A unique arrangement that could advance an affordable housing development near University Research Park could be replicated elsewhere, but perhaps not as frequently as some might hope.
That arrangement has allowed a long-awaited, $63 million affordable housing development from Milwaukee’s Mandel Group to gain some traction. It would permit the Mandel Group to receive city of Madison tax incremental financing and other real estate funding, and in exchange, Madison can purchase an option to acquire the property in 15 years.
The real estate services firm proposes to develop a multifamily facility with 197 units, many of them below the market rate-rental level, at Research Park near Garner Park on the city’s west side. The apartments would be situated along the new, east-west bus rapid transit (BRT) route and close to large University Research Park employers such as Exact Sciences, FluGen, and Thermo Fisher Scientific.
The high cost of housing is an acute problem in Madison and other cities. As of 2024, the vacancy rate for apartments in Madison is just 2.8%, according to an analysis by CBRE, and low vacancy rates tend to drive up the cost of rental units. City leaders, developers, and nonprofit organizations have been looking for creative ways to build more affordable housing in an area where the average rents for a one-bedroom unit ranged from $1,419–$1,511 in 2024, according to Apartments.com. Realtor.com reports that in 2023, the average cost of a single-family home was $391,053.
The six-story project would include studios and one-, two-, and three-bedroom units and 151 stalls of underground parking. Levels of affordability would vary: 144 units will be reserved for tenants making 60% or less of the county median income and another 53 will be for those making 80% of it. The development is part of a larger, multi-phase effort to remake Research Park’s northeastern corner, called Element Collective, that will create a concentration of housing and businesses with increased walkability.
Madison Ald. John Guequierre, who represents the 19th District that includes the development site, believes the novel arrangement will enable the Mandel Group to piece together the various layers of financing necessary to start building. Guequierre said the developer was looking for a way to secure multiple lenders and assure that in 15 years, there was an option that enabled the development to remain sustainable.
“As far as I know, this last package should be sufficient for [Mandel Group] to wrap it all up,” Guequierre said.
At the moment, it is not publicly known how close the Mandel Group is to completing the financing, but the firm would appear to be near the culmination of a process that began before the COVID-19 pandemic.
Asked whether the financing arrangement could be applicable elsewhere to accelerate the development of affordable housing, Guequierre indicated that it would depend on the circumstances.
“I would say that we may use some of these tools again, but it would be pretty unique, so it’s not a one-off. Maybe it’s a one- or two-off or something like that over a couple of years,” he said. “We’re primarily driving this one with TIF funds from a relatively mature tax incremental district (TID], No. 46 in University Research park. It doesn’t have a lot of life left, but this was a good way to finish it up.”
“There are some other layers of complexity like the purchase option and so forth, but it will help them formalize the construction period financing — permanent financing,” he said.
Tax incremental districts are primarily used to provide the necessary infrastructure — streets, sewers, and water service — to complete a commercial development. With a TID, a municipality generally borrows the money for infrastructure improvements and pays it back over time from increased property values (additional tax base) generated by the new development.
The increased tax base also promotes development in other ways, especially in a well-developed TID. Matt Mikolajewski, director of the city’s economic development division, wrote in an email that tax incremental district 46 is a very successful TID that affords the city the opportunity to exercise a purchase option.
“We might not have the financial capacity to do so in a new or less successful TID,” he wrote. “In other words, the ability to replicate this approach will be largely dependent on the health of the TID where a project is located.”
According to Guequierre, when considering the biannual use of the city’s affordable housing fund, the city received more worthy development proposals than it had the capacity to accommodate, and so city officials explored other tools that could work.
“We thought this one, given its location and the level of affordability, is one to pursue,” he said, “and we connected it to the TID. That’s how it came together.”
As the project evolved, the Mandel Group agreed to expand what Guequierre calls “strata of affordability.” All of the units will be affordable to some extent, “and that was the major move for the developer,” he said. “They had originally only looked at only a portion of the units qualifying as affordable. … So, there is a range of affordability, but basically all of them will be somewhat, or a lot, under current market rates, which are pretty high.”
City officials anticipate that a number of the occupants of this development will be working at businesses in Research Park. “That’s a hope,” Guequierre said. “We can’t state that for certain but one of the things that you have is a bunch of different types of jobs that are needed to keep those businesses and labs in the research park operating.
“This would make it simpler — not only for people who would live right there and work right there, but since we’re right on the new BRT route, we’ve also got a lot of ability for people to take inexpensive public transit to get to those jobs.”
