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UW-Milwaukee - Center for Economic Development

Policy Research Report Abstract

Residential Development Activity on Urban Brownfields in Milwaukee and Chicago: An Examination of Redevelopment Trends, Developer Perceptions, and Future Prospects, September 2006, by Christopher De Sousa

Executive Summary

Over the last two decades, policy makers, planners and urban researchers have been paying significantly more attention to methods designed to foster sustainable development and "smart growth" in America's cities. One initiative that has gained widespread political support, during this time frame, is the redevelopment of brownfield sites, which are often located in the core sections of urban areas and, as such, are prime candidates for urban revitalization efforts. While a significant amount of consideration has gone into policies and programs to encourage redevelopment that creates jobs and new taxable activities, little has been done to take full advantage of the potential socio-economic and environmental opportunities that residential redevelopment on these sites can bring about. And, surprisingly, little research has been conducted to understand the nature and scale of such redevelopment and examine measures for facilitating it.

The present study addresses four questions related to residential brownfields redevelopment:

  1. What kinds of residential brownfield redevelopment activities have been implemented in Milwaukee and Chicago in terms of scale, character, value and other key market variables;
  2. Is brownfield redevelopment perceived as being less cost-effective and more risky than greenfield redevelopment for market rate and affordable housing?
  3. Is government intervention important in this domain and, if so, to what extent and in what ways?
  4. What implications does the project have for mapping out a strategy for future redevelopment issues in the cities of Milwaukee and Chicago specifically, and what broader implications does it have for redevelopment generally?

To address the first question, data on the location and characteristics of residential brownfield projects in the cities of Milwaukee and Chicago was gathered from local and state government sources and databases, as well as from the developers responsible for them. Analysis of the data reveals that residential development on brownfields has been rather extensive in both cities.

In Milwaukee, thirty-two projects were completed or were in the latter stages of planning from 1992 to 2004. Together these projects will produce 2,648 residential units on 91.5 acres of reclaimed land and are valued at just under $500 million dollars. The reclaimed brownfield sites were previously utilized for a range of activities, and a third had lain vacant. The vast majority of units in Milwaukee are new construction (81%), multi-story (83%), market-rate properties (87%) that are for both sale (52%) and rent (48%). Government assistance amounting to $5.19 million dollars for brownfields related costs (i.e., for site assessment, remediation, demolition, and related site preparation costs) was provided to 21 of the 32 residential projects (valued at $329 million) from city (45%), state (47%), county (7.7%) and other sources. Projects that received public assistance typically involved more extensive cleanup.

In Chicago, 52 projects were completed from 1997 and 2004 on 133 acres of brownfield land and will generate 7,362 residential units (unit value based on 51 projects) valued at $2.17 billion (value based on 49 projects). Almost half (44%) of the brownfields had previously been industrial properties, although many had contained other uses, including residential. Most residential units are newly constructed (93%), multi-story (83%), market-rate properties (64%), for both sale (47%) and rent (53%). Almost 36% of all units (2,653) were affordable. Government assistance of $164 million was provided to 18 projects, primarily in the form of TIFs ($104 million), to support multiple aspects of development (e.g., infrastructure, construction, cleanup and assessment, soft costs, etc.), not just brownfields related costs. Those 18 projects are valued at $991 million. As part of their remedial management programs, 32 of the 52 projects have institutional controls in place restricting the extraction of groundwater and slightly over half of them (27) utilize engineered barriers.

To address the second and third questions, data was gathered via personal interviews with twenty-seven residential developers in the two cities (12 in Milwaukee and 15 in Chicago). Interviewees were asked questions related to: (1) the characteristics of the organizations they represent; (2) their attitudes towards the costs, risks, and benefits associated with residential brownfields redevelopment; and (3) the effectiveness of different policies and programs for getting residential projects developed.

In Milwaukee, most developers of brownfields were mature developers that focused primarily on brownfield properties and multi-story projects in the urban market. Factors attracting them to brownfields related primarily to location, but several also pointed out attributes associated with brownfield land (i.e., the low price of land, the availability of an area-wide development plan, subsidy provisions). In terms of barriers to residential redevelopment, the most common response was the cost (or amount) of cleanup required, with two or more respondents also mentioning liability risks, longer project duration, and "unknown" or "surprise" costs. Most of the public sector interventions perceived as necessary for increasing residential development on brownfields in Milwaukee related directly to improving the bottom-line of these projects, whether through some form of direct funding to help cover costs, relaxing regulatory requirements to minimize cleanup and/or time-related costs, or reducing land acquisition costs.

In Chicago, developers involved in brownfields were from established companies, but many were typically involved in slightly more projects on greenfields than on brownfields. Most of the developers interviewed specialized in residential construction and multi-story buildings (80%), although many stated that they also build townhouses/row houses, single-family dwellings, and duplex/tow-flat homes. The most common response in terms of what attracted them to brownfields was the property's proximity to public transit and the strength of the area's property market. Three or more interviewees also mentioned proximity to roadways and highways, good neighborhoods, and gentrifying/"yuppifying" neighborhoods. As in Milwaukee, the main barrier to redevelopment was identified as being the cost (or amount) of cleanup. Many interviewees also emphasized regulatory hurdles that added to project duration, as well as barriers related to unknown costs, the difficulty in obtaining financing, weak markets, and a lack of public funding. As for measures for increasing residential development on brownfields, over half pointed out the need to streamline regulatory procedures at both the state and local level, while most other suggestions related to helping them deal with relevant brownfields costs.

