The city’s $25 million Affordable Housing Fund was created to combat this, and has contributed millions to developments offering affordable units around the city. But those millions aren't enough; it often takes housing tax credits to make the projects a reality.
This Friday, Dec. 8, is the deadline for developers to submit applications to the Wisconsin Housing and Economic Development Authority (WHEDA) for those low-income housing tax credits. Earlier this year, Community Development Division director Jim O’Keefe said that these credits can account for as much as 75 percent of the financing cost.
The city's Affordable Housing Fund was created to encourage developers to apply for tax credits and build affordable units in amenity-rich areas with easy access to public transportation. Affordable units set rents at 30, 50 and 60 percent of area median income.
Five Madison-based affordable housing projects will send in their WHEDA applications before Dec. 8, and then wait until early next year to find out if their projects can move forward.
Applying for the first time:
- “The Grove Apartments” by MSP Real Estate, Inc. at 204 Cottage Grove Rd.: The proposal would create 112 units of housing, and 95 of those would be affordable. The City has committed up to $3 million to the approximately $20 million project.
Applying for additional tax credits:
- “Normandy Square” by MSP Real Estate, Inc. at 6509 Normandy Ln.: It would create 58 units of housing for seniors, and 48 of those would be affordable. The City committed $850,000 to the project last year, and it received $5.6 million in tax credits. The project is asking for additional tax credits for the $11 million project.
Projects that applied for WHEDA credits last year, but were denied, and are applying again:
- “Park Street Apartments” by Heartland Housing at 1202 S. Park Street: The proposal would build 58 units for homeless single adults. The project is estimated to cost $11.6 million dollars, and the city has committed $1.9 million from the Affordable Housing Fund.
- “Tree Lane Senior Housing” by Common Bond Communities at 7941 Tree Ln.: The proposal would create about 54 units of senior housing, and 51 of those units would be affordable. The City has committed up to $1.48 million to the project from the Affordable Housing Fund to the $11 million project.
- “Fair Oaks Apartments” Stone House Development at 134 S. Fair Oaks Ave.: The development would build create 80 total units, and 68 of those would be affordable. The estimated cost of the project is approximately $17 million, and the city has committed up to $1.35 million to the project from the Affordable Housing Fund.
The Fair Oaks project has faced criticism for its location next to Madison-Kipp, with concerns about air quality and ground contamination, although a city report found the site presented no human health hazards. The report did note the following: “We do expect that prospective residents of this new development will be informed about the general odor, noise and traffic issues they will experience on a regular basis.”
Conversation about potential pollution on the site has resurfaced with a nearby proposal for a five-story mixed use development.
O’Keefe said that the city believes the three projects that are re-applying have a better chance this year because they are receiving more city funds, a benefit in the WHEDA scoring system.
But there are no guarantees, he said, especially as the applications always exceed the available tax credits.
“The changing federal tax climate, and the resultant erosion of tax credit values, suggests that WHEDA may need to offer larger allocations to fewer projects,” he said. “So, while we know these are all quality projects, and are hopeful they will secure credits, we also know that WHEDA will have very difficult decisions to make.”
This is the fourth year of the city's Affordable Housing Fund Initiative, with three previous cycles of WHEDA applications. Of the 13 city-backed affordable housing projects, 10 have received WHEDA credits.
These 10 represent a total of $120 million in development, with the city contributing just under $11 million, and federal tax credits chipping in more than $70 million, O'Keefe said. In total, those 10 projects will add 650 rental units of housing, 570 of those are affordable. Of the 570, 105 are for formerly homeless individuals.
In June, city housing initiative specialist Matt Wachter said the city is on track to create 1,000 new affordable units in a five-year span.