$6.2 Million, 29 Homes, and the Question Nobody Asked

Madison’s biggest affordable homeownership investment ever in owner-occupied housing skipped the most basic question: Is this the best way to help families buy homes?

Key Points

• The Common Council is voting tonight on Legistar File 91615, which commits $6.2 million in public funds, including 10 City-owned lots, to build just 29 homes—an average of $213,112 per household, more than five times the cost of the City’s existing direct homebuyer assistance program.
  

• No cost-benefit analysis comparing this approach to direct homebuyer assistance exists anywhere in the legislative file, despite research from Harvard, Brookings, and HUD consistently finding that direct assistance serves more families at lower cost with less risk.
  

• One developer’s actual cash equity in a $2.1 million project is $1,255—six one-hundredths of one percent—meaning the City bears virtually all of the financial risk on spec homes in a neighborhood the market has rejected for over a decade.
  

• The City’s own Affordable Housing Targeted Area Map designates Owl Creek as ineligible for new construction subsidies, yet this resolution directs 17 of the 29 homes there—a contradiction no one has explained.
  

• By adopting the City’s own HBAD affordability standard, applying federal HOME purchase price limits, and utilizing NACA’s below-market mortgage, the same budget could serve approximately 114 families instead of 29.
  

The Vote

Tonight, the Madison Common Council will vote on Legistar File 91615, a resolution awarding up to $6,310,450 in City and federal funds for affordable homeownership development, programs, and services.^[1] It is the largest single commitment of public homeownership dollars in the City’s recent history—substantially larger than the two prior rounds combined. The Finance Committee and the CDBG Committee both recommended approval. The votes were quick. The questions were few. My full public comments on this resolution, including the detailed analysis behind this post, are available here.

What neither committee asked—and what the legislative file does not answer—is whether this is the most cost-effective way to help income-qualified families buy homes. That is not a hypothetical question. It is the central question, and the Council has an obligation to answer it before committing $6.2 million to a single strategy.

For context, consider the City’s existing Home Buy the American Dream (HBAD) program. In 2025, HBAD provided direct homebuyer assistance totaling $2,240,000 to 64 income-qualified families—$35,000 per home.^[2] This resolution would spend more than twice as much to serve fewer than half as many families, at more than five times the cost per buyer. And after $200,000 in City subsidy per home, free land, and a below-market sales price, some homes will still be too expensive for the families they are designed to serve.

Follow the Money

The resolution commits $5,414,250 in City and federal funds, plus the sale of 10 City-owned lots for $1 each, valued at $765,990, to build 29 homes for purchase by income-qualified buyers.^[3] That works out to an average City investment of $213,112 per home. The Council has approved similar development-subsidy approaches twice in recent years: $1,971,719 for 15 units in 2021 (Legistar File 63936), averaging $131,448 per unit, and $1,650,000 for 15 units in 2022 (Legistar File 74456), averaging $110,000 per unit.^[4] This resolution is not a continuation of established practice. Per-unit costs have nearly doubled since 2022.

Consider those numbers in a different light. The AnchorHaus Development LLC proposal—which I have reviewed in detail as a representative example—plans to build three-bedroom twin homes at a total development cost of $573,198 per unit, including the lot at market value. The target sales price is $346,000. The gap—$227,198 per home—must be covered entirely by City subsidy. By comparison, the 2025 median price of a new three-bedroom twin home in Madison was $417,400. If an income-qualified buyer purchased a typical new twin home at market price using the City’s existing HBAD assistance ($35,000 in City funds plus $10,000 in federal funds), the gap between the buyer’s means and the purchase price would be approximately $45,000—one-fifth of the AnchorHaus gap.

Cost comparison: AnchorHaus proposal vs. market benchmarks for new twin homes in the City of Madison.

Note: “Package Price” reflects Veridian Homes bulk sales (2023), adjusted for 8.7% construction cost inflation to 2025 dollars.

The AnchorHaus homes are also significantly larger than necessary. At 1,900 square feet, they exceed the 2025 market median of 1,517 square feet for a twin home with at least three bedrooms by 25 percent. Of 116 comparable twin homes sold in 2025, only two were 1,900 square feet or larger. For a program intended to serve low- and moderate-income households, building homes in the 98th percentile of this housing type is extravagant. A home sized to align with market expectations would reduce costs, lower the required subsidy, and serve more families.

