A "for sale" sign in front of a house.
Madison’s home buying market has become just as hot as its rental market in recent years, with competition from high-income newcomers to the city putting ownership out of reach for more and more Madisonians, according to a draft version of Madison’s 2023 Housing Snapshot. The annual report, produced by the city's Department of Planning, Community and Economic Development to track housing market trends, also finds low-income renters are being displaced from Madison, while many others are stretching their budgets on units they can’t afford.
“I’m really concerned about the information in this report,” said Ald. Kristen Slack after the draft report was presented on July 27 to the city’s Housing Strategy Committee. “The area median income is going up, but mostly among the highest sector of earners; we’re losing families with lower or more modest incomes, who are leaving the city; the home values are skyrocketing, which is contributing to these wealth inequities; and you have these higher-income households under consuming [renting or buying more affordable units]…. It’s all just a recipe that is not looking good.”
“We have seen a very high percentage of high-income households moving to the city recently,” said Matt Frater, a community development specialist for the city and co-author of the report with planner Colin Punt. That pressure on the market has meant buyers offering on average 6-7% above the asking price. “If you’re looking at a $415,000 house, that’s like $25,000-$30,000 dollars over asking.”
The competition has gotten so fierce that buyers have started purchasing single-family rental homes. About one in five Madison homes available for rent —1,100 or so — have been converted to ownership since 2020, according to the report, which notes that these larger units are typically rented by families with children. Slack asked staff for additional data that would seek to measure whether families with larger household sizes are more likely to leave the city.
The report found the average home in Madison is far out of reach for most. The median renter household in Madison looking to buy a house can afford a purchase price of $198,000, the median Black Madison household can afford a $159,000 home and the median white Madison household a $317,000 home. None of those numbers is close to the average home price in Madison, which now tops $400,000.
And for some looking to buy a home, finding cheaper options outside the city isn’t always an option. “I’ll be blunt and honest, there’s a lot of reasons why families of color want to remain in the city limits,” said Belinda Thomas, a committee member and real estate consultant for The Alvarado Group. “It’s not only due to transportation, it’s based also on comfortability, being accepted. There’s more of a community inside of Madison versus being in the rural areas.”
About a quarter of home-owning households are burdened by their housing costs — meaning they pay more than 30% of their income toward those costs, which the city and others use as a benchmark of affordability — and half of all renters are, with both numbers ticking up since 2019. The median Madison renter can afford combined rent and utilities of about $1,170 per month according to the report, while Madison’s average rent is about $1,570, according to RentCafe, a number that jumped by 14% last year, the largest increase of any major U.S. city.
The city has been trying to keep up with the market. According to the Housing Snapshot, city financing subsidized almost one in five new rental units built since 2016, more than 2,100 in total.
But intense competition still threatens many with displacement. For more than 11,000 renters, rents are so high that no available units in the city are affordable on their income. That number grew year-to-year, “meaning that more renters became classified as low-income than the number of units that were created at that price point.” And while there are few vacancies anywhere, the market is even tighter for low- and mid-cost units, “disproportionately impact[ing] lower-income households as they compete with higher-income households for the same units of housing.”
