New home construction falls in 2019 in sign of state’s housing crunch

Wisconsin’s pace of new home construction and subdivision development dropped in 2019 from the previous year, a sign the state’s housing supply is bottoming out amid strong demand last year.

According to Census data, the number of residential building permits issued in Wisconsin last year for both single and multi-family homes fell to 17,589 from 19,113 in 2018 — an 8% drop in new housing units. Meanwhile, the number of new lots established in the state fell to 4,500 in 2019 from 5,000 the previous year, according to data from the Wisconsin Department of Administration.

Such a drop in new residential construction comes amid steep demand for houses and rapidly rising prices. Prices have gone up by 17.7% in the past three years, according to the Federal Housing Finance Agency’s house-price index. During that same period, the state’s median household income, not adjusted for inflation, grew by just under 7%.

“Wisconsin families are finding it increasingly more difficult to find a home they can afford,” said Tom Larson, senior vice president of legal and public affairs at the Wisconsin Realtors Association, in a statement. “Homeownership rates throughout the state are down primarily because of the lack of housing inventory.”

A pair of reports presented to lawmakers last fall examined the state’s struggles to build affordable housing units in the wake of the Great Recession. One study, by Mark Eppli, director of the University of Wisconsin-Madison’s Grasskamp Center for Real Estate, found construction employment hasn’t fully recovered from the economic downturn of 2008. The state has lost 8,800 construction jobs since 2001 and employment on subdivision projects in particular has fallen by 61% since 2005.

Likewise, a report from Kurt Paulsen, a professor of urban and regional planning at the University of Wisconsin-Madison, found the state suffers from a shortage of so-called workforce housing. To blame here are rising construction costs, a lack of skilled labor and local zoning rules that restrict new home construction. With too few homes for sale, rent prices have been rising faster than wages in recent years.

State lawmakers have responded to the shortage with a pair of bills:

• Assembly Bill 859 would tweak the state’s Tax Increment Financing rules to give municipalities additional leeway to offer incentives for the development of new housing projects. The bill passed the state Assembly in February and awaits a vote in the state Senate.
• Assembly Bill 544 would direct the Wisconsin Housing and Economic Development Authority to hand out $10 million to support affordable housing in rural counties. After passing the Assembly, its adoption now depends on a vote in the full Senate.

Industry groups say the lack of affordable housing has exacerbated labor shortages in other industries, too. Manufacturers, for instance, are likely to have a hard time finding workers if nearby housing is costly or inadequate in some way.

Wisconsin Builders Association Executive Director Brad Boycks said in a statement that factors such as state and federal regulations and minimum lot sizes in some communities could be driving builders away from new projects.

“The lack of affordable housing is a topic of frequent conversation and one that we are looking to continue to address as the state’s builders association,” Boycks said. Follow @natebeck9