New Housing Market Snapshot Report & Data (draft)

The City's Housing Strategy Committee

One of my appointed City committees is the Housing Strategy Committee. This committee's mission by ordinance is to serve as a forum for discussion & communication about housing strategies; shall establish a schedule for the Dept. of Planning & Community & Economic Development to prepare and submit a biennial housing report to the Mayor and the Common Council, which will include the following: current data on Madison and regional housing supply and trends, strategies for maintaining a broad range of housing choices for all households and income levels; and strategies for maintaining & increasing affordable owner-occupied and rental housing in Madison and the region. We met yesterday to receive a presentation from City staff in the Planning and Community Development divisions about the findings of the 2023 Housing Strategy Report. Here's a link to the draft report, and here's a link to the staff presentation. 

2023 Housing Snapshot Report (draft) - Presentation Notes

I'm sharing my notes from the presentation because this information is tremendously important for us to understand as we consider how we manage the City's growth responsibly. City leaders need to make decisions about neighborhood planning, urban infill, new subdivisions, land uses and density, affordable housing resources, etc., with these housing supply and demand findings in mind.

The draft report includes several helpful figures and graphs that visualize the data findings. Many of these graphs also appear in the staff presentation, along with helpful text summaries of the take-aways from several of those graphs. I highly recommend that interested readers take a look at those resources! Here are my notes:

Renter-occupied housing

• Renter households growth grew faster (2.4% renter household growth over 0.9% owner household growth) over the last ten years. However, owner household grew faster over the last three years (3.8% owner over 2.6% renter), suggesting that this recent trend toward owners may, if it continues, reverse the longer-term trend.
• The city is seeing a loss in lower-income households and a strong gain in higher-income households over time. This finding represents incomes going up (net gain, not inflation-adjusted) AND displacement of low-income households from the City.
• Newest units and oldest units of rental housing are the least affordable. New construction is very expensive and leads to units, on average, that are not affordable to the "median renter" (less than or equal to 30% of income for housing). The median renter can generally still afford rental units built between 1940 and 1989.
• Rental unit vacancy rate is well below healthy levels, though recovering somewhat over the last six years.
• Renting households in multiple income bands are competing for lower-tier (most affordable) rental housing in the market.
• We’ve seen a high number of high-income households moving to the City in recent years and competing for high-end and middle-tier housing and driving up housing costs. Plus, they drive up Dane County’s AMI calculation.
• Over 11,000 low-income households are “renting up” and cost-burdening themselves. Over 13,000 higher-income households are “renting down”. This squeezes Madison’s housing market from both ends and increases housing costs.

Owner-occupied housing

• Owner-occupied housing built in any era is affordable (less than or equal to 30% AMI) to the median homeowner by AMI because owners in Madison are so much higher-income
• Vacancy rates are significantly lower than healthy levels due to sustained tightening market conditions.
• Monthly owner-occupied housing inventory dropped steadily over the last nine years. These units spend significantly less time on the market before selling. The average sale price:list price ratio grows (selling above listed price more often and by more money over list price)
• “Drastic” appreciation in market value of owner-occupied housing
• The owner-occupied housing market at different home value tiers is dominated by highest income category of buyers (greater than 100% AMI) who “buy down”. These households own the most owner-occupied housing at each of the four tiers of the ownership market. This creates drastic downward pressure on the market by high-income buyers and puts tremendous competitive pressure on lower-income households.

Global take-aways

• Because households who own their housing are on average much higher-income than those who rent, a much higher percentage of renter households are “cost-burdened” (spending more than 30% of income on housing) than owner households. Nearly 50% of renter households are cost-burdened and around 20% of owner households are cost-burdened.
• The Construction Cost Index increased more than 70% between 2009 and 2023, much higher than inflation over this time (about 45%) over the same period of time. Median Gross Rent tracks closely with the Construction Cost Index between 2009 and 2021 and we don’t yet have 2022 or 2023 data for this metric. Median Owner Cost grows more slowly because so many owners have long-term mortgages that fix their costs for a long time.
• City financial support assisted in the creation of 17% of all new rental units since 2016. Significantly fewer units came onto the market in 2022 with City Assistance, likely due to pandemic delays, cost increases, and smaller-scale developments finishing that year.
• Homeownership rates for folks of color (18% for Black households, 32-35% for others in 2021) are *significantly* lower than for white households (53% in 2021). Income disparities are the root cause of this in 2021: per the report, the Affordable Purchase Limit for the median Black household is $158,860 and for the median white household is $316,537.
• On the renter side, median Black households, on average, are the only demographic who could not afford average rent in the City. This fact directly leads to more Black households being rent-burdened than other demographic groups in Madison.
• On single-family home rentals (not owner-occupied), in 2020 there were more than 6,000 renter-occupied single-family homes; in 2023, there were around 5,000 single-family rentals. A net change of more than 1,000 single-family home rentals were purchased for owner occupancy over this period, leading to fewer rental options on the market.
• Using a January point-in-time count, the population of individuals experiencing homelessness went up during the pandemic and has since decreased since the 2021 high. The average length of homelessness went down in 2022 and 2023. Individuals and families are both finding permanent housing more quickly, though this is probably due to expanded pandemic-area funding and increased outreach efforts.

Thanks very much to City staff Colin Punt and Matt Frater for their hard work on this important resource.