Where the Money Goes

The AnchorHaus budget reveals soft costs and contingencies that substantially exceed industry norms. Architect fees are $50,000 for two duplexes—a figure that should be between $5,000 and $10,000 using standard stock plans with modifications. Legal fees are $50,000 for a straightforward residential project on lots the City is providing for $1 each. Civil engineering and surveying is $50,000 on lots in an existing platted subdivision with completed infrastructure, where costs should be well under $15,000.

Then there is the 10 percent hard-cost contingency: $136,000 across the four homes. In homebuilding, a contingency covers changes to the scope of work—buyer-requested upgrades, design modifications, unforeseen site conditions. But AnchorHaus is building spec homes to its own plans, on finished City-owned lots with known site conditions. There is no buyer making changes. The developer controls every variable. In homebuilding, the standard practice is a fixed-price contract. There is no legitimate basis for a 10 percent contingency on these homes, and it should not be funded with public money.

These four line items—architect, legal, civil engineering, and contingency—total $286,000 across the four homes, or $71,500 per unit. The excess above industry norms is approximately $60,000 per unit. A construction lender underwriting this project would flag each of these figures and require justification or reduction before approving the loan. There is no evidence that the Community Development Division benchmarked these costs against market norms, required competitive bidding for soft-cost services, or imposed per-unit cost limits.

The developer fee is $190,176—$47,544 per home—for a scope of work that amounts to hiring a general contractor to build homes on finished lots. That fee alone is enough to cover nearly an entire year’s housing costs for a family at 60 percent of area median income.^[5]

The Equity Fiction

The RFP requires developers to contribute 5 percent equity. But it permits them to satisfy that requirement entirely through a deferred portion of the developer fee—which is itself paid from City funds at project completion. This is not equity. It is a circular arrangement in which City money stands in for private capital.^[6]

AnchorHaus’ actual cash investment in its $2.1 million project is $1,255—six one-hundredths of one percent of the total development cost. The remaining capital comes from a construction loan (59.7 percent), City Affordable Housing Fund awards (37.9 percent), and an ACRE predevelopment grant (2.4 percent). When a developer has no meaningful personal capital at risk, the financial consequences of cost overruns, construction delays, or unsold homes fall almost entirely on the City.

No private construction lender would accept these terms. The program was designed so that developers bear no personal financial risk on projects exceeding $2 million.

Owl Creek: The Location the Market Rejected

Seventeen of the 29 homes would be built in the Owl Creek neighborhood on Madison’s far southeast side. The City’s own planning documents tell a story that the legislative file ignores. The 2017 Owl Creek Assessment and Strategic Plan, prepared by the Community Development Authority, found that Owl Creek’s Walk Score is 9 out of 100—the City average is 48—and its Transit Score is 17, less than half the citywide average of 38.^[7] The assessment concluded that these conditions make it “particularly difficult and inconvenient for residents without access to vehicles to live in the area.”

Transit access matters especially for this program’s target population. According to the City’s own transit analysis, people of color in Madison transfer 2.5 times more often than other riders and are twice as likely to have a trip that takes longer than 45 minutes.^[8] Owl Creek is served by a single bus route running every 75 minutes. Placing affordable homes for low-income families of color in a location with this level of transit service compounds the very disparities the City’s transit redesign was intended to address.

Here is the contradiction the Council should not overlook: the City’s 2025 Affordable Housing Targeted Area Map designates Owl Creek as a “Preservation and Rehab Area (Ineligible for New Construction).”^[9] The stated rationale is to concentrate housing subsidies in areas served by mass transit, to avoid incompatible land uses, and to prevent overconcentration of low-income housing in a single area. Owl Creek meets all three exclusion criteria. That map was distributed with the 2025 Affordable Rental Housing Tax Credit RFP, released July 18, 2025. It was not included in the Affordable Homeownership Development RFP released just two weeks later on August 1, 2025—the very RFP that authorizes this resolution’s funding. No explanation was provided for this omission. The rental housing program enforces the map’s restrictions while the homeownership program ignores them.

The resolution also funds six different developers to build essentially the same product in Owl Creek, creating significant cost duplication across legal, engineering, sales, marketing, and construction management, and forfeiting the economies of scale that a single experienced builder would achieve. Worse, it pits subsidized developers against one another for a limited pool of income-qualified buyers. If developers receive City funds before buyers are under contract, the City is financing speculative homebuilding in a neighborhood that has struggled to attract market-rate development for over a decade.

