Let me start off by saying that I don’t know everything… and I don’t understand everything. I openly admit that… I start out with that statement because what I am about to write about … something just isn’t making sense to me… not even a little bit. And, although I don’t know everything about various sources of development incentives from the local, state and even federal level… I am not completely without knowledge either.
Last night, as you may have read in DJ Slater’s article in the Daily Herald, the zoning change was approved for a 40-Unit apartment complex near downtown. It would be located where the Zastrow Beer Distribution facility is, on the river just south of Bridge Street. This is not the first I have heard about this. Last night the meeting was to get the parcel rezoned, but about a year ago they were working on a developer’s agreement with the City where the City of Wausau (through various sources, including funds allocated toward development of low-income housing) was going to be thrown at this project to the tune of $450,000. I do not believe these are loans…. I believe these are grants… “free money” as I like to call it… However, as I started, I don’t know everything and I invite anyone who has the specifics to correct my misunderstandings so that I may set the record straight.
Before I start my Rant about how this project, appears to me, to be an outright ABUSE of those systems in place to help with our “affordable” housing crisis, it is important that I make a few of my thoughts clear.
I do NOT oppose a development of this nature in this location. Those apartments that were approved out on 25th Street just boggle the mind from an urban planning perspective, but this project does make sense. The property is currently zoned manufacturing, which made sense back when we floated logs down the river. However, a mixed use of commercial and high-density housing along the river front makes sense from an urban planning perspective. So, I don’t object to multi-family housing on this parcel of land, nor do I have any problem with the CDA using funds it has available to limit blight to help encourage this (or any) development. The shape of our river front truly is a waste.
Yes, the market for apartments and rentals is saturated. You have seen the articles in the Daily Herald and the City Pages that went into great detail on that fact. Yet, even though I am trying to work my way through this saturated market, you will never see me object to a private multi-family development that is proposed for land that is properly zoned as such, or makes good urban planning sense. If a private developer wants to through private money at a project, even though the market is saturated, that is their business… and I am a free-market kind of guy.
When I have problems, is when a developer realizes that they will not make money on a project because of market conditions, so need for the City/State etc. to throw money their way, to help the project cash flow better. That, my friends, is where the good Dr. here says WAIT!!
At the hearing, I testified neither in favor or against, but more for informational purposes. I understood this was a zoning request and like I said, from an urban planning perspective, this is a good thing. However, my problem is with the nearly half million dollars the City of Wausau feels they need to throw at this to make this happen. And, although the developers agreement already signed by the City wasn’t on the table last night, and I was sort of out of order by doing so, that was the specific area that caused me concern, and I made sure that my voice was heard.
We have a crisis when it comes to low-income housing. Most of our subsidized housing developments have waiting lists. The Section 8 waiting list has gotten so long, with so few people coming off of it, that the Housing Authority isn’t even taking applications any more. When I went to the hearing, I was okay with the City helping with housing that will help with this need…. But thanks to the questions answered, this is NOT that type of housing. This developer has found a way to use CDA funds and WHEDA tax credits to develop market-rate multifamily housing that if I remember right from last year, even gets some pretty serious property tax breaks from the City!!
To give you an idea how much $450,000 is, the average amount that I get as the Section 8 part of the rent for my Section 8 tenants is $260 per month… but let’s say that $300 per month is an average amount spent. That means that someone who just needs a safe roof over their head costs the section 8 program about $3,600 per year (lets call it $4,000). At $4,000 per year per family, over 50 families (10% of those on the waiting list) could get safe housing for over 2 years…
However, money can only be used certain ways… so I know this $450,000 can’t go to fund the voucher program. If, instead of cash for clunkers or new home buyers credits the federal government would put some funding in the Section 8 program, we could solve the problem of this huge waiting list of families that need help AND solve the problem of record vacancy levels in market rate units AND at the same time… however, that is a federal issue, and would make way to sense. We don’t have time for solutions that make sense!!!
So… here we have a $6.9 million multifamily development. That comes out to well over $170,000 per unit. When calculating the financial feasibility of multi-family projects, a good rule of thumb is you need $100 per month in rent for $10,000 of value. That is just a guideline. If the market says you can get $600 per month in rent, you are looking at about $60,000 per unit. Now if you are close, say $80,000.. the project may still cash flow, you just need to sharpen your pencil… but if you can only get $600 per month and the costs are going to be $120,000 per unit, there is no way to make that thing profitable. Here we are talking about a project that is $170,000 per unit, with rents (according to information given at last night’s meeting) that run $600 on the low end to $750 on the high end.
So, the only way to make that work is to not spend your money. You do this by getting WHEDA tax credits designed for low income housing. You do this by getting the City of Wausau to throw money at the project. Apparently, you don’t do this by looking at the cost of the project and seeing if there is anyway to cut the costs.
They said by getting these WHEDA tax credits, they have to keep the rents “low and affordable” for low and moderate income individuals and families. I am sorry, but $600 for a 1 Bedroom, that is not low income housing.. that is market rate. Actually, if you look around, that is actually a little higher that what the market charges for 1 Bedroom units.
As a matter of fact, only a few of these units will even take those people who do manage to get off the waiting list and get Section 8 vouchers (though I don’t know of too many landlords in town who would turn down a Section 8 tenant).
Based on the information handed out last night, of the ten 1 BR units, only 2 will be at rates that are eligible for Section 8. I had been told by Mary Fisher of the housing authority (no relation, not even spelled the same), that the highest need is for 2 BR units. Of the nineteen 2-Bedroom units, again only 2 are priced where a Section 8 tenant could live there. The rest are from $650 to $775 (the highest priced 2 BR unit Section 8 will allow is $631).
Like I said, I don’t know everything… but I understand the system to be well enough that this made me so mad that I couldn’t sleep last night. WE HAVE A NEED FOR HOUSING THAT IS AFFORDABLE TO OUR LOW INCOME FAMILIES!!! WE HAVE PROGRAMS AVAILABLE AT THE STATE AND CITY LEVEL!!! AND THOSE PROGRAMS ARE BEING THROWN AT A PROJECT THAT DOES NOTHING – NOTHING, NOTHING!!! TO HELP ALLEVIATE THOSE NEEDS.
I need for someone to explain to me what I am understanding incorrectly… because if I am right, a great disservice is being done, not only by the City of Wausau, but also by WHEDA.