River News: Our View

This past week, the state Assembly passed a package of bills — in hugely bipartisan fashion — to make housing more affordable in Wisconsin.

That the bills were hugely bipartisan — Republican sponsored and Democrat supported — tells us they probably won’t do a thing to help affordable housing, but it’s the thought that counts, right?

Still, the fact that the bills are moving forward does put a spotlight on the state’s housing crisis, and in a way that we hope will motivate real leaders — meaning people not otherwise known as “politicians” — to craft sensible housing solutions. At the very least, these bills require a lot more thought on the subjects they address.

Still, there’s good and bad afoot in the legislature, so let’s take a look.

To cite one example of a likely negative outcome, one bill would allow Tax Increment Financing (TIF) districts for residential projects, and this really requires revisiting the whole idea of TIF districts. We aren’t ready to say it’s a completely bad idea, but we also aren’t ready to say it’s a good idea, either.

That’s because commercial TIF districts have historically been abused, and they come with automatic downsides. Supporters need to better explain why those downsides are outweighed by the benefits.

Here’s how TIF works. When a municipality creates a TIF district, it borrows money to fund infrastructure improvements — such as roads, sewers, and sidewalks — in a designated area. As such, developers don’t have to pay those costs. As new development raises property values, the resulting increase in property tax revenue (the “increment”) is used to pay off that debt.

In theory, it’s self-funding. In practice, it often isn’t. Those diverted tax revenues don’t go to schools, counties, or technical colleges. They’re locked away in the TIF district, sometimes for 20 years or more, until the debt is retired. Meanwhile, taxpayers outside the district bear the cost of public services that new developments demand — police, fire, schools, snowplowing, and more.

On the other hand, the districts do incentivize development and, Lord knows, we need new housing development. The question is, as some conservative TIF opponents argue, would the development have happened anyway, without the gift of a tax subsidy to the developer?

Oftentimes, the answer is yes. Let’s rewind just a decade or so ago and revisit a major offer by Kwik Trip to buy the county’s current highway facility and property to build a new gas station/convenience store there. It was a generous proposal — more than $2 million — and a number of supervisors were all revved up about the possibility of getting a gleaming new highway facility to show off to its poorer residents.

Here’s the thing: Kwik Trip demanded a TIF district. It sought a substantial government subsidy, which, by the way, would have given it an advantage over local competitors. They adhered to that demand throughout the negotiations.

However, as Judgment Day approached and the county board was set to vote on the project, word had it that the proposal was in trouble, thanks to the due diligence of a number of fiscally responsible citizens.

Suddenly, as if by magic, as the county board convened, Kwik Trip changed its position, as we reported at the time: “In a day of surprises, the other breaking development was an announcement by county board chairman Dave Hintz that Kwik Trip had decided it did not need a Tax Incremental Financing district to move forward.”

And there you have it. Kwik Trip wanted the development, period. If the county had sold the company the land — it did not — Kwik Trip would have taken it, as their last-minute bid to win votes shows. The TIF district request was just an opening bid to scam taxpayers.

Too often, TIFs have become a subsidy for the well-connected rather than a tool for renewal. Some years ago, then-Sen. Duey Stroebel of Cedarburg, himself a developer, had warned that TIFs have “morphed into something so much different” from their original purpose. “It’s like a drug for some developers,” he said. “They can’t develop without it.”

True, this bill caps the total amount of taxable value in the district at a quarter of that for commercial districts, so the grift is much lower, but it’s still there, and overall this idea — and whether it would have any impact on the real issue of affordable housing — should be debated more.

Another bill in the package would require that local zoning codes align with comprehensive plans when government-projected housing availability is inadequate. This is a tip of the hat to by-right zoning, but the problem is that the parameters for that zoning are built around government plans and planning projections over an extended period. Such projects are too often arbitrary and miscalculated, and they would endanger farmland as well as potentially foreclose other areas ripe for residential development from automatic permitting approval.

It’s the government picking winners and losers based on bureaucrats’ projections, and it, too, needs to head back to the drawing board.

Another bill being considered in the Assembly is a better concoction. It would allow homeowners in single-family neighborhoods to add an accessory dwelling unit, or ADU, to their property. Think of a backyard cottage or garage apartment. It’s practical and gives families more options.

The bill would permit single-family homes to have ADUs as a permitted use statewide, while preserving local control over key zoning details, such as height, setbacks, and lot coverage, as well as forbidding their use as short-term rentals. That balance matters. 

However, the key aspect of that bill is that it places the focus on affordable housing where it belongs — on zoning regulations and government overreach.

Meaning, there’s too much of both. The ADU legislation is merely a slight loosening of zoning restrictions, but the fabric of regulation needs to be torn wide open: Zoning districts are little more than fences within which development is contained and restricted, often to the point of strangling the economy completely.

The integrity of single-family neighborhoods needs to be protected, to be sure, perhaps with some modifications, such as ADUs, but so much more can be done in multi-family and commercial districts to encourage affordable housing.

All of which is to say that, if legislators really want to spur housing growth, they should start by getting government out of the way. Simplify permitting. No more Madison mandates. Review outdated building codes and regulations, and let the private market expand supply naturally.

In other words, remove obstacles rather than piling on incentives.

Several years ago, the Wisconsin Institute for Law and Liberty (WILL) proposed a substantive blueprint for reform that would help resolve the affordable housing crisis. Lawmakers would do well to revisit it, as they obviously overlooked it when it was first released.

As WILL pointed out — and this was in 2022 — government adds approximately $88,500 to the average cost of each newly built home in the Midwest because of the regulatory hoops developers must jump through. Zoning regulations, environmental commands, such as green spaces and bike paths, obsolete parking requirements, large lot minimum sizes, and more — all drive up the cost of housing by a phenomenal amount.

WILL recommended, among other things, decreasing or eliminating minimum lot sizes and minimum setbacks, as well as obsolete parking requirements and implementing more true “by-right” zoning.

Real by-right zoning does not require adherence to long-range comprehensive plans that may become outdated (which is why comprehensive planning should be eliminated altogether, by the way), but instead means that if a proposed use or building meets all the existing zoning requirements of that district — things like lot size, setbacks, height limits — then the local government must allow it. It minimizes the use of conditional use permits.

This is significantly different from requiring zoning to comply with comprehensive plans drafted by some planning commission from who-knows-where. 

Getting back some of the land the government has confiscated through “conservation easements” would also open much more land to development, and we mean land that does not need to be protected in perpetuity, which is a lot of it.

True housing reform that empowers homeowners is a win-win for both liberty and affordability. Reform that centralizes control and subsidizes developers and environmentalists is a win only for lobbyists.