the area median income of the county where the property is located if the housing is owner-occupied. “Senior housing” is defined as housing that has the same income limits as “workforce housing” and at least one of the occupants is 55 years or older. Each loan program will require the housing to remain workforce housing or senior housing for a set period of time.

Local regulatory reform: To be eligible for any of the loan programs, the housing project must be located in a local community — which could be a city, village, town or county — that has done all of the following: (a) reduced the cost of housing related to the project by voluntarily revising the local development regulations, such as zoning, subdivision regulations, impact fees and approval process; (b) satisfied the current statutory requirements related to completing a housing element of a local comprehensive plan, a housing affordability report and a new housing fee report; and (c) updated the housing element of a comprehensive plan within five years of the date of the loan application. In addition, funding for the loans will be prioritized by the extent to which the community has engaged in regulatory reform for the entire community. 

Loan application scoring requirements: Each of the loan programs is administered by the Wisconsin Housing and Economic Development Authority (WHEDA) and consists of a competitive loan application process, whereby WHEDA will compare the various loan applications and award loans twice per year on the basis of (a) credit risk, collateral and the need for a loan guarantee, (b) the estimated reduction in housing costs, and (c) the need for workforce housing or senior housing in the area. WHEDA is given the authority to establish an interest rate for the loan programs at or below market rate, or even 0%. To be eligible for the loan, the developer must enter into an agreement with WHEDA to pay back the loan within a certain period of time or upon the sale of the housing units. Moreover, the developer must put up adequate surety or guarantees to ensure the loan gets repaid in the event of a default. 

Allocation of funds: To ensure that the funding for the loans is dispersed evenly around the state and to communities of all sizes, each of the loan programs requires 30% of the funding to be allocated to communities with a population of 10,000 or less. Moreover, the residential infrastructure loan program places an additional geographic limit on loan distribution by requiring the money to be dispersed evenly around the state according to the area serviced by the regional planning commissions in the state. Note: any region not serviced by a regional planning commission is considered a separate service area under the law.

Annual reporting: Every year, WHEDA is required to provide a housing report to the legislature on each loan program identifying the location and amount of each loan granted and the number of dwelling units created under the loan program. 

Different revolving loan programs

The four different housing revolving loan programs are described as follows:

Residential infrastructure loan program (2023 Wis. Act 14): Creates a $275 million loan program to fund infrastructure for streets, water, sewer and sidewalks for residential developments. The loans can be used for infrastructure related to single-family or multifamily workforce housing or senior housing. Twenty-five percent of the funding for the loan program must be used for senior housing. Loan amounts may not exceed 20% of the total development costs, including land. The housing must remain workforce housing or senior housing for at least 10 years after the commencement date of the loan. 

In addition, local governments are eligible for infrastructure loans if part of the infrastructure in a loan granted to the developer is owned or maintained by the municipality, such as a street, wastewater treatment plan or a lift station. However, no more than 10% of the funds in the loan program can be granted for such public infrastructure. 

Main street residential housing rehab loan program (2023 Wis. Act 15): Creates a $100 million loan program to fund the rehabilitation of second- and third-story apartments over main-level businesses for work related to windows, lead-based paint, electrical and plumbing. The loans can be used only for the rehabilitation of rental workforce housing, which is not owner-occupied workforce housing or senior housing, located on the second or third floor of an existing two-story or two-story building with a commercial use on the main floor, and the commercial use cannot constitute more than two-thirds of the building’s gross square footage. Moreover, the building must have been constructed at least 40 years before the date of the loan application and has not been significantly improved for at least 20 years before the date of the loan application. Loan amounts may not exceed $20,000 per unit or 25% of the total rehabilitation costs, whichever is less.

Vacant commercial-to-housing conversion loan program (2023 Wis. Act 18): Creates a $100 million loan program for the conversion of vacant commercial buildings to workforce housing. The loans can be used only for the conversion of commercial buildings that have been vacant or underutilized for at least one year into at least 16 units of single-family or multifamily workforce housing or senior housing. Loan amounts may not exceed $1,000,000 per eligible project or 20% of the total project costs, including the land, whichever is less.

Housing rehabilitation loan program (2023 Wis. Act 17): Allocates $50 million to an existing loan program created to rehabilitate older, single-family homes. The loans can be used for the rehabilitation of homes that are the loan applicant’s primary residence and that were constructed at least 40 years before the date of the loan application. The amount of the loans cannot exceed $50,000 or 100% of the appraised value of the residence after the completion of the rehabilitation, whichever is less. The loan term cannot exceed 15 years. As part of the state budget process, Act 15 was modified by Gov. Evers to provide WHEDA with the option to distribute funds as a grant or as a forgivable loan.  

Local regulatory reform law

In addition to the new loan programs, the workforce housing package contains a significant regulatory reform law aimed at creating more certainty and predictability in the development-approval process by limiting the ability of “Not In My Backyard” (NIMBY) opponents to delay or stop the approval of proposed housing developments. This new regulatory reform law, 2023 Wis. Act 16, attempts to lower the cost of housing by making the residential development process more predictable and less time-consuming. The effective date of most of the provisions in Act 16 is June 24, 2023. However, the requirement for all zoning changes to be by simple majority vote has a delayed effective date of January 1, 2025.

Specifically, Act 16 attempts to streamline the development of new housing through all of the following:

1. Improving certainty and predictability in the development process

• Development by right: Requires local governments to approve development proposals that are consistent with local development regulations.
• Judicial remedy: Allows a developer to appeal to circuit court a local unit of government’s denial of a development proposal that complies with local development regulations and authorize a judge to approve the project. 

2. Preventing lawsuits that challenge approvals: Limits who has standing to file legal challenges to projects that have been approved by local governments.

3. Prohibiting supermajority requirements for zoning changes: Requires zoning changes to be approved by simpl-majority vote.

While developers are often the targets of NIMBYs, the victims of NIMBYism generally are those who would have occupied these new homes. Generally, those victims include fellow members of the community who are on fixed incomes, young families, teachers, police officers and workers in the service industry who are looking to improve their lives by finding a better place to live. Act 16 will hopefully make it easier to build and develop new housing in Wisconsin, which will lower costs and create more housing opportunities for Wisconsin families, workers and seniors.

Conclusion

The state of Wisconsin’s historic $525 million investment in housing will hopefully increase new homeownership opportunities, attract new workers to fill job openings, and grow our state and local economies. These initiatives recognize the important role that local regulatory reform and access to low-interest loans for development and redevelopment efforts play in reducing the costs necessary to create new affordable housing opportunities.