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Report: Solving Wisconsin's workforce challenges could exacerbate housing shortage

That need for housing will only increase if the state attracts more working age residents, something lawmakers hope to achieve to address the state's longstanding workforce shortage challenges.

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Sold sign in front of a home.
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MADISON — If state lawmakers succeed in their efforts to attract more residents to Wisconsin to address longstanding workforce shortage woes, doing so could further exacerbate the state's growing need for sufficient housing offerings, according to a new report.

At the core of both issues is Wisconsin's aging baby boomer population, which will continue to age out of the statewide labor pool over the next decade, yet is projected to increase its share of the state's limited workforce housing offerings, according to a report released Monday, Jan. 9, by the Wisconsin Counties Association's nonpartisan research arm Forward Analytics.

"The baby boomers at the age of 65 or older, many are going to retire, but they're going to remain in their homes for 10, 15, 20 years," said Forward Analytics director Dale Knapp. "The way I think about it is that those housing units are no longer workforce housing which creates a need for a large number of new units to be built."

Wisconsin's adult population is projected to grow by about 204,000 between 2020 and 2030, marking a smaller overall growth compared with the two previous decades, according to the report.

At the same time, the number of Wisconsinites 65 or older is also expected to grow by more than 330,000 by 2030, while the population of those under 65 years old is projected to decline by about 130,000 based on migration patterns.

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"The modest increase in the number of adults combined with the shift in the age structure of the adult population is what will drive the need for additional housing," the report notes.

The report notes that Wisconsin will need to build roughly 140,000 new housing units by 2030 in order to compensate for the loss of workforce housing caused by the state's aging population.

That need for housing will only increase if the state attracts more working age residents, something lawmakers hope to achieve to address the state's longstanding workforce shortage challenges.

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The numbers

Lawmakers on both sides of the aisle have pointed to the state's workforce shortage issue as one of the top priorities in the upcoming legislative session and biennial budget process. Some options being kicked around by the Legislature to attract more talent to the state include tax breaks, addressing the high cost of child care and easing local government levy limits to help communities generate more revenue for amenities and services.

"If we're going to solve that workforce problem, we might need (50,000 to 70,000) more housing units," Knapp said. "So now you're up to 200,000 or more over the decade, which is a real mountain to climb."

The amount of housing needed in any city or county depends on a number of factors, primarily the number of adults who own or rent. In addition, residents who are 75 or older are roughly 3.5 times more likely to live alone than individuals between 35 and 64, meaning an older population requires more housing units than a similarly-sized middle-age population.

Wisconsin had just over 2.7 million housing units in 2020, according to U.S. Census Bureau data. Of the roughly 300,000 of those units that were unoccupied, 58% were seasonal units, 12% were for rent and the remainder were for sale, recently sold or rented or vacant for another reason.

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But simply building more housing units is easier said than done. The number of lots created by local governments dropped dramatically in the Great Recession, though has slowly been ticking up.

"This urgent need for housing in the short and medium term may also create a very different challenge longer term," the report states. "Wisconsin's youth population has been shrinking for two decades. Fewer children today means fewer young workers in the future and a shrinking demand for housing by 2040 and beyond. That is about the same time that many of the baby boomer homes will begin coming back on the market, possibly leading to an excess of housing."

The market

Rising mortgage rates, which decrease the buying power of prospective homeowners, are also an issue.

Mortgage rates have been floating between 6% and 7% this winter, according to a recent Forbes analysis. Over the summer they hovered around 5%, and several local real estate agents said demand for houses was at an all-time high. Dane County home sales dropped from 887 in June to 512 in October, according to the Realtors Association of South Central Wisconsin.

The median home sale price in Dane County was $381,330 as of October — roughly $41,000 above 2021 figures. It topped $400,000 over the summer. The average sale price in October was $436,054, compared with $381,900 in 2021, according to association figures.

Forward Analytics' latest report follows another released in September that detailed Wisconsin's need to attract and retain more out-of-state families to address the state's ongoing workforce challenges, which could soon be exacerbated by impending retirements in an aging labor pool.

Federal income tax return data from 2012 to 2020 found Wisconsin lost more than 105,000 tax filers identifying as families under the age of 26 while gaining fewer than 89,000 from other states. Typically, such filers are single individuals, the report notes.

All told, more than 460,000 families left Wisconsin over that nine-year span, compared with just under 430,000 individuals moving into the state.

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More than one-third of the families that left Wisconsin between 2012 and 2020 moved to a bordering state. Of the nearly 160,000 Wisconsin residents to move to a neighboring state, more than 62,000 moved to Illinois while more than 65,000 moved to Minnesota.

© 2023 The Wisconsin State Journal

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