Washington County, WI Next Generation Homes Program Case Study
Investing in Homeownership: Public Investments in Starter Home Development
Washington County is a suburban county located to the northwest of Milwaukee County. With a population of less than 140,000, the county had seen continuous and substantial growth since the 1950s, growing more than 10% each decade until the 2010s. Since 2010, however, growth has slowed substantially, with the county only adding 4% to its population between 2010 and 2020.
A lack of new housing development is a major contributor to the slowed population growth, with Washington County building only 5,000 new homes between 2010 and 2020, compared to nearly 10,000 in the 2000s. In order to address the lack of new housing development, Washington County Executive Josh Schoemann established the Next Generation Housing Initiative (NGH) in 2021 as part of the Our Great Community Campaign. NGH focuses on addressing a suite of barriers to housing development in Washington County, including high development costs, high cost of homeownership, zoning and land division regulation, and increasing permit fees. The Initiative provides opportunities to overcome each of those barriers, including new programs to decrease development costs and increase homeownership opportunities, working with municipalities to reform land use codes, and conducting public outreach to inform residents of the current conditions of the housing market within Washington County.
The Next Generation Housing “2.0” Framework, approved in June 2024, includes a set of incentives and funding sources for developers to build new, owner-ccupied housing units. The framework aims for all new housing built with these incentives to sell for less than $420,000, with 40% of those homes selling for under $340,000 and 80% selling under $360,000. This is substantially less than the average price of a new home in the county: $430,000, according to Zillow data.
In order to spur the development of new starter homes or other diverse owner-occupied housing types, the Next Generation Housing Initiative offers two different incentives. First, the NGH Fund Incentive provides up to $20,000 per owner-occupied dwelling unit as a loan with a 0% interest rate for eligible expenses associated with new housing development, including land acquisition, engineering studies, infrastructure construction, and more. In order to recoup the cost of the $20,000 loan, a lien is placed on the property, to be repaid at closing or through the use of tax increment financing. In order to prevent “double dipping”, housing developments that are using tax increment financing to repay the $20,000 NGH Incentive associated with the NGH Fund are ineligible to use the Permit Fee Incentive, described below.
In addition to the lien, the County or developer records a Declaration of Protective Covenants on all NGH properties, requiring owner-occupancy in perpetuity. The County also records a deed restriction on any property sold under fair market value in order to prevent potential “flips for profit”. The restriction states that a certain percentage of the difference between the purchase price and the fair market value will be owed back to the County should the buyer sell within five years of initial purchase (100% at year 1, 80% at year 2, etc.). There are several NGH developments where the homes are being sold for well below fair market value and after living in the home for five years, the first homebuyer fully earns the difference in value. In total, the County allocated $7.65 million for the NGH Fund, largely made possible by the federal funding that the County received as part of the American Rescue Plan Act (ARPA) in 2021.
In addition to the NGH Fund Incentive, Next Generation Housing has provided a Core Construction Permit Fee Incentive to cover 100% of the cost of local government permitting fees, up to $6,000, including fees for plan reviews, building inspections, occupancy, HVAC, electrical, plumbing, water, sewer, and other impact fees. The Permit Fee Incentive is included in as part of the Deed Restriction placed on the property to prevent “flip for profit” scenarios. This has helped spur the conversation with local governments who control the permitting process for new housing developments. The county has allocated $600,000 for the Core Permit Fee Incentive program. Typical permit fees in Washington County are between $8,000 – $12,000 per home.
To date, multiple developments have taken advantage of the Next Generation Housing Initiative, including two developments totaling 139 units in the Village of Jackson, two developments totaling 23 units in the City of Hartford, and one development boasting 48 units in the Village of Kewaskum. A number of homes in the Village of Jackson and the City of Hartford are already completed and are now occupied by new homeowners.