On Friday, December 2, Professor Jaime Luque hosted over 300 hundred students, alumni, faculty, and Madison residents in Grainger Hall’s Plenary Room at the Wisconsin School of Business for the first ever “Big Event on Homelessness and Affordable Housing.” Jaime, who has been a member of the teaching and research faculty at the Graaskamp Center for Real Estate since 2012, has spent considerable time examining the homeless problem in Madison, WI, and invited several speakers to address and educate the audience about affordable housing.
In his opening remarks at the Big Event, Jaime indicated that there are more than 560,000 homeless people in the U.S., of which 25% are children. In Madison, specifically, there are over 3,000 homeless individuals, of which 33% are children. Cities throughout America are “struggling to cope with the problem of homelessness and the lack of affordable housing.” Homeownership is at a 20-year low, and almost “half of renters struggle to pay their landlords.”
Dr. Revel Sims, Ph.D., of the Department of Urban and Regional Planning at UW-Madison, was the event’s first speaker. His research proposed that race and eviction problems are correlated, and that 80% of people in Dane County homeless shelters identify themselves as “non-white.” Of those, the majority are African Americans, and poor black women are at the highest risk of being evicted. Dr. Sims also showed us that apartment rent prices have increased 8% over the past ten years, while incomes have remained flat. One of the primary reasons that homeless people are living on the street is because they have been evicted due to low or zero income. In fact, in the last 15 years, there have been approximately 40,000 evictions in Dane County alone. Dr. Sims suggested that more affordable housing needs to be developed to support these populations.
Robert Schwartz, Co-founder of Nakoma Development, LLC and adjunct professor in the Real Estate MBA program, and Chris Jaye, President of Mirus Partners, Inc., were the next speakers. They both have significant experience in developing and owning affordable housing apartments. Robert, who teaches the Commercial Development class for second-year MBA students, has advised our class this semester on how to apply for affordable housing tax credits and the development process for building such real estate. While both Robert and Chris suggested that the development industry can be challenging at times, affordable housing projects – if managed properly – will benefit cities, homeless people, and the developers who build them.
As a second-year MBA student, I had the privilege of taking Jaime’s Urban Economics class during the fall semester, where he not only taught us to understand the main determinants of cross-border real estate capital flows and the economic drivers of real estate cap rates, but he also helped us learn why homelessness and affordable housing is a big challenge in the U.S. economy. While admittedly at the beginning of the semester I was not enthusiastic to learn about affordable housing, the subject matter has become increasingly more appealing, and I now have a better understanding as to why so many developers have created niche companies dedicated to low-income housing. For one of our many class projects, we competed with classmates in an Affordable Housing Case Competition. We were asked to locate an area of Madison and propose an affordable housing development concept – using our gained knowledge of land rents, scoring areas, loan and tax credit considerations, and spatial feasibility analysis applications we had learned in class throughout the semester. The project was complicated and time consuming, but many of us gained valuable insight into how affordable housing projects are established.
The final set of speakers at the Big Event were Jocelyn Friedman, Joe Minor, Jose Nevarez, and Jessie Wright, who won our Affordable Housing Case Competition in Jaime’s class. The group proposed a 3-story, 103-unit mixed use development with first floor retail located on South Park Street in Madison. Their project, “Park Wingra Apartments,” would be intended to serve low-income veterans and low-income families. The project was well-received by the audience and panelists and included both site linkages and a rendering of the proposed development.
The Big Event was considered an overall success. While many students are often focused on learning how to develop, own, and operate high-end real estate projects that have strong IRR’s and equity multiples, each of us has learned how to appreciate affordable housing and the benefits it creates for the city, its residents, and developers alike. Many of the real estate students – undergrad and graduate – were thankful for the opportunity to learn about a real estate specialty that is often overlooked.