Milwaukee TIF Guidelines Prioritize Affordable Housing in At-Risk Neighborhoods

Background

For nearly a decade, Milwaukee has undergone a construction boom that has reshaped the City’s skyline.  Some estimated that the post-Recovery downtown construction boom has enabled Milwaukee’s builders to add nearly 12,000 new units of market rate housing to supply.  But, the downtown Milwaukee’s recent years-long trend in prosperity belied other serious challenges in City neighborhoods such as lingering issues of vacancy and abandonment, rising foreclosures and evictions, and a severe shortage of affordable housing units for low income families.  In fact, Milwaukee is ranked among the cities with the very worst shortages of housing affordable to low-income residents.  In Milwaukee, only 25 affordable housing units are available for every 100 extremely low-income households[1].  In a key recommendation from Milwaukee’s 2018 Anti-Displacement Plan (ADP), the Department of City Development found that the City’s ability to preserve and protect housing choices for low income families at risk for displacement, was dependent upon the production of new affordable housing units[2]

Dilemma

In early 2018, in support of recommendations from the City’s ADP, Mayor Tom Barrett announced his 10,000 Homes Initiative which aimed to build and preserve 10,000 housing units over ten years in neighborhoods throughout the city.  The 10,000 Homes Initiative would rely on funding from developer financed tax incremental districts – an economic development tool infrequently used to fund residential development.  While the City’s past experimentation with using tax incremental financing for local housing development projects had earned support for more proactive use of the strategy citywide, a key question remained for the Mayor and other city leadership[3].   What priorities for the use of tax incremental financing (TIF) would be set to ensure progress on closing the gap in supply of affordable housing units and the prevention of displacement in Milwaukee’s most vulnerable neighborhoods?

Proposed Solution

In early 2019, city leaders drafted guidelines governing the use of TIF assistance for multi-family residential developments involving the rehabilitation or construction of affordable housing units.  The new TIF assistance guidelines prioritized residential development projects located in neighborhoods identified as at risk for displacement, projects located in the downtown neighborhoods where robust market-rate housing development has exponentially outpaced affordable housing development, and projects located in neighborhoods that lack current affordable housing options.  

To be eligible to receive TIF assistance, a minimum of 20% of the proposed projects were required to be affordable to households earning 60% or less of Area Median Income (AMI), and 25% of units were required to be affordable to households earning 50% of AMI.  All projects were required to yield a minimum of 20 affordable housing units and remain affordable for at least 15 years. 

Other stipulations required developers to make use of all available sources of project financing such as LIHTC, grants, below market rate funding, and other options, to prove that the proposed project would be financially infeasible without the City’s TIF assistance. 

City leaders report that these guidelines will get their first real test in projects that received 2019 allocation of low-income housing tax credits from the Wisconsin Housing and Economic Development Authority.  City leaders expect to apply the new guidelines to projects that receive the LIHTC credits and estimate that as much as 1,200 new affordable units could be produced this year as a result.  

 

[1] Nusser, Susan. “Can Milwaukee Really Create 10,000 Affordable Homes?” CityLab. https://www.citylab.com/equity/2018/10/can-milwaukee-really-create-10000-affordable-homes/570742/.

[2] Department of City Development, A Place in the Neighborhood. City of Milwaukee, 2018. https://city.milwaukee.gov/ImageLibrary/Groups/cityDCD/planning/plans/AntiDisplacement/Anti-DisplacementPlan.pdf

[3] Spicuzza, Mary. “Mayor Tom Barrett unveils housing plan for Milwaukee:10 years, 10,000 new or improved housholds.” Journal Sentinel. https://www.jsonline.com/story/news/local/milwaukee/2018/02/25/mayor-tom-barrett-unveils-housing-plan-milwaukee-10-years-10-000-new-improved-households/361501002/