Wisconsin's Affordable Housing Programs: The 2025 Housing Package

New "Affordable" Housing Package

A slew of bills were introduced in the Wisconsin legislature just a few weeks ago as part of a housing package aimed at addressing Wisconsin's housing crisis.

12 bills in all, the proposed legislation runs the gamut: from modifying WHEDA's lending and the creation of a new loan program; to rezoning and building code adjustments; from changes to occupancy rules and the allowance for Accessory Dwelling Units (ADUs); to the expansion of TIF districts and changes to tax crediting.

But the bottom line is this: the majority of these bills do very little to tackle the root cause of housing un-affordability. In fact, many of these bills exacerbate the problem by looking, instead, to what will benefit local units of government at the expense of current and would-be homeowners.

As we have said before, the problem with housing is not access to capital or elevated prices per se, it is due to a lack of all types of housing in places where people want to live.

WHEDA: AB194, 454 & 455

We addressed the role of WHEDA and its relationship to the state and federal government in Part I of this research, but the quick-and-dirty take is that WHEDA is able to offer grants and subsidized mortgages (indirectly through its lending partners) because the state has given it a de facto guarantee to cover any financial loses it incurs.

The 3 bills above addressing WHEDA's programs are simply more of the same. They do not impose a direct cost on homebuyers, nor do they require any new spending. However, the inherent risk posed by WHEDA is that the taxpayer is on the hook should WHEDA ever experience financial troubles. There's also the risk that the creation of new programs permits a legislature or governor to increase government spending by offering funds to WHEDA (free of charge), as Governor Evers did in 2023. The result of this being that some homebuyers are subsidized at the expense of others.

AB 194 – "This bill makes modifications to three housing programs administered by WHEDA"

This bill modifies 3 loan programs offered by WHEDA:

1. the Infrastructure Access Program
2. the Restore Main Street Program
3. and the Vacancy-to-Vitality Program

In each case, the bill authorizes WHEDA to increase the size of its loans; typically from 20% to 33% of total project costs. It also increases access to these loans by allowing certain excluded parties to become eligible loan recipients.

But the effect of increasing loan sizes should be clear enough: more and larger loans increases the implicit risk borne by the taxpayers and also encourages malinvestment. In other words, reducing the cost of capital encourages applicants to engage in riskier developments since the reduced interest rates distort the cost-benefit analysis. More and riskier projects will be started which can lead to increased default rates, higher taxation at the local level to pay back the loan, and a weakened financial position for WHEDA.

AB 454 – "This bill establishes a workforce home loan fund under the jurisdiction of WHEDA"

This bill creates an interest-free loan that supplements a traditional mortgage.

The loan size is capped at $60,000 or 25% of the total price of the home, whichever is less.

All of the consequences of the first bill apply here, but this time, it becomes quite clear that this bill facilitates redistributionism of scarce housing units by favoring those with incomes below 100% of the median area income. By subsidizing the acquisition of housing, this bill would not only encourage lower-income individuals to consume housing, but would encourage them to consume housing of a greater quality and quantity than otherwise. The result of this is that individuals who receive the loan could displace would-be homebuyers from housing more appropriate to their needs.

This bill interferes with the self-sorting that naturally occurs in the free market and substitutes for it an artificial selection criterion which leads to suboptimal housing use by encouraging mismatching.

AB 455 – "This bill requires WHEDA to establish and administer a condominium conversion grant"

This bill creates a grant program to facilitate the conversion of multifamily housing to condominiums.

The bill caps the grant amount at $50,000 per awardee, and also caps the total volume of the grant program at $10,000,000.

All of the consequences of the first two bills apply here, but counter to purpose, this bill almost explicitly reduces the supply of housing. In virtually every case, a multifamily building has more housing units per square foot than if that building consisted solely of condominiums. It's important to remember that the housing crisis is not a crisis because there is a lack of a specific type of housing; it is a crisis because there is a lack of housing in general. To focus on a particular style of home is to miss the point. Would-be homebuyers are not distressed by the lack of single-family homes or any other home; they are distressed by the lack of any type of home. The goal of policy ought to be to encourage development of housing of all types by relaxing building and zoning requirements.

While we can expect the impact of this grant program to be small–negligible, even–the impact is still there: fewer units and more expensive housing.

ADUs: AB 424 & 449

How about some good news? Fortunately, one of these bills fall very much in line with MacIver's preferred policy solution regarding Accessory Dwelling Units (ADUs), with some caveats. The other bill deals with definitional changes and so has little impact on housing, but will be included for the reader's convenience nonetheless.

AB 424 – "This bill changes the definitions of 'resident' and 'occupant,' changing the requirements relating to rental of mobile and manufactured homes"

This bill deals with changes of definition and thereby the implications of living in a mobile or manufactured home.

An analysis of this bill is beyond our scope.

