Report: Housing cost taking bigger chunk of people’s income

IOWA CITY — The number of Iowans spending high percentages of their income on housing has grown significantly during the last 20 years, according to a June report by the University of Iowa's Public Policy Center.

'The shortage of decent, reasonably priced housing in Iowa has worsened,' said Jerry Anthony, director of the housing and land use policy program at the center and author of the report.

The report, which analyzed U.S. Census data, looked at the percentage of people housing cost-burdened. Households that spend more than 30 percent of their income on homeownership or rental costs are considered cost-burdened, while households paying in excess of 50 percent of their income are considered extremely cost-burdened.

The report found that from 1990 to 2010, the percentage of cost-burdened renters in Iowa rose sharply, while the percentage of all cost-burdened households — both renters and owners — in the state rose from 18.7 percent to 25.5 percent, Anthony said.

Renters are typically more cost-burdened and extremely cost-burdened than homeowners, the report found. In Iowa, the percentage of cost-burdened renters was 33.5 percent in 1990 and 40.3 percent in 2010. This is compared with only 12.4 percent of homeowners in 1990 and 20 percent in 2010.

'Very little new rental housing is available at prices that are affordable for very low-income and low-income families in Iowa,' Anthony said. 'For example, in 2013, there were only 87 units available for every 100 households with incomes lower than 50 percent of the area median.'

Cost-burden levels are comparatively lower in Iowa than those of the nation as a whole, according to the report. In 1990, 26.3 percent of U.S. households were cost-burdened and by 2010 that number was up was up significantly, hitting 35.9 percent and representing more than 41 million households.

Iowa's rural nature may have something to do with the lower percentage of cost-burdened residents, the report found. That's because states with large metropolitan areas tend to have higher rents than rural states.

Additionally, Iowa's gross median rent in 2010 was one of the lowest in the country. Nationally, housing prices have increased more quickly than have incomes, the report found. But in Iowa, housing costs have not increased as rapidly, which is reflected in the lower cost-burden percentages.

Johnson and Linn counties

Linn County has the lowest cost-burden and extreme cost-burden percentages among the most populous counties in 1990 (17.4 percent), 2000 and 2010 (24.8 percent), the report found.

This is likely due to the number of large employers in Cedar Rapids like Rockwell Collins, Quaker Oats and General Mills, that employ entry-level workers and pay decent wages, the report said.

'The high volume of jobs available in Cedar Rapids, coupled with a relative availability of reasonably priced housing (the vacancy rate in Cedar Rapids in 2010 was 7 percent and the median rent was just slightly higher than the state median), may result in lower levels of cost-burden,' according to the report.

The story is different in Johnson County, which consistently had the highest percentages of cost-burdened and extreme cost-burdened households, according to the report — with 27.6 percent in 1990, 29.5 percent in 2000 and 34.7 percent in 2010.

Story County — home to Iowa State University — had the second highest percentages of both cost-burdened and extreme cost-burdened households, the report found.

The report pointed to the influx of students as the cause for rising rental prices, which in turn forces low-income wage earners to pay a higher percentage of their income toward rent.

'Johnson County has historically had a shortage of reasonably priced ownership and rental housing,' Anthony said, pointing to little new supply, competition from students and opposition from neighbors whenever new rental housing away from downtown areas is proposed.

Indeed, Johnson County had the highest percentage of cost-burdened renters in Iowa, with 44.2 percent in 1990, 48.2 percent in 2000, and 55.6 percent in 2010.

'On the ownership side, the primary reason is this — developers/builders are producing new units primarily for upper middle class and high-income people,' he said. 'There is a huge deficit of new ownership housing aimed at young adults in the workforce for a few years and for low-income households that want to own.'

Help available

Tracy Hightshoe, neighborhood services coordinator for the city of Iowa City, said the high number of students in Iowa City can somewhat skew the data, as they are typically low income. She added that when the city does its own housing market analysis, it does not include residents under age 25 — which brings the percentages down a bit.

'We're still very cost-burdened,' she said, adding students compete with families for downtown properties, which keeps costs high.

'We have an odd housing market that's not really typical in Iowa,' she said.

The city has a number of programs to help make housing more affordable, including the UniverCity Neighborhood Partnership, which has purchased and rehabilitated 56 homes since 2011 to turn them into affordable, owner-occupied housing.

About one-third of the homes are sold to those making less than 80 percent of the median income.

The city also receives federal funds and vouchers from the housing authority to assist renters.

'We believe that everyone who works here should be able to live here and find a place they can afford,' she said.

Additionally, Iowa City-based MidWest One Bank started a new grant program earlier in July that provides $1,500 toward down payment and closing costs to low- to moderate-income borrowers who are purchasing their first home.

'We know there is a need out there, especially in Iowa City' for more affordable housing, said Marcia McKeag, compliance officer at the bank, which has 26 branches across Eastern Iowa. The bank received funds from the Federal Home Loan Bank of Des Moines to develop the program.

Under the program, the buyer can borrow up to 97 percent of the appraised home value, up to a $250,000 home. Buyers also must participate in an online homebuyer education program, McKeag said, which includes topics like budgeting for repairs.

'It's a big step to go from renting to owning a home,' she said.