Iowa City sees a student housing boom, even as enrollment cliff looms

IOWA CITY — Birds live in a nest and bees live in a hive. But by next fall, college students will be living in the Nest, the Hive and several other new student-focused apartment complexes that offer amenity-rich digs at premium prices.

The Iowa City rental market will have more than 2,500 more beds by 2025 than it did before five new complexes started coming online in 2018. The apartments are being built at a time when Iowa’s higher education system is expecting an enrollment cliff based on fewer college-age people.

Most of these new apartments are within a mile of downtown — an area that had the highest apartment vacancy rate in 2021.

Despite these factors, investors apparently remain optimistic as they put tens of millions of dollars into high-rise complexes with pools, fitness centers, coffee bars, gaming lounges and rooftop patios.

“They wouldn’t invest millions of dollars if they didn’t think there was a market,” said Tracy Hightshoe, Iowa City’s neighborhood and development services director.

University scales back dorm rooms

The University of Iowa has 30,042 students this fall, which is 27 students more than last fall. But the freshman class shrunk by 2.2 percent, from 5,178 last fall to 5,064 at this year’s 10-day count.

Iowa’s community college, private and public university enrollment dropped 13 percent from 2019 to 2023, according to data last spring from the National Student Clearinghouse Research Center. And because of lower birthrates between 2008 and 2010, the college-age population will start shrinking in 2025 — which college officials are calling an enrollment cliff.

The UI is selling its Mayflower Residence Hall, which has a capacity of 946, and plans to use some of the proceeds to build a smaller dorm for returning students. Mayflower is 93 percent full in its last year as university-owned housing.

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The UI is housing 6,415 students in the residence halls this year, with a commitment to provide housing to all freshman who want to live on campus. Other rooms are made available to non-freshmen.

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“We have space in our current inventory, even without Mayflower Hall, to house first-year students,” Vice President for Student Life Sarah Hansen said. “If, for instance, we were to have a very large first-year class, we have the ability to limit the returners.”

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New apartments offer more services, perks

Hansen said she doesn’t think about whether the UI is competing with private student-focused apartment complexes. The estimated cost of housing and food on the UI campus is about $12,000 for an August through May contract. That varies, depending on the type of room and size of meal plan.

The new student-focused apartment complexes in Iowa City and Coralville also have varying rental rates, but can cost as much as $1,700 a month for a penthouse studio to $1,000 a month for a room in a three-bedroom apartment. Food costs are additional. Many of these complexes offer furnished apartments, much like university housing.

The Hive, a 250-unit, 499-bed complex opening next fall in Iowa City, offers 12 floor plans with one-bedroom, two-bedroom and three-bedroom units. If you don’t have a roommate, the Hive’s “matching services is sure to find you the perfect roomie,” the website said.

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“While you’re focusing on school, our amenities are focused on you,” the site says, offering fully furnished apartments with washer/dryer, stainless steel appliances and a 50-inch Smart TV. Communal perks include a private study room on every floor, coffee bar, fitness center, Grill Zone, outdoor TVS, package concierge and a Jacuzzi.

Riverfront West, scheduled to open in 2025, will be a six-story complex built on four acres with 291 apartments containing 648 beds. The complex on Riverside Drive, across from Dairy Queen, also will include more than 500 parking spaces.

Many of the perks and services offered at the new apartment complexes are similar to those the UI provides all students — whether they live in the dorms or in an off-campus apartment.

“There’s nothing about living off campus that limits a student’s access to all the amenities and supports we provide on campus, such as using the rec center, Student Health, or the Iowa Memorial Union, as long as they are a student enrolled at the university,” Hansen said.

Is there a need for new apartments?

The 2021 Multi-Family Housing Survey, the most recent report by Iowa City’s Cook Appraisal, shows Iowa City had an apartment vacancy rate of between 6 percent and 7 percent. The 12.85 percent vacancy rate in what Cook calls the Pentacrest Mile is twice as high as the vacancy rate of all Iowa City zones.

“Will 2,000 more beds cause a vacancy?” said Jeff Edberg, an Iowa City real estate agent with Lepic-Kroeger. “I don’t think so. I don’t know how much room there is for more units like that, but I don’t think what we have on the table and on the pike is going to create a vacancy.”

When new apartment complexes open, older apartments continue to provide housing — just at a lower price point, said Edberg, who is helping the UI sell Mayflower.

A shortage of affordable housing has long been a concern in Iowa City. Some of the new student-focused complexes have set aside units for affordable housing in order to get tax increment financing from Iowa City. Others chose to pay a fee in lieu of providing affordable housing.

Iowa City now has $7.7 million from those fees that city officials now can invest int affordable housing projects, like eight duplexes the city bought in the South District. The city renovates the units and sells them to buyers who earn less than 80 percent of the area’s median income.

Comments: (319) 339-3157; erin.jordan@thegazette.com