As Wisconsin employers compete to attract workers to the state, increasing the supply of workforce housing has been one of the WRA’s top legislative priorities this session. In fall 2019, the WRA commissioned a study by Kurt Paulsen, professor for the UW-Madison Department of Urban and Regional Planning, that identified the causes of Wisconsin’s workforce housing shortage, the impacts of the shortage on state and local economies, and possible legislative solutions to increase the supply of workforce housing. The study generated statewide media attention and great interest from both state lawmakers and local officials. 

“Workforce housing” is defined as housing that is affordable for households making (b) 60% of the area median income (AMI) for renters, and (b) 120% of AMI for home purchasers.

Since the release of Dr. Paulsen’s study, numerous lawmakers on both sides of aisle along with stakeholders representing real estate, labor, local government, economic development professionals, builders and large employers have been working together to find solutions that could receive support in this current legislative environment.  

Recently, several legislative proposals were introduced that aim to increase the supply of workforce housing. Each proposal focuses of different aspects of the workforce housing supply shortage.  

Rural workforce housing initiative 

The first piece of the legislation is aimed at increasing the supply of workforce housing in rural areas. The legislation, AB 544/SB 484, authored by Rep. John Nygren (R-Marinette) and Sen. Patrick Testin (R-Stevens Point), expands the scope of existing programs administered by the Wisconsin Housing and Economic Development Authority (WHEDA). The legislation directs WHEDA to create two new initiatives aimed at increasing the supply of workforce housing in rural areas:

Create pilot program for new workforce housing: WHEDA will create and administer a competitive rural workforce housing pilot program for rural communities, scoring the applications based on criteria approved by the Joint Committee on Finance. WHEDA will select at least three pilot rural communities with which to work. WHEDA will develop an outreach plan to optimize pilot participation and build greater awareness of new and existing programs that benefit rural areas.

Rehabilitate older single-family housing: WHEDA will create a single-family rehabilitation loan product in targeted rural areas through partnerships with local lending institutions and community development organizations. This product would address single-family home appraisal gaps in areas that would not otherwise support loan-to-value ratios that are traditionally required. 

Local regulatory reform incentives

The second piece of legislation focuses on reforming local regulations to promote the development of new workforce housing. The legislation, AB 859, authored by Rep. Rob Brooks (R-Saukville) and Sen. Dan Feyen (R-Fond du Lac), encourages local municipalities to streamline local regulations, improve development approval processes, or create other ways to increase the supply of workforce housing. Under the bill, local municipalities will receive priority for housing-related grants by completing three or more of 11 workforce housing initiatives. The 11 initiatives include the following:

1. Reduce permit processing times for workforce housing.
2. Reduce development impact fees for workforce housing.
3. Reduce parking requirements for new workforce housing developments.
4. Increase allowable densities for new workforce housing developments.  
5. Allow accessory dwelling units in all areas zoned for residential use.
6. Establish a workforce housing or mixed-use development tax increment district (TID).
7. Demonstrate compliance with the housing affordability report specified under sec. 66.10013 of the Wisconsin Statutes.
8. Rehabilitate existing, uninhabitable, housing stock into workforce housing.
9. Allow for workforce housing in commercial and mixed-use zones, commercial centers or employment centers.
10. Create workforce housing near major transit corridors.
11. Implement any other initiative to address the workforce housing needs of the municipality.

In addition to these 11 initiatives, AB 859 also seeks to help reduce the development costs associated with workforce housing units. AB 859 also authorizes municipalities to:

• Increase the percent of residential housing allowed in a tax increment district (TID) from 35% to 60% if the increase is used for workforce housing.
• Extend the life of an existing TID for up to three years if the revenues generated from the TID will be used to build more workforce housing in the community.

Older housing rehabilitation tax credit

Another piece of legislation, SB 792, authored by Sen. Pat Testin (R-Stevens Point) and Rep. Rob Summerfield (R-Bloomer), creates a state income tax credit up to $15,000 per year — a 10% tax credit on up to $150,000 in expenses — for rehabilitation expenses on single-family, owner-occupied residences built before 1980 and that have a fair market value equal to or less than the county median price.

Workforce housing tax credit program

SB 786, authored by Sen. Kathy Bernier (R-Chippewa Falls) and Rep. Rob Summerfield (R-Bloomer), would create a 4% state income tax credit for the development of new housing for individuals within 61-100% of the area median income. A 10-year restrictive covenant would be recorded with the housing units to ensure they remain affordable. The framework of this tax credit would be similar to the low-income housing tax credit state lawmakers created last session.

Sales tax exemption for construction materials related to workforce housing

SB 791, legislation authored by Sen. Pat Testin (R-Stevens Point) and Rep. Bob Kulp (R-Stratford), would create an exemption from the state sales tax for all building materials used in the construction of workforce housing. 

The WRA will continue to work with legislators on both sides of the aisle, along with Gov. Evers’ administration, to enact these workforce housing proposals into law. 

Tom Larson is Senior Vice President of Legal and Public Affairs for the WRA.