The present study has revealed that despite limited attention devoted to the issue, residential redevelopment on brownfields has been rather extensive over the past decade and will likely continue to increase as more developers enter the urban market and become more comfortable managing the costs and risks. While the patterns of redevelopment activity differ slightly in both cities, it would seem that Milwaukee is following a similar path to that of Chicago, but is at an earlier stage along that path. Thus far, brownfields redevelopment in Milwaukee consists largely of mid- to high-end, high-density, market rate housing built by for-profit developers clustered in neighborhoods near the downtown core, while lower density and affordable units are constructed in other parts of the city mainly by non-profits or the municipal government with the hope of sparking interest in renewal. In Chicago, market rate and affordable projects are scattered throughout the city, although proximity to the downtown core continues to attract much of the private development interest.

The study has also revealed that developers are utilizing brownfields of many different types, sizes and contamination levels, which highlights the potential of residential redevelopment from a brownfields and an urban infill perspective. While private dollars seem to be going mainly to projects that involve minimal contamination and maximum location-oriented amenities, public dollars and support still play a key role in both attracting and situating new development in both cities.

While developing on brownfields is indeed perceived as slightly more costly and risky than greenfields, views regarding costs and risk are strongly tied to the experience of developers in managing them. The more experienced developers consider brownfields management as just another aspect of development, while those with less tend to react more cautiously, but are willing to "do it again." Projects, therefore, are occurring at an increasing rate driven by a small group of "veteran" urban developers, many of whom now concentrate on larger-scale mega-projects, and a cadre of new developers trying out the brownfields market on smaller properties. In both cities, the vast majority of developers feel that greater financial assistance is the key to increasing residential redevelopment. However, many are still willing to go about profitable projects on their own, particularly if it helps avoid bureaucratic entanglement and delays.

Government intervention is important for residential brownfields redevelopment on several counts. In areas with extensive cleanup problems, public funding is very important for managing costs. There are, in fact, many different tools that have been applied successfully to facilitate redevelopment. In areas with fewer cleanup challenges, the efficiency of government intervention is perceived as essential for managing time-related costs and attenuating developer frustration. Government intervention is also important for shaping the scale, character, and location of residential redevelopment. The needs of both government and developers can be satisfied as far as the market allows it, even to the point of mixing affordable with market rate housing. It is important at this stage for governments to take a closer look at the potential of residential redevelopment to help manage the brownfields problem and to harness its potential in a more strategic way. Cities must take a more comprehensive look at their brownfields inventories, develop portfolios of city and privately owned brownfields, and then devise site-specific or area-wide strategies for renewal based on public and private interests. The market for residential redevelopment is strengthening in many cities across the US, and those with a better environment for developers to work in, in terms of procedures and incentives, will be best able to "ride" that market. Clearly, residential reuse is an important piece of the brownfields puzzle that should no longer take a back seat to other uses. Results from the analysis of redevelopment data, the surveys, and the case studies outlined in the appendix of the present study, have helped to answer the fourth question related to mapping out a strategy for future brownfields redevelopment issues in the cities of Milwaukee and Chicago specifically and in other cities more generally. Key recommendations are outlined below and organized on by level of government.

Housing and Urban Development:

  • HUD should permit the use of risk-based methods for residential brownfields redevelopment, including the use of engineering and institutional controls, particularly given that the market and consumers have seemingly accepted them.
  • HUD should focus more directly on promoting residential development on brownfields for both affordable and market rate housing given the location of many of these sites in communities in need of affordable housing, the potential of residential development generally, and to achieve the socio-economic and environmental benefits associated with redeveloping these sites.

Environmental Protection Agency:

  • The EPA should work closely with state governments to develop and implement policies for regulating residential brownfields redevelopment in order to promote certainty and consistency for developers.
  • The EPA should develop funding programs that promote residential brownfields redevelopment, particularly given the public return on investment that these projects can offer and the higher remediation standards that they are typically required to meet.

State Governments:

  • State governments in Illinois and Wisconsin, as well as in other parts of the country, should provide more funding opportunities for residential brownfields redevelopment, particularly given that such projects are relatively under funded but generate significant benefits.
  • State governments in Illinois and Wisconsin, as well as in other parts of the country, must examine ways in which to speed up the review process in their voluntary cleanup programs.
  • State voluntary cleanup programs must retain better records of the remediation activities carried out at brownfields redevelopment projects and make better use of geographic information systems to map the location of engineered barriers and other controls in order to ensure long-term management.

Local Government:

  • Local governments must implement a "one-stop-shop" approach to both facilitate and regulate brownfields redevelopment in their communities, preferably within a department that can link economic, environmental, and community-based aspects of redevelopment.
  • Local governments must come up with both area-wide and site-specific strategies for redevelopment, preferably in consultation with the development community, to maximize the potential of smaller infill development and large-scale projects throughout the city; this should be tied to a shift from cataloguing sites in an inventory to devising a portfolio of properties containing relevant information for developers.
  • Local government must devise strategies for both market rate and affordable housing in conjunction with private developers and non-profits, and work toward generating a broader range of housing types and values.
  • Local governments must improve how they track their involvement in brownfields redevelopment so as to better understand redevelopment outcomes related to both housing and economic variables, but also sustainability and equitability oriented ones.

The complete report (1.9mb) is available in Adobe's Acrobat format. Acrobat Reader is required to view the file. Use Adobe's web site to download a free copy of Acrobat Reader.

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