This year’s Wisconsin Real Estate & Economic Outlook Conference once again attracted a capacity crowd at the Fluno Center on October 4. “Real Estate as a Catalyst for Change” was the conference theme and leading academics and practitioners shared their insights on the housing outlook, transformations in finance, effective urban renewal, and the challenges of a national housing shortage, especially workforce housing. Wisconsin School of Business Vallabh “Samba” Sambamurthy kicked off the conference with welcome remarks, followed by Graaskamp Center Director Mark Eppli, who reminded attendees that the conference is truly an extension of the “Wisconsin Idea” in action by connecting the University and the professional communities together to solve problems and share ideas.
The Outlook for Housing and the Economy
Sam Khater, Chief Economist at Freddie Mac, summarized some of the reasons why the economy is causing many to feel anxious about the health of the economy going forward. Industrial production is down and global economic uncertainty is on the rise, and investment activity and business confidence has fallen as a result. However, unemployment and jobless claims are not reflecting the conditions that would typically lead to a recession, a fact that Khater made a point of repeating. Additionally, wage growth has risen significantly starting in 2017, reaching levels similar to previous economic expansions. Consumer spending has reaped the benefits of these trends, an important indicator as consumer spending drives 2/3rds of US economic production.
House purchases have started to rise as the economy has demonstrated resilience, but housing unit construction remains at recessionary levels. This has culminated in a housing shortfall of almost 5 million housing units since 2000, a situation that Laurie Goodman expanded upon.
As Khatar touched on in the Keynote, the shortage of affordable housing across the country has been a major cause of concern. According to Laurie Goodman, Vice President of Housing Finance Policy at the Urban Institute, supply is the largest issue, particularly in the lower end of the market. Housing demand first began to outpace supply at the end of 2008, and that trend has not reversed since. As a result, the median home was built in 1977, and annual total new units remain at the lowest levels since the early 90’s.
There has also been a profound shift away from homeownership across most age groups and particularly among Black and Hispanic households, which can be partially attributed to a large wealth gap. Homeownership is out of the reach of many people because credit availability has been tight since the Global Financial Crisis, and Goodman thinks it’s time to find ways to safely expand the credit box.
Transformations in Housing Finance
For the “Transformations in Housing Finance” panel moderated by Dave Stark, President of Stark Realty, David Dworkin, President and CEO of the National Housing Conference, walked us through how these housing shortages are affecting us closer to home. Data about the cost of owning and renting in Madison showed how the cost of housing has outstripped the incomes of many people in the region. Dworkin recommended changes to the Community Reinvestment Act which would increase investment in low and moderate-income communities and people, and prevent the displacement of the people the program was meant to help
Tom Faughnan, Executive Vice president of Residential Lending at the Associated Bank, reinforced many of Dworkin’s points when he explained why banks prefer to make larger loans on less affordable home purchases. The fixed cost of loans result in much greater revenues for lenders when making loans to more affluent buyers. Faughnan suggested making changes to Government-Sponsored Enterprises and the Federal Housing Administration to improve the process for borrowers.
Inspiring Urban Renewal Projects in Wisconsin
The last session of the conference, titled “Inspiring Urban Renewal Projects,” sought to shine a bright spotlight on effective transformation within Wisconsin communities. The panel was made up by Kurt Paulsen, a professor in the Department of Urban and Regional Planning at the University of Wisconsin-Madison, Mark Freitag, City Manager of Janesville, Tom Landgraf, who works in development and teaches real estate and urban land economics at UW-Madison, and Dale Peters, City Manager of Eau Claire.
Paulsen’s presentation discussed the causation and subsequent consequences of a shortage in Wisconsin’s workforce housing. In order to combat the shortage crisis, Paulsen proposed that creating more housing and invoking tax incentives to reduce the costs of workforce housing were two viable options, with a handful of others behind them. Landgraf, who spoke about a new series of single-family homes in Horicon, highlighted the fact that successful projects invoke change when they rely heavily on strategic financing. “The big opportunities to affect change are how you finance housing, not how much you spend to build it,” Landgraf said.
The planning and complete revitalization of an old theater in Eau Claire was funded almost evenly by both public and private investments, Peters said. Challenges that came with the project, such as time, managing competing priorities in the community, and assuring long-term viability for the development, were far outweighed by the rewards, Peters said. These include meeting critical needs of the Eau Claire community, working to the strengths of both public and private sectors and creating a catalyst for future development.
According to Freitag, Janesville was recognized as the city of “slow” and “no” before several projects benefitted the community. In 2012, a 124-acre Dollar General distribution facility was located in Janesville, creating 562 new jobs. In 2017, an old Menards property was completely repurposed to include four retail stores and two new hotels. Brand new high-end apartments were finished earlier this year, and there are future plans for revitalizing an industrial park.
The panel was moderated by Jerry Deschane, Executive Director of League of Wisconsin, a multi-faceted organization aimed at enhancing communities within the state. During the planning stages of the conference, when Deschane was prompted to identify a Wisconsin city that has done something transformational, he said that he thought of 15 right away. “There are some really cool things happening in the cities of Wisconsin,” Deschane said to wrap of the panel. “To a lot of you in here, that’s probably not a surprise, but if you haven’t been to downtown Green Bay, downtown Beloit, downtown Fond du Lac, downtown Oshkosh, downtown Whitewater…if you haven’t been to your downtowns, go there.”