Houston-based Hines is proceeding with plans to develop the 31-story, 305-unit tower overlooking the Milwaukee River at North Water Street and East St. Milwaukee downtown apartment developments that can command high rents include 333 N. Project's cost rises $25 million in a year downtowns surveyed by CoStar, a commercial real estate data provider, he said. The current vacancy rate for downtown Milwaukee's apartments is 3.65%, said Lyle Landowski, president and CEO of commercial real estate services firm Colliers International/Wisconsin. That's because the demand for downtown housing remains strong enough to allow for higher rents. Verdigris, 1333 North Milwaukee and other downtown-area developments that provide apartments at market rates aren't eligible for those grants.īut inflation hasn't yet blown up financing packages for those market rate apartment projects, developers say.Īlso, they've so far absorbed higher costs for borrowing money tied to the Federal Reserve's interest rate hikes designed to slow economic activity and reduce the inflation rate. The tax credits generally require developers to provide at least 85% of a building's apartments at below-market rents to people earning no higher than 60% of the local median income. That fund is financed through federal money from ARPA.ĭevelopments receiving those grants, as well as grants from a separate $20 million state fund created in April with ARPA cash, have already received federal or state affordable housing tax credits That cash is coming from the state's Neighborhood Investment Fund. Tony Evers to help develop more than 400 affordable rental units in Milwaukee, has filled some of the funding gaps. Public money, including $12.9 million provided by Gov. The Journal Sentinel reported in February that new affordable apartment buildings throughout Wisconsin were facing delays as developers worked to fill funding gaps caused by those cost increases. Inflation is tied to double-digit construction cost increases since late 2020. That was the largest 12-month increase since the period ending December 1981.
Bureau of Labor Statistics reported in early June that the Consumer Price Index, a broad measure of inflation, had increased 8.6% over the past year. Since then, the decision by the United States and other nations to stop buying oil from Russia after its invasion of Ukraine has caused energy prices to rise even further - fueling even higher inflation. Meanwhile, the inflation rate last year was 7%, the biggest increase in prices for consumer goods since 1982. The nation’s gross domestic product, the value of all goods and services produced in the United States, grew 5.7% in 2021 - the economy's highest annual growth rate since 1984. Many economists say that's tied to labor shortages as well as supply chain lags at catching up with revved-up growth in 2021 following 2020's abrupt downturn due to the COVID-19 pandemic.Ĭonservatives have blamed economic stimulus spending tied to the American Rescue Plan Act (ARPA) that was passed in 2021 by Congress and President Joe Biden. Inflation began soaring last year, and has accelerated in 2022. The firm's projects include Journal Square, the redevelopment of the Journal Sentinel's former offices into a mix of uses, including Journal Commons, 333 W. "It has made for a difficult environment for our business for doing new deals, but we are working through it," said Jeffers, president and chief executive officer of J.
"The challenge has been navigating which of those categories are increasing faster than others, then layering in the challenges of increasing interest rates," he said. Rents and construction costs have both been escalating, Jeffers said. Milwaukee St., Haughney told the Milwaukee Journal Sentinel. LG Development is on track to break ground in the fourth quarter on the six-story, 197-unit 1333 North Milwaukee, at 1333-1339 N. "Higher costs and interest rates are a major challenge right now, but we strongly believe in the demand for downtown Milwaukee, which is what drove us to this project," said Daniel Haughney, chief investment officer at Chicago-based LG Development Group. Other developers are pursuing similar plans despite high inflation rates - thanks to strong demand for apartments throughout downtown and its surrounding neighborhoods. With construction costs spiking, developer Joshua Jeffers seriously considered pausing work on his firm's projects until 2023 - when he believes the inflation rate will be lower.īut, after also looking at the prospect of higher rents, Jeffers decided to continue working on developments that include downtown Milwaukee's 141-unit Verdigris apartments, later renamed Journal Commons.
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