Housing

Understanding Housing 

Housing is a HUGE topic with a lot to it! We may not be able to cover everything but we want to establish a strong foundation for understanding the basics. 

Key Housing Terms

When it comes to housing, terms and definitions matter. Let’s talk about them!

There are a variety of housing terms to cover but let’s start with three key ones that come up a lot: affordable, low-income, and section 42-LIHTC.

Housing Challenges 

Across the country communities are experiencing significant housing challenges largely due to the fact that housing supply has not kept pace with demand. Although this is not the only piece of the puzzle regarding housing issues, it is a critical one. Sun Prairie, as part of the Dane County housing market, is experiencing these issues primarily due to housing underproduction and significant job growth, or also referred to as housing demand.

In order to keep up with demand, Dane County needs to produce 7,000 new housing units per year to address the housing shortage and keep pace with 2040 forecasted housing growth. Sun Prairie would need to produce 517 units annually.

Key Indicators of Housing Need

1. Rental Vacancy: Sun Prairie’s point in time rental vacancy rate is fluctuating between 2-5%. A 5-7% rental vacancy is considered reflective of a healthy market.

2. Housing Cost Burden: Sun Prairie has approximately 4,250 households paying 30% of gross income toward housing costs. This is 43% of all renter households and 19% of all owner-occupied households in the City. 82% of these renter households have incomes less than $50,000 and are at a higher risk of housing instability.

Need for More Affordable and Diverse Housing Types 

Housing is a basic human need and essential to build a vibrant and sustainable community:

• Strong labor force and economic benefits – businesses are better able to retain and attract workers.
• Stronger families – safe, affordable housing creates a more stable environment for children; children do better in school.
• Reducing homelessness – increasing housing cost burden is correlated to an increased amount of homelessness.

More Rental or Ownership Units? 

We need both! Although we've built more housing since housing production came to a halt during the Great Recession, there is still pent-up demand, particularly for reasonably priced rental and ownership units.

•  Rental homes meet the needs of many households. Especially for low- and moderate-income families in high-cost markets like Dane County, renting is the most financially viable option. Others rent because they prefer the lifestyle of renting or don’t want to worry about the hassle or costs of yard maintenance and home repairs.
• Homeownership can be a good option when the mortgage terms and home price are within reach of a family’s budget. For many working families, homeownership still represents the American Dream and serve as a critical opportunity to build generational wealth.

In the coming weeks, we will highlight how the City and Dane County are addressing local housing challenges.

Data retrieved from the following sources:

• Dane County Regional Housing Strategy (https://rhs.danecounty.gov/)
• 2023 5-Year American Community Survey Data (https://data.census.gov)
• Sun Prairie Utilities
• 2021 Comprehensive Housing Affordability Strategy (https://huduser.gov/portal/datasets/cp.html)

Challenges to Building Affordable Housing

Strictly focusing on supply and demand-side housing factors, there are four major barriers affecting affordability throughout the U.S.: 

1. Zoning ordinances that restrict density, building height, and land-use alternatives. 

2. Growth in income has not kept pace with the growth in housing (and other) costs. 

3. Rising costs that make building homes more expensive. Delays and higher material, land, and labor costs are contributing to rising home prices. In Dane County scarcity of land has driven up land prices. Between 2021 and 2022 the price of a standardized 1/4 acre lot in Dane County increased by 31%, from $130,000 to $171,100. Due to materials and labor shortages during COVID, the cost to build a home increased 15% between 2021 and 2022. Nationwide studies indicate that construction costs on average increased 30% during COVID. 

4. Demand has outpaced supply of housing.  While there is a nationwide shortage of housing, Dane County's housing crisis is particularly severe due to the job growth the County experiences. Between 2010 and 2021 Dane County accounted for 27% of the State of Wisconsin's job growth. 

Sun Prairie's Efforts 

In February 2025, City Council adopted the Affordable Housing Fund Policy and extended the life of two tax increment finance districts (TIDs) for one year to add $5.3 million into the City’s Affordable Housing Fund. This extension is one of the most significant financial tools available in Wisconsin for municipalities to tackle housing challenges. 

Here are some misconceptions about the TID Affordable Housing Extension: 

1. This funding could be used for non-housing purposes, such as covering budget deficits. 

Correction: State statutes require that 75% of the increment benefit affordable housing and the remaining 25% any housing.  

2. This allocates funds away from the School District.  

Correction: The School District has already hit levy limits. To spend beyond its current capacity, the school district would need to go to referendum.  

3. This money is going straight to developers. 

Correction: While one of the six possible programs is a loan for affordable rental units, the remainder are programs that would directly benefit residents.