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Friday, May 24, 2024

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Soaring Madison house prices leave Madison residents scrambling for solutions

Residents and politicians are struggling to keep up with a dynamic Madison housing market that is only continuing to expand as worry grows that the crisis will worsen.

Housing affordability in Madison has become a significant concern for residents as the prices of homes continue to skyrocket, making it increasingly difficult for people to purchase property. 

With median home prices reaching record highs in past years as wages fail to keep pace, many are being priced out of the housing market and forced to consider alternative options. Those looking to find housing in Madison face the daunting task of choosing between renting a home or apartment, or buying one, typically through a mortgage. 

Renting is traditionally a smaller monthly payment, as opposed to buying a home and getting a mortgage. Over a long enough period, however, the value of a home appreciates enough that the net profit on the house makes the overall mortgage cheaper compared to renting in that same time. 

Yet, the gap between mortgages and rent is changing in most parts of the nation, which could impact which option becomes the best value, The New York Times reports.

Wages struggle to keep up with housing costs 

From January 2011 to January 2021, the median price of a home in Dane County rose from roughly $200,000 to $350,000, an increase of approximately 75%, according to a report from the Realtors Association of South Central Wisconsin. 

In that same period, estimates from the Federal Reserve Bank of Saint Louis showed that median household wages in Madison grew from around $60,000 to approximately $78,000 — a 30% increase, which is a 45% less increase in wages than home prices during that time frame.

A typical interest rate on a 30-year fixed-rate mortgage in Wisconsin is currently 6.12%, according to Insider. This would make the average monthly cost of a median price $350,000 home in Madison about $2,100 a month, or $25,200 a year, which accounts for 32% of a household's median yearly income.

The median price for renting a two-bedroom home or apartment in Madison in 2021 was close to $1,700, according to real estate listing service Zumper. Over 12 months, that comes to $20,400, which accounts for over 26% of a median household income in Madison.

The Department of Housing and Human Development considers households that spend more than 30% of their income on housing to be "cost-burdened" and finds those families may struggle to afford other living costs.

Therefore on average, a household that rents spends 26% of their income on housing, while a household with a mortgage spend 32% of their respective income on housing costs. This places a significant amount of Madison's population at risk of, or already, cost-burdened by housing costs.

Trying to find solutions to Madison's housing problem

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As of January 2023, there were only 14 homes for sale within city limits, according to Zillow

"We are working to address historical and persistent inequities in housing while also facing growth pressures — and the displacement and affordability challenges that come with them," Madison Mayor Satya Rhodes-Conway said in a 2021 blog post. 

In that blog post, Rhodes-Conway outlined a plan of adding 10,000 homes every five years to meet the "projected demand" of 70,000 new Madison residents and 40,000 new households over the next two decades. Rhodes-Conway also outlined the "Housing Forward" plan she claimed would utilize "every tool at the City's disposal."

Namely, the plan will aim to aid the development of affordable housing, invest in homeownership for people of color, help prevent evictions and expand loan programs that allow individuals to afford their homes, and facilitate shelters that will aim to move individuals into full-time housing.

However, not all of these measures are popular in the Madison community. For example, in January, community members disagreed about new zoning laws for specific historic neighborhoods, many of which are close to, or a part of, downtown Madison.

Members of the community shared similar frustrations when Madison's Plan Commission voted to approve development for 10-story ōLiv Madison development on the 300 block of State Street. ōLiv aims to be an affordable housing option for students, having signed an agreement with the city to provide 10% of their beds at a discount for students with financial needs.

Construction on the ōLiv is well underway, as developers removed the planned chunk of the block in 2022, with plans to open ōLiv in 2024. The change to the renowned State Street district signals the possibility of similar future projects that the city will approve to address Madison's housing crisis.

"It sets a dangerous precedent for the city," Elisabeth McDonald, who, according to The Cap Times, had collected 469 signatures against the proposal, told the Plan Commission. "Once we alter the height for this building, it will allow further developers to ask the same of the city."

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Ian Wilder

Ian Wilder is a Sports Editor and former senior staff writer for The Daily Cardinal. He’s formerly covered the men’s hockey beat, state politics and features. Follow him on Twitter at @IanWWilder.

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