DOES GROWTH PAY FOR GROWTH?

It seems like every time I drive through Madison, there's another apartment building going up.

And I've heard people ask some version of the same question:

What's up with all the new apartments?

The simplest answer is that Madison is growing.

Madison had 269,840 residents in 2020. The City's 2025 Housing Snapshot projects about 290,845 residents in 2025—roughly 21,000 additional people in five years.

And that growth is expected to continue. The City projects Madison will reach approximately 385,000 residents by 2050.

Between 2015 and 2024, Madison added 22,472 homes, increasing the city's housing stock by about 20%. About 76% of those new homes were in buildings containing 25 or more units.

So what we're seeing around Madison makes sense. We're growing, we're adding housing, and much of that housing is coming in the form of larger apartment buildings.

But while trying to understand all of this growth, I learned something:

New construction doesn't just give people somewhere to live. It also plays a role in how Madison pays for city government.

And that's where my question changed.

It went from:

Why are we building so much?

to:

Does growth pay for growth?

HOW GROWTH AFFECTS THE CITY BUDGET

Wisconsin limits how much municipalities can increase their property-tax levy for ongoing operations. One important part of that calculation is net new construction.

In simple terms:

New taxable construction − demolished property = net new construction.

That amount is measured against the value of Madison's existing tax base. The resulting percentage helps determine how much the City's operating property-tax levy can grow.

So new development does more than accommodate population growth.

It expands the tax base and helps create additional revenue capacity for the City.

But as Madison adds people, it also adds demand.

More residents eventually mean greater pressure on Fire and EMS, police, streets, transit, parks, libraries, garbage collection and other City services.

Not every new resident requires a new ambulance, road or fire station. Cities can absorb growth using existing capacity.

Until that capacity runs out.

Then additional staff, equipment, facilities and infrastructure may be needed.

And that's where the financial question becomes important:

Is the revenue capacity created by growth keeping pace with the cost of supporting it?

HERE'S WHERE THE NUMBERS GET INTERESTING

From 2019 through 2023, Madison's net-new-construction rate averaged approximately 2.1%.

Over those same years, inflation averaged approximately 4.0%.

That's not my comparison. It's in the City of Madison's own 2025 budget materials.

The City identifies the gap between levy growth and inflation as a primary cause of Madison's structural deficit.

That doesn't mean growth caused the deficit.

In fact, without new construction, Madison's financial challenge would likely be worse.

But it does mean that even with substantial development, the additional operating levy capacity generated through net new construction hasn't necessarily kept pace with rising costs.

SO WHAT HAPPENS NEXT?

Growth creates housing, businesses, jobs, economic activity and taxable value.

Growth also creates demand on the systems supporting the city.

And those two sides don't necessarily grow at the same rate.

That raises a question I think is worth understanding:

Can a growing city eventually become dependent on continued growth to help pay for the costs created by the growth that came before it?

I don't know if that's happening in Madison.

And I don't think we should assume that it is.

But I think we should know.

Because Madison is expected to keep growing.

The question shouldn't simply be how much we grow.

It should also be:

What does that growth add to Madison's long-term financial capacity—and what does it require from it?

If we're going to build the city of the future, we should know whether we're financially prepared to support the city we're building.

SOURCES & FURTHER READING

City of Madison — 2025 Housing Snapshot
Growth Trends and population data

City of Madison — 2025 Housing Snapshot
New Housing Construction

Wisconsin Department of Revenue
Net New Construction

City of Madison Finance Department
2025 Budget materials and information