Milwaukee struggles to attract apartment developments for the city’s poorest residents because there is not enough grant or loan money to balance project budgets.
Affordable-housing projects in the city seldom target families making less than about $33,850 — or 50 percent of the area’s average income — because developers cannot bridge the gap between the cost of developing buildings and the amount of money they can raise from very low-income buyers or tenants, said Richard Sciortino, president of Brinshore Development LLC, Northbrook, Ill.
“There definitely is a need for a deeper subsidy in Milwaukee to try to get down to the rents that are really affordable to working-class families,” he said.
There are 47,200 families in the city making less than $20,300, or 30 percent of the area’s average income, but only 30,700 apartments, condos and houses those families can afford, according to an affordable-housing report released Tuesday by the Public Policy Forum Inc., Milwaukee.
Brinshore last month was awarded $674,248 in state tax credits for the company’s 24-unit Heart and Hope Place project at 3400 N. Dr. Martin Luther King Jr. Drive in Milwaukee. The project targets residents making 50 percent to 60 percent of the area’s average income, Sciortino said. To rent to residents making less than 40 percent, the developer would need another $10,000 to $15,000 in money per housing unit, he said.
Since February 2008, the city of Milwaukee Housing Trust Fund gave $2.3 million to housing projects in the city and has about $1 million left, said Heather Dummer Combs, housing campaign director for the Interfaith Conference of Greater Milwaukee. Most of those projects received a few hundred thousand dollars, she said.
The Housing Trust Fund was designed to fill budget gaps on projects for very low-income residents, but it does not have enough money to support construction of the 16,500 units to balance available housing with the needs of the city’s poorest residents, Dummer Combs said.
“The funding is going to have to come from all kinds of places to make that happen,” she said.
Private-sector money is necessary to finance projects that will satisfy the demand for cheaper housing, said Leo Reis, executive director of the Milwaukee office of the Local Initiatives Support Corp., which paid for the Public Policy Forum report.
“There’s never going to be enough public money,” he said. “But the public money can be used strategically to leverage private money.”
Milwaukee city and county governments can entice banks to lend to affordable-housing developments by dedicating public money to affordable housing and creating a strategy around it, Reis said. The city and county, both of which have housing trust funds, should partner to create one program that receives money from a dedicated tax, such as a hotel tax, or possibly through real estate transfer fees, he said.
Banks will lend money to projects if there is public money supporting affordable housing and a specific plan encouraging such development, Reis said.
“(Banks) have resources that can be tapped into, no question,” he said. “But what they need is a roadmap that says these are our community’s priorities, and here is a role you can play.”