IOWA CITY — When Lorraine Bowans, an Iowa City Realtor, was selling her home in the 500 block of South Governor Street two years ago, she had multiple offers for $400,000.
But those offers came from buyers who wanted to turn the property into a rental home. Because of the rental cap set by the city on single-family and duplexes in her neighborhood, however, Bowans couldn’t get a permit to allow her home to become a rental property. The offers dried up and Bowans didn’t sell her home until nearly a year later — for $335,000.
“This is a chunk of my retirement,” Bowans told the Iowa City Council on Wednesday. “You cost me a boatload of money. ... I hope you understand how angry I am. I would like to see you all put $10,000 in a hat and give it to me.”
The council didn’t give Bowans any money, but it did vow to work with landlords, homeowners, property owners and residents after unanimously approving the first consideration of a 10-month moratorium on new rental permits for single-family and duplex properties in neighborhoods close to the University of Iowa while the city decides how to best protect core neighborhoods not designed to support large numbers of rental properties.
“I view this as the first in an extended conversation about the issues that were raised,” said council member John Thomas. “I’m very sympathetic to the comments that were raised. ... What we’ll be seeing over the next period of time is coming together to address the unintended consequences of the current rental cap concept.”
The council held a 90-minute meeting Wednesday to discuss the moratorium, which is in response to proposed state legislation that would ban cities in Iowa from using or adopting rental caps. The city implemented a 30 percent cap of single-family and duplex rental properties in certain neighborhoods in response to 2017 legislation that prevented the city from limiting rental permits based on the number of unrelated people residing in a property.
More than a dozen people — most of them Realtors — spoke during the council meeting about the impact of the rental cap on homeowners. One of those Realtors, Tim Lehman, said he has a client who is unable to sell his owner-occupied rooming house on Van Buren Street because it should be used as a rental and he can’t obtain a permit.
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“He’s going to be financially burdened by this,” Lehman said of his 70-year-old client. “We can’t get it sold.”
Mark Kamps, a Realtor with Coldwell Banker, said the rental cap prevents homeowners from moving but trying to rent their home as an additional source of income.
“I plan to keep my home because it’s paid off as an investment to supplement my income,” Kamps said. “I can’t do that. I can’t keep my home and move into perhaps a condo. That just isn’t fair.”
Speakers said the cap also prevents parents from buying and renting a home for their college-age children or for those in higher education to rent out their homes while away on a fellowship.
City staff have said the moratorium is necessary to consider the next step and prevent a rush of rental permits once the proposed legislation banning rental caps is signed into law.
City Manager Geoff Fruin said the city was “completely blindsided” when the rental ban legislation was introduced this session. He said the city reached out to lawmakers and asked to have a conversation locally about the measure and discuss alternatives. The city proposed limiting the rental cap to historic districts, raising the cap percentages or looking at other exceptions.
Rep. Mary Mascher, D-Iowa City, also proposed amendments to the legislation that included exceptions for economic hardship similar to what Bowans described, for properties contiguous to other rental properties, for people renting to immediate family members and for those who — due to disabilities or age — are unable to function at their property.
“We tried our best to respond to all of the concerns that were voiced to us,” Fruin said. “The feedback was no compromise on rental caps. That leaves us where we are today.”
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While the council was in support of the moratorium, council members Bruce Teague and Mazahir Salih preferred a six-month moratorium, but their proposal was defeated.
The moratorium will require two more votes, which could occur this month.
“This is not a ban,” said council member Rockne Cole. “We do not have the authority to do a ban. All this gives us is time. I’m hoping that during this time we can come together with a shared solution.”
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