Madison has become a city of renters.
"We're now a majority-renter community. We haven't been adding a lot of new homeowners," says Matthew Wachter, housing initiatives specialist for the city. "Even though we've built thousands of new apartments, it's barely keeping up with demand and with growth."
That assessment comes as Madison's Housing Strategy Committee drafts a market rent report examining the current trends and demands for housing. The city formed the committee in 2013, instructing it to create biannual reports on the market.
The market rent report follows a 2014 biannual report focusing on homeless and low-income housing. That report found that half of renters in Madison pay more than 30% of their income in rent, the maximum percentage of rent that the U.S. Department of Housing and Urban Development defines as "affordable housing." It prompted the mayor and the Common Council to create the Affordable Housing Fund, providing $4 million in annual funding for the next five years to create housing for low-income citizens.
The new market rent report, Wachter says, seeks to understand Madison's overall rental market. Using demographic data from the U.S. Census Bureau, vacancy rates from Madison Gas and Electric and average rents around the city, Wachter found that the city's housing market is defined by extremely high demand for rentals. The demand is so great that even the current building boom isn't keeping pace with the demand.
And the demand is growing at all income levels, the report finds, particularly among people who make over $150,000 a year, who account for one-fourth of household growth in Madison.
The report also uses vacancy rates to show the lack of rental supply. According to the report, the typical rule of thumb is that a vacancy rate of 5% is ideal for maintaining stable pricing and housing options. When the occupancy rate gets too high, landlords control the market; if it's too low, the renters do.
But in the fourth quarter of 2014, Madison had a vacancy rate of 2.39%. The vacancy rate has not been above 5% since 2006.
"The vast majority of Epic employees don't want to own in the near future -- in the next three, five years," Wachter says. "And across the board, down payment is the biggest barrier to them owning."
Patty Prime, president of the Tenney-Lapham Neighborhood Association, says her neighborhood, which is on the eastern end of Zeller's district, hasn't been too stressed by the rental increase. If anything, it's helped the Tenney-Lapham economy boom.
"It's definitely had an impact on businesses," Prime says. "There's more people going out to eat, more people shopping."
The market rent report is in its earliest draft, but it will be finalized by the end of the year. Wachter says the goal of the report is to broadly assess the market so city leaders can make decisions.
"What's in the report is kind of a broad but blunt assessment of the market," Wachter says. "The use of the report at the end is going to be to give a resource to the Common Council and the mayor so that, when they have a policy before them, they can have some quality, neutral data about what's happening."
Lisa Alexander, a University of Wisconsin Law School professor, says that policymakers need to be wise with this information.
"That shift [to a rental market] causes all kinds of effects on housing. It can have effects like restricting affordable housing, increasing evictions," Alexander says. "What has been shown in [other] markets is that when you have low vacancy rates and when it becomes a primarily [rental] market, it creates all sorts of pressures."
Those pressures, Alexander says, not only affect what is built but also who rents. Brenda Konkel, director of the Tenant Resource Center, says the city has added a lot of housing in the past couple years, but it only focuses on a small portion of renters.
"If you look at...The Hub [on State Street], it's over $1,000 for a 300-square-foot unit. It [is adding] a lot of units, but who can afford those units?" Konkel says. "We see a lot being built, but we don't see anything affordable being built."
For a long time, housing advocates dominated the push for affordable housing; Konkel says formation of the Housing Strategy Committee is an important first step toward the larger issue of affordable rentals.
"The reports are coming out to show what we've known for a long time, but I do think it's a positive step," Konkel says. "We're finally making very small steps to address this problem, but it's going to take a much bigger effort than that."
Alexander has a similar take: "Cities have to think about how we preserve equitable housing when all those changes occur -- how everyone can get access to high-quality and affordable housing."
