Fox Valley homebuilder Tom McHugh is trying to fill a much needed gap in the Northeastern Wisconsin housing market: affordable, newly built homes.
McHugh owns Tom McHugh Construction LLC, a Greenville-based residential construction company that specializes in the construction of production buildings, also known as track construction.
Here’s how it works: McHugh buys a portion of a subdivision’s lots from a developer. It gives buyers an option of five floor plans to choose from and then builds the homes in one lot so that he can get a volume discount on high quality materials and lower the cost to the buyer.
All of the McHugh homes are modest-sized ranch-style homes that range in size from 1,350 square feet to 1,550 square feet. Most have three bedrooms and two bathrooms. Base models, with no add-ons, cost between $ 265,000 and $ 325,000.
The homes built by McHugh meet a need for new homes identified in a 2019 report by the Wisconsin Realtors Association. The Falling Behind report found a significant shortage of affordable housing for households earning between 60% and 120% of an area’s median income, also known as workforce housing.
In Outagamie County, these would be households earning up to $ 79,480 per year, $ 77,349 in Brown County and $ 70,016 in Winnebago County, according to the US Census Bureau.
There aren’t enough homes under construction in Wisconsin, especially housing for the workforce, said Kurt Paulsen, professor of urban planning at the University of Wisconsin-Madison and author of the Falling Behind report. . There are hundreds of job openings that pay living wages, but few affordable housing for workers and their families to buy, he said.
“We’re seeing statewide that that kind of average income, the price of housing for labor for property is just gone,” Paulsen said.
The lack of housing for the workforce not only impacts middle-class households; it spills over across the affordable housing spectrum, Paulsen said. When people can’t find a home at their price, they choose the next cheapest option, which “puts pressure on people at the bottom of the pay scale,” he said.
“What we are seeing now is that the affordability crisis is moving up the income ladder due to the overall housing shortage,” said Paulsen. “So even a teacher who earns $ 50,000 (per year) is struggling to find a home to buy anywhere in the state.”
McHugh wants to go even smaller
Federal guidelines recommend that households spend no more than 30 percent of their income on housing expenses. Those over 30 percent are considered “encumbered costs,” meaning that housing costs take up such a large part of a household’s budget that they find it difficult to cover other costs or save money. ‘money.
In 2019, nearly 20% of households in Appleton and 23% of households in Green Bay were considered to have a financial burden, according to the Joint Center for Housing Studies at Harvard University.
Paulsen said a good rule of thumb for determining how much a household should spend on a conventional mortgage is to triple their income. So, to afford one of the cheapest and smallest homes in McHugh, at $ 264,900, a household would have to earn around $ 88,000 a year.
The “sweet spot” for workforce housing in the Appleton area would be homes between $ 180,000 and $ 225,000, Paulsen said.
“All you have to do is look at the ads to realize that there is hardly anything in this price range,” Paulsen said. “And if it’s available, it goes really fast.”
It’s also almost impossible to build a new home in this price range, McHugh said.
McHugh wants to build smaller, more affordable homes that are closer to that price, but he’s often stuck with commitments on the ground from developers that dictate size, materials, and other things that drive up prices. , did he declare.
For example, a municipality may allow a minimum house size of 1,300 square feet, but developers can decide they want homes to be at least 1,700 square feet and have features such as stone facades, said McHugh.
Having the developers working directly with the builder to make sure their bundles match what the builders need would be the biggest cost savings, McHugh said.
“There are a few developers who understand and try,” he said. “But there aren’t many.”
McHugh would be able to build more houses in the same space if the developers reduced the lots. For example, his homes can fit on lots that are 60 feet wide, but many developers sell lots that are 90 feet wide. If the developers downsized the lots, McHugh could install three houses in the same space as two, and that alone could save between $ 15,000 and $ 20,000 per house.
“There is a definite need for (smaller houses),” McHugh said. “There’s no way to build this new inventory anymore, period. It just can’t be done because there aren’t any subdivisions that allow it.”
At this point, building a smaller 1,200-square-foot house wouldn’t be much cheaper, unless McHugh started removing some amenities, like the master bathroom. This could save between $ 10,000 and $ 15,000. Building two-story or two-story homes could also reduce the cost of a home by about $ 10,000. But, people seem to prefer ranch-style homes, McHugh said.
Together, these three changes could reduce the cost of a home by as much as $ 50,000, and “now you’re talking about something that could mean the difference between being affordable or not,” he said.
If someone could figure out a way to build a three-bedroom, two-bathroom, 1,500 square foot home in Fox Valley for around $ 200,000, “you could probably sell thousands of them because there is one. such request, “said Paulsen. .
Affordability comes with options
Amy and Erik Van Hammond purchased their three-bedroom, two-bathroom Kaukauna home from McHugh in early 2020.
The couple, who tied the knot in May 2020, were looking to buy their first home together but became frustrated with the housing market after bidding on half a dozen homes.
“It was like, when we walked through other houses, we always had to give up something that was important to us,” like a third bedroom or an attached garage, said Amy, a 26-year-old recruiter for US Company.
But McHugh’s homes had everything the couple wanted, and the home they bought was within their budget.
After adding upgrades like a fireplace, basement exit window, and various roof gables, the Van Hammonds paid $ 237,000 for their house. The base price was $ 215,000 before the upgrades.
McHugh has since had to increase the price of his homes, mainly due to rising lumber costs, he said.
“It’s really unique how we were able to choose our products before they were even built,” said Erik, 26, who works as an environmental health and safety manager at Amcor in Oshkosh. . “It was affordable, but we could still make it our own.”
The Van Hammonds love that everything in the house is new and that they have the flexibility to customize aspects such as flooring, cabinets, countertops and siding without being overwhelmed by the options, they said.
“It was our first home for both of us,” Amy said. “It was really cool for our first home to be able to have a say in what it is, but not to be inundated with endless options.”
McHugh’s homes aren’t just for honeymooners looking for their first home. Singles, families with children, and retired couples all live in the Van Hammonds neighborhood. In fact, Erik’s cousin, a single man, bought a house from McHugh next door, and Amy’s brother, sister-in-law and their three children bought a house two doors down.
“There really is room for each of these stages in life,” Amy said.
The couple don’t see this home as their forever home, but they can see each other staying for the next seven to 10 years. There is plenty of room for them to start a family when the time comes, they said.
A new style of construction for the Fox Valley
McHugh has been building homes in Fox Valley for over a decade. He started out by doing renovations, additions and custom homes. But four years ago, he began to focus almost exclusively on production houses.
This type of building is common in many states, and McHugh learned about it in Florida, he said. He saw a need for more affordable housing in Fox Valley and knew that would be one way to do it.
Unlike most new home construction, McHugh’s business finances the construction loan. Buyers put down a down payment of $ 5,000 or $ 7,500 and then buy the house after it’s built.
He is currently building homes in Kaukauna, his smallest and cheapest homes at 1,350 square feet for $ 264,900.
“There is significant demand for our product,” McHugh said.
Contact Natalie Brophy at 715-216-5452 or [email protected]. Follow her on Twitter @brophy_natalie. This story is part of the NEW News Lab, a journalistic collaboration covering northeastern Wisconsin.