Still Too Expensive After All That Subsidy

Even after $200,000 in City subsidy per home, free land, and a below-market sales price, the resulting homes are still too expensive for the families they are designed to serve. The AnchorHaus proposal lists a target sales price of $346,000. But the applicant’s own affordability worksheet reveals that at 80 percent AMI, the estimated monthly housing cost of $2,900 exceeds the 30-percent-of-income affordability cap of $2,596 by $304 per month.^[10] At 60 percent AMI, the monthly deficit is $953. At 50 percent AMI, it is $1,277.

Additional subsidies from other sources will be needed to close this gap. The supplemental questions identify potential sources—HBAD down payment assistance and the FHLBank Chicago Down Payment Plus program—but these are not reflected in the affordability calculations and were not included in the proposal budget. The legislative file does not disclose how this gap will be closed or whether the additional subsidies are funded and committed.

The City’s own Racial Equity and Social Justice analysis of the Owl Creek plan warned that “creating design guidelines that will increase construction costs for any new housing options could make it too costly for households to afford the alternative housing options offered after re-development.”^[11] That is precisely what has occurred.

The Safeguards That Aren’t There

Several basic protections that responsible lending and public finance demand are absent from this resolution:

No independent credit analysis. CDD did not pull personal or business credit on any developer. Instead, the City deferred credit analysis to the construction lender—on projects where the City holds a subordinate lien representing 40 percent of the total capital. This is the reverse of standard practice.

• No cost controls on construction. The only cost constraint is on the buyer’s monthly payment—not on the cost to build the home. Federal HOME regulations require that assisted homeownership units not exceed 95 percent of the area median purchase price. The AnchorHaus target sales price falls below this cap, but the total development cost of $573,198 per unit exceeds it by $79,198.
  

• No loan terms disclosed. The Legistar file contains no loan agreement or disclosure of loan terms. Based on the City’s published Q&A and CDD’s responses, up to 20 percent of each award is an outright grant, the remainder is a zero-interest loan in second lien position, and up to half the loan may be forgiven at initial sale. The City’s actual recovery on an $800,000 award could be as low as $320,000—40 percent of the original commitment.
  

• No risk analysis. Neither the CDD memo nor the Legistar file identifies or addresses the risks of lending millions of dollars to build spec homes. The AnchorHaus proposal identifies zero risks—none—despite proposing to build in one of the City’s most challenging locations, with no prior homebuilding experience, in direct competition with five other City-financed builders.
  

• No buyer required before construction. CDD has confirmed that City funds are not contingent on an executed purchase agreement. This resolution authorizes funding to build spec homes where the developer’s actual equity at risk is $1,255—0.06 percent of the $2.1 million project cost. When homes go unsold, the City holds the financial risk the developer never had.
  

What the Research Says

The Harvard Joint Center for Housing Studies, the Brookings Institution, and HUD have each published analyses comparing direct homebuyer assistance with new construction subsidies.^[12] The research consistently finds that direct homebuyer assistance—down payment grants, closing cost support, mortgage rate buy-downs—serves more families at lower cost with less risk.

J. Michael Collins of the University of Wisconsin–Madison developed an evaluation framework for the Harvard Joint Center that categorizes homeownership subsidies and identifies eight criteria for assessing their effectiveness: scalability, marginal effect, targeting, administrative efficiency, subsidy recapture, neighborhood externalities, default risk, and mobility.^[13] I applied Collins’ framework to the program proposed in this resolution. The development-subsidy approach fails or rates poorly on six of eight criteria. It passes only on targeting (income restrictions exist, though actual affordability is not achieved) and partially on recapture (community land trust restrictions help, but developer-side recovery is weak).

For a program that commits $6.2 million in scarce City resources to produce 29 homes, that is a disqualifying result.

Alternatives That Would Serve More Families

The good news is that proven alternatives exist. They are not hypothetical programs. They are operating programs with documented outcomes.

Direct homebuyer assistance at scale. For the same total investment contemplated by this resolution, the City could serve approximately 137 households at $45,000 each through its existing HBAD program, rather than 29 households averaging $213,112 each. Buyers would choose any home, anywhere in the city, eliminating the geographic concentration risk that defines the current proposal.

The NACA mortgage. The Neighborhood Assistance Corporation of America operates the largest nonprofit homeownership program in the United States, with over 75,000 mortgages originated—approximately 90 percent to people of color—and a near-zero foreclosure rate.^[14] NACA’s mortgage requires no down payment, no closing costs, no private mortgage insurance, and no fees, and carries a below-market fixed interest rate. NACA maintains an office in Milwaukee and is licensed to originate mortgages in Wisconsin. There is no geographic barrier to Madison households accessing this program.