AB 449 – "This bill requires political subdivisions to permit ADUs on lots with single-family dwellings"

This bill requires political subdivisions to permit at least 1 ADU per lot so long as the lot has a single-family dwelling and is zoned as either residential or mixed use.

In short, this bill directly addresses housing affordability by requiring local units of government to liberalize the real estate market. Its other benefit is that it does not impose costs on the taxpayer, and instead puts the burden of development entirely on private individuals. They are neither penalized nor subsidized for choosing to develop ADUs on their property, and must absorb all development costs themselves.

On the other hand, their is an element of this bill (perhaps trivial) that hinders its ability to alleviate housing strain and supplement homeowners' income: a restriction is placed on the owners of ADUs which prevents them from renting out their ADUs on a short-term basis. I.e., the bill prohibits vacant ADUs from being listed as vacation rentals on platforms like Airbnb (although Airbnb is not explicitly mentioned). The issue at hand here is that those who are most likely to develop ADUs on their property are those most in need of supplemental income. Additionally, managing tenancy is difficult. Tenants don't always pay on time and sometimes don't pay at all. If a tenant is evicted for whatever reason, this bill would prevent ADU owners from leasing their housing unit on the temporary market to try and minimize their loses. If someone considering building an ADU expects that leasing the unit will be unprofitable on its own and would require additional short-term renting, this prohibition could limit the supply of available housing.

Residential TIF Districts: AB 451

The last bill to cover in detail has to do with Tax Increment Financing districts. The MacIver Institute has reported frequently and often on the impact of TIF districts and their role in increasing taxation. For more on the specifics, view the following sources (Legislative Council memo, Article).

AB 451 – "This bill allows cities and villages to designate tax incremental districts (TIDs) as residential TIDs"

This bill allows local units of government to create TIF districts designated for residential development. It also exempts these Residential TIFs from the 12% Rule that applies to normal TIF districts, and instead creates a separate equalized value rule that applies to Residential TIFs.

The effect of this bill would be to stifle housing development. TIFs are advantageous to two groups and two groups only: those who develop within the TIF, and the local governments who have TIFs within their territory (the city and county governments).

A TIF benefits developers because the development process is streamlined. A city that creates a TIF district signals that the permitting and approval process will be expedited, and that they will also cover some of the site preparation expenses (utility hookups and road access, for example).

A city or county benefits from TIF districts in this way: they are allowed to double-tax the property inside the TIF. First, those with property inside the TIF pay their property taxes. But then, those outside the TIF pay the TIF's property taxes too. This is what the Legislative Council memo linked above explains. By creating a TIF, any development that occurs inside the TIF district can increase the property taxes of those outside the TIF. Based on our prior research, this is almost always the case. Local governments virtually always take advantage of the increased taxing authority that TIF districts permit, and exercise that authority to increase their residents' property taxes without having to go to referendum.

As for the effect of this bill, a local government's decision to pay for some of the development results in subsidizing developers by incurring some of their costs. The effect of this is to reduce the overall cost of development. If it did not, developers would not seek out TIF districts. Therefore, it must be cheaper than developing in a non-TIF district. These lower development costs then result in cost savings being passed on to future residents of the TIF district so that here, too, we are subsidizing another group at taxpayer expense.

The fundamental reason that the creation of Residential TIFs would stifle housing development is because the TIFs are financed at taxpayer expense. While in the short run there will be more visible housing, in the longer term there will be more houses that are never built. When a government increases spending or taxes, the money it acquires is taken from the balances of taxpayers. Where do you suppose developers receive the financing that makes their developments possible? It comes, of course, from normal people who keep money in their bank accounts. If more of that money is taken to finance government, less is available to be lent, reducing the supply of loans and increasing interest rates.

In effect, we have a clear-cut example of what Frederic Bastiat called "The Seen and the Unseen": we will see houses being built inside Residential TIFs, but we will not see those that are never built.

Other Bills

AB 280 – "This bill makes adjustments to the workforce housing investment and child care investment awards under the business development tax credit"

This bill changes the criteria for claiming the business development tax credit.

AB 375 – "This bill modifies the historic rehabilitation tax credit"

This bill changes the criteria for claiming the historic rehabilitation tax credit.

AB 450 – "This bill applies the 2025 commercial building code rules to certain buildings"

This bill applies the 2025 commercial building code rules to certain buildings, especially public buildings.

AB 452 – "This bill makes various changes to the process that a city, town, village, or county must use for approving subdivisions"

This bill requires local authorities to engage in certain practices with potential subdividers.

AB 453 – "This bill requires a political subdivision to grant a request for rezoning if the request aligns with the comprehensive plan"

This bill requires political subdivisions to grant rezoning requests if the request to rezone corresponds with the subdivision's comprehensive plan.

The bill also allows a TIF district's life to be extended by up to 2 years if certain conditions are met.

AB 456 – "This bill makes various changes to the law governing the practice of real estate"

This bill changes the laws surrounding real estate practice with respect to the sale of residential properties with 1-4 dwelling units.