Business

Iowa City has higher share of renters paying 30 percent or more of income to housing than other metros

Developers build close to University of Iowa, where they can charge more

Madonna Ballinger (left) hugs Megan Irwin during a news conference at the Rose Oaks apartment complex in Iowa City on Tu
Madonna Ballinger (left) hugs Megan Irwin during a news conference at the Rose Oaks apartment complex in Iowa City on Tuesday, April 19, 2016. Residents have formed the Rose Oaks Tenants Association and are asking for more time to find new housing as well as money to help cover application fees and deposits. Both women recently moved into the complex and are now facing unexpected application fees, deposits and other moving fees. (Liz Martin/The Gazette)
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IOWA CITY — A greater share of Iowa City renters pay 30 percent or more of their income to rent than any other major city in Iowa — including other college towns.

Luis Saez is one of those renters. The Iowa City father said he pays 40 percent of his monthly income as a factory line worker to rent a two-bedroom apartment on Iowa City’s southeast side.

Soon an even larger chunk of Saez’s paycheck will be going to rent because he and hundreds of other tenants are being asked to vacate their apartment complex so it can be renovated. With a less than 1 percent apartment vacancy in much of Iowa City, displaced renters are competing for scarce units.

“If I move from here, I will pay between $700 and $800,” Saez said. “The pressure continues to be very high.”

Sixty-one percent of Iowa City renters are paying almost a third or more of their income for housing, according to a Gazette analysis of U.S. Census Bureau data.

This is compared to 42 percent in Cedar Rapids, 49 percent in Des Moines and 51 percent in Waterloo. Even among Iowa’s other college cities — where students can skew the data — Iowa City still is the highest. Fifty-five percent of Cedar Falls renters pay 30 percent or more of their income for housing and 59 percent of Ames renters.

Renters who pay no cash rent or who have no income are not factored into the analysis because the data doesn’t explain how those costs are being covered, such as if renters’ parents are paying rent or if costs are covered by Medicaid. These units are included in the overall number of renter-occupied housing units for each city.

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Spending no more than 30 percent of gross monthly income on housing, including utilities, is the U.S. Department of Housing and Urban Development’s definition of affordable housing. This is becoming impossible in some U.S. cities — such as San Francisco — where rents far outpace some wages.

Determining how many residents pay at least 30 percent of their incomes on rent shows how many families may be challenged to cover other expenses, such as food, clothing and health care.

Short supply leads to high rent

The price of rental property is closely linked to availability — supply and demand.

Iowa City’s 2.38 percent apartment vacancy rate for 2015, as calculated by Cook Appraisal, was far lower than the 5 percent national rate and 6 percent Cedar Rapids apartment vacancy rate reported by the Landlords of Linn County. But that doesn’t tell the whole story.

The vacancy rate of apartments within a mile radius of the University of Iowa’s downtown Pentacrest — the most desirable area for University of Iowa students — was 4.13 percent. This area has seen a building boom in recent years, with student-focused apartment complexes rising on all sides of the UI campus.

“Everyone out there is looking at the student market because they (students) pay a little more,” said Tim Ruth, co-owner of McCreedy-Ruth Construction and past president of the Greater Iowa City Home Builders Association.

But the rest of Iowa City, called Zone 2, has an apartment vacancy of just .6 percent, Cook Appraisal reported. If you want a one-bedroom apartment in Zone 2, forget about it — the vacancy rate is 0.

Coralville and North Liberty are just as bad, at .31 percent apartment vacancy and .66 percent, respectively.

This housing shortage has driven up Iowa City rents. The average rent outside the Pentacrest Mile increased by nearly 16 percent from 2013 to 2015, double the increase for apartments closer to campus.

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“As you can see from Cook Appraisal, there’s not a whole lot of empty apartments,” said Karyl Bohnsack, executive officer for the Iowa City homebuilders group. “If you don’t have to charge less, then why?”

What is affordable?

Iowa City’s average rents, as outlined by Cook Appraisal, are over fair market value.

For example, HUD said the fair market value for a two-bedroom in Iowa City in 2015 was $802, but the real cost was $822, Cook reported. Apartments within a mile of the Pentacrest drive up the citywide average — a two-bedroom close to campus cost an average $889 a month last year, while a two-bedroom in Zone 2 was $755.

Saez pays $659 a month for the two-bedroom apartment at Rose Oaks he shares with his 17-year-old son. Rent and utilities eat up more than 40 percent of his $1,600 monthly income, but it’s cheaper than other places.

Saez moved to Iowa City in January 2008 from Puerto Rico after a temp agency found him a job as a line worker, producing shampoo, conditioner and mouth wash at Procter & Gamble. Eight years later, Saez still is a temp, although he makes $12.20 an hour as a line leader.

Money struggles caused tension in his marriage.

“My family separation came because of this,” said Saez, speaking through an interpreter.

Saez has until Aug. 1 to move out of Rose Oaks, whose owners plan to demolish buildings and renovate others at the 21-building complex south of Highway 6.

Rose Oaks residents are paying below fair market value for their apartments — which is rare in Iowa City — but the complex is in dire need of upgrades, said Tracey Achenbach, executive director of the Housing Trust Fund of Johnson County.

“We can’t have affordable housing if it’s not safe and decent,” she said. “I don’t want to see people live in those conditions.”

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College Fund Properties II LLC., a Minnesota company that purchased Rose Oaks in January, said it can’t maintain the rent prices after renovations, but officials are talking with city officials about developing another property with lower-cost units, said Reggie Reed, director of operations for the company.

“It’s clear to us as well there’s a shortage of affordable housing,” he said.

Hurdles to affordable housing

Bohnsack of the homebuilders group said more developers would build apartments in Iowa City if there were fewer regulations, which add to the cost of building.

“We have more laws than most other towns,” she said.

John Yapp, development services coordinator for the city, said Iowa City requires builders include green space with their projects and minimum lot sizes may be larger than other places. For some high-density developments, such as Riverfront Crossings, Iowa City has higher standards for building materials and design.

“The regulations we have are there for good reason,” Yapp said.

There are new affordable housing projects coming in Iowa City. A $7.4 million, 40-unit complex focused on seniors will be built on Williams Street. This project, which got federal and city funding, will include 36 low-income apartments.

Johnson County has set aside$600,000 for affordable housing. Some of that money likely will go to the Housing Trust Fund, which provides low-interest loans to builders worried about losing money on affordable housing, Achenbach said.

Iowa City is planning a June 21 work session to discuss an affordable housing strategy for coming years, Interim City Manager Geoff Fruin said last week.

Percent of Iowa renters paying 30 percent or more of income on rent

The rule of thumb is people should pay less than 30 percent of monthly income on rent to be able to afford other necessities, but many Iowans are paying more. Iowa City has the largest share of renters surpassing the 30 percent rule.

City | Percent of renters

Ames | 59 percent

Cedar Falls | 55 percent

Cedar Rapids | 42 percent

Council Bluffs | 45 percent

Davenport | 45 percent

Des Moines | 49 percent

Iowa City | 61 percent

Marion | 41 percent

Sioux City | 47 percent

Waterloo | 51 percent

West Des Moines | 35 percent

Source: Gazette analysis of U.S. Census Bureau data

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