NACA’s One-Dollar Homeownership Program. Madison is already proposing to sell City-owned lots for $1—precisely the transaction NACA’s program is designed for. Under NACA’s model, the homebuyer purchases the property directly from the city, and NACA provides financing for new construction or renovation through its below-market mortgage. The program eliminates the developer as a middleman and operates in cities across the country at a fraction of the public cost contemplated in this resolution.^[15]

Financial impact of recommended policy changes, per home (family of four at 80% AMI):

Note: All scenarios assume 80% AMI household income ($103,800/yr, family of four), 30-year fixed mortgage, 1% down payment, 3% closing costs, City mill rate 0.018656312, $1,500 annual insurance.

With the NACA mortgage at the HBAD affordability standard, the buyer’s monthly payment is $2,837—$450 below the 38-percent cap—and the only City subsidy needed is $54,200 to buy down the sales price to the HOME limit. At that rate, the same budget could serve approximately 114 families instead of 29.^[16]

This Program Doesn’t Build Developers—It Builds Dependence

Cultivating a pipeline of diverse local developers is an explicit City goal, as CDD’s Jim O’Keefe confirmed.^[17] That may be a worthy objective. But the program structure fails on its own terms as a capacity-building strategy.

In the private market, emerging developers build capacity through a well-established progression: working for experienced builders, assembling a small deal with personal savings or investor capital, navigating zoning and entitlements, managing financial risk themselves, and building a track record that earns access to larger projects and more favorable financing. Every step develops a skill the developer will need throughout their career.

This program skips every one of those steps. It hands emerging developers projects exceeding $2 million with zero personal equity, no requirement to raise private capital, and no financial consequence for failure. The first time these developers attempt a project without full City subsidy, they will have no track record of raising private capital, no experience managing personal financial exposure, no demonstrated ability to build a product the market accepts, and no lender relationships built on their own creditworthiness. The program is not building developers. It is building subsidy-dependent organizations.

What You Can Do

The Common Council votes tonight, Tuesday, February 24, 2026. Legistar File 91615 is Agenda Item 32.^[18]

Contact your alder before the vote. The Council directory is at cityofmadison.com/council. Email or call your alder and ask them to refer the development proposals back to committee for the analysis described in this post. Approve the homeownership service programs—housing counseling and buyer education are valuable and should proceed—but direct CDD and EDD staff to evaluate alternative strategies using the Collins framework before committing to this approach.

Register to speak or in opposition. You can register at the meeting registration page on the City’s website, even if you cannot attend in person.

Share this post with your neighborhood association, your neighbors, and anyone who cares about how their tax dollars are spent. Share this post on social media, with your neighborhood association, your neighbors, and anyone who cares about how their tax dollars are spent. The more people who see this before tonight’s vote, the harder it is to ignore.

The Pattern

This resolution fits a pattern that readers of this blog will recognize. A staff recommendation arrives at committee with a thin file and a tight timeline. The committees verify that funds are available and that staff have vetted the proposals. The vote is taken. But the harder question—whether this is the best use of scarce public dollars—is never asked. By the time the resolution reaches the full Council, the political cost of sending it back feels higher than the financial cost of proceeding.

City staff and the developers recommended for funding have invested considerable time and effort in this process, and I recognize the difficulty of asking the Council to send this back. But the Council’s fiduciary obligation to taxpayers and to the families this program is designed to serve must take precedence. These problems are not cosmetic—they are structural, and they cannot be fixed by conditions added at the point of approval.

The Council will not have a better opportunity to get this right. Once construction begins, the City’s leverage disappears and the financial commitments become irreversible. The time to impose controls, require the analysis, and evaluate the alternatives is now—before the vote, not after.

We cannot abandon our commitment to affordable homeownership. But we owe it to the families this program is designed to serve—and to the taxpayers funding it—to pursue that commitment in a way that is fiscally sound, transparent, and effective. When public resources are scarce, the measure of a program is not what it builds but how many families it moves from renting to owning.

77SquareMiles.com covers what mainstream media won’t—because democracy dies in darkness, especially at City Hall.

© Alex Saloutos 2026.

Footnotes

[1] City of Madison Common Council, Legistar File No. 91615, “Awarding up to $6,310,450 in City and Federal Funds for Affordable Homeownership Development, Programs, and Services,” Agenda Item 32, February 24, 2026. https://madison.legistar.com/LegislationDetail.aspx?ID=7051792&GUID=2E4ED3F1-A38E-4C17-B18D-C8A67C0DD16D

[2] City of Madison, Home Buy the American Dream Program, 2025 program data. CDD confirmed 64 families served at $35,000 per household in City funds.

