When State Law Limits Affordable Housing Policy

Milwaukee was considering mandatory inclusionary zoning. Then the city attorney said that the policy would violate state law.

Milwaukee has added over a thousand apartments in 2017 with about 1,500 more under construction. An additional 1,700 are planned for next year. With all that development, city leaders attempted to ensure that lower-income renters weren't being left out. (Photo by Mrlaugh on Flickr)

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Milwaukee Alderman Robert Bauman has watched the real estate market in the greater downtown areas of his district bounce back since the Great Recession that began a decade ago. But in the poorer central city neighborhoods that he also represents, Bauman says, property values have continued to drop, and virtually nothing is built without some type of government subsidy or grant.

So in November, Bauman authored a bill that would establish a mandatory inclusionary housing policy downtown. Buildings with 20 or more apartments would have to keep 10 percent of units set aside for tenants earning up to 60 percent of the area median income. The goal was to let low-income Milwaukeeans get in on some of the development benefits. Almost a third of Milwaukee renters spend half or more of their income on rent; that’s significantly higher than the national average, according to Census figures.

“We looked at this disparity of what’s going on in the central city of Milwaukee versus what’s going in the greater downtown area,” Bauman says. “And we wanted to at least open up some opportunities for … people who are earning a wage but not a high wage.”

Bauman’s proposal didn’t get very far. Just a few days after the legislation was introduced, the office of the city attorney sent a letter saying that the proposal ran afoul of a Wisconsin state law that prevents cities from establishing rent control programs, as Urban Milwaukee reported. A Wisconsin Court of Appeals decision from 2006 had held that a similar proposal in the city of Madison was illegal and unenforceable under the state statute, the attorney said. At the same time, the part of Bauman’s legislation that would require affordable units in projects that receive public financing was likely OK, the attorney said, because it would amount to a condition on an agreement between the city and a developer, rather than a requirement for obtaining a zoning permit. (Madison operated with a modified version of the legislation that didn’t apply to rental housing for a few years, but the policy expired under a sunset provision in 2009.)

“The court decision seemed pretty on point,” Bauman says. “So we modified our proposal.”

The version of the bill that’s now making its way through the Common Council of Milwaukee would only apply to publicly financed projects. It could still help reduce housing disparities, Bauman says, but not nearly as much.

More and more cities around the U.S. have begun to flirt with inclusionary zoning policies as housing in rebounding urban neighborhoods has gotten more expensive. There’s still no broad consensus around the degree to which the policies work. Research suggests that they aren’t a great solution for housing the lowest-income tenants, and many people, including some in Milwaukee, argue that the policies can suppress residential development overall. A mandatory inclusionary zoning bill was introduced in Philadelphia over the summer, but the proposal has generated a lot of disagreement, and is still being negotiated.

Meanwhile, cities are working under a “patchwork” of state laws that constrict their policy options in various ways, says Jim Lapides, a spokesman for the National Multifamily Housing Council. His organization, which is staunchly opposed to rent control, has mapped laws in every state, categorizing them by how they impact cities’ ability to develop their own policies. In addition to Wisconsin, four other states preempt both rent control and mandatory inclusionary zoning, according to NMHC’s research.

Lapides says that setting aside even a handful of a building’s units at lower rents can make the difference between the project being profitable or not. NMHC opposes mandatory inclusionary zoning policies, but Lapides says that voluntary policies, based on incentives, can work in some cities. The group, whose political donations have skewed Republican, advocates for local governments to adopt policies that it says would make housing development easier, like faster approval processes, by-right zoning, and density bonuses for certain types of development.

“It’s a really hard problem,” Lapides says. “Cities like Milwaukee are trying to find creative ways to add affordable housing, and the bad news is that they’re not alone, and the good news is that they’re not alone.”

Alderman Bauman says his goal was to get some lower-rent housing in neighborhoods that are otherwise prosperous and have good transit options. The proposal was tailored to a defined area within greater downtown Milwaukee. But once he got the city attorney’s opinion, he never considered petitioning the state to change the law.

“Our legislature is so anti-Milwaukee that it probably would have made it worse,” Bauman says.

Bauman admits that there’s less enthusiasm in progressive circles for the current version of the legislation, which would require a 20 percent set-aside for large housing projects that receive more than $1 million in city financing. The proposal was subject to a committee hearing last week, but won’t be up for final passage until the spring. Bauman hopes it could still make a difference.

“We’re making a very small dent in a very big problem,” he says. “But at least it’s something of a dent.”

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Jared Brey is Next City's housing correspondent, based in Philadelphia. He is a former staff writer at Philadelphia magazine and PlanPhilly, and his work has appeared in Columbia Journalism Review, Landscape Architecture Magazine, U.S. News & World Report, Philadelphia Weekly, and other publications.

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Tags: affordable housingreal estatemilwaukee

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