[3] Legistar File No. 91615, CDD Memorandum and attached budget summaries. https://madison.legistar.com/View.ashx?M=F&ID=15149990&GUID=D07EA99F-0147-4EFB-86E0-19C77DFB4D15

[4] Legistar File No. 63936 (2021), $1,971,719 for 15 units; Legistar File No. 74456 (2022), $1,650,000 for 15 units. Per-unit figures exclude the value of any City-owned land sold at a discount. https://madison.legistar.com/LegislationDetail.aspx?ID=4765969&GUID=582FDED6-D1F1-4BB8-B18C-375FE0E6C6F9&Options=ID|Text|&Search=63936

[5] AnchorHaus Development LLC, proposal submitted in response to RFP #2025-14027, Financing for Affordable Homeownership Development. Developer fee: $190,176 ($47,544 per unit). At 60% AMI, annual household income is $77,850; monthly housing cost at 30% of income = $1,946 × 12 = $23,356. https://madison.legistar.com/View.ashx?M=F&ID=15150007&GUID=16459A4A-08DD-47F3-BF7A-F03935095698

[6] City of Madison, RFP #2025-14027, Q&A published responses; CDD written response to author inquiry, 2026. https://www.cityofmadison.com/dpced/community-development/documents/_RFP%202025-14027%20Financing%20for%20Affordable%20Homeownership_1.pdf https://www.cityofmadison.com/dpced/community-development/documents/QA%2009222025.pdf

[7] City of Madison Community Development Authority, “Owl Creek Assessment and Strategic Plan,” 2017. Walk Score and Transit Score data cited therein. https://madison.legistar.com/LegislationDetail.aspx?ID=3110725&GUID=A003F476-3E40-44DC-9996-4AD2837B9FB1&Options=ID|Text|&Search=Owl+Creek

[8] City of Madison, Metro Transit Network Redesign, equity analysis data, cited in the 2017 Owl Creek Assessment RESJ analysis. https://madison.legistar.com/LegislationDetail.aspx?ID=3110725&GUID=A003F476-3E40-44DC-9996-4AD2837B9FB1&Options=ID|Text|&Search=Owl+Creek

[9] City of Madison, 2025 Affordable Housing Targeted Area Map, distributed as Attachment A to RFP #14052-2025, Affordable Rental Housing Development: Tax Credit RFP, released July 18, 2025. https://www.cityofmadison.com/dpced/community-development/documents/B.%20AHF%20Map%202025.pdf

[10] AnchorHaus Development LLC, affordability worksheet submitted with RFP response. Monthly PITI of $2,900 vs. 30% of $8,650 monthly income = $2,595. https://madison.legistar.com/View.ashx?M=F&ID=15150007&GUID=16459A4A-08DD-47F3-BF7A-F03935095698

[11] City of Madison, Racial Equity and Social Justice (RESJ) Analysis, Owl Creek Assessment and Strategic Plan, 2017. https://madison.legistar.com/LegislationDetail.aspx?ID=3110725&GUID=A003F476-3E40-44DC-9996-4AD2837B9FB1&Options=ID|Text|&Search=Owl+Creek

[12] See, e.g., Harvard Joint Center for Housing Studies, “Homeownership Built to Last” symposium proceedings (2013); Brookings Institution, analyses of homeownership subsidy effectiveness; HUD, “Homeownership Gaps Among Low-Income and Minority Households.”

[13] J. Michael Collins, “Developing Effective Subsidy Mechanisms for Low-Income Homeownership,” Harvard Joint Center for Housing Studies, HBTL-08, October 2013, Section 4: “A Framework for Evaluation.” https://www.jchs.harvard.edu/sites/default/files/hbtl-08.pdf

[14] Neighborhood Assistance Corporation of America (NACA), program data. https://www.naca.com/naca-programs/

[15] NACA, One-Dollar Homeownership Program. https://www.naca.com/naca-programs/

[16] Author’s analysis. See attached spreadsheet: “Public Subsidy and Monthly Payment Scenarios.” Scenario 4 (Market Rate New Home & NACA Mortgage Rate): City subsidy of $54,200 per home; $6,180,240 total budget ÷ $54,200 = ~114 households.

[17] CDD Jim O’Keefe, response to author inquiry regarding developer capacity-building as a program goal, 2026.

[18] City of Madison Common Council, February 24, 2026, meeting agenda. https://madison.legistar.com/View.ashx?M=A&ID=1328953&GUID=3A91F95E-FDE4-4552-BBC7-9488BEB98BFB