IOWA CITY — Back in the early 1990s, Ted Knights stayed in the Gaslight Village, an artisan community on Brown Street in historic northside Iowa City.
Three years ago, the Knights bought a house near there for a family of four — a remarkable accomplishment given the shortage of affordable housing in the area.
“If you’d told me then I would be living in a house a block away from it, I would’ve been like ‘yeah, right,’” said Knights, who got some help from a program that seeks to make homes in the out-of-kilter Iowa City market affordable.
That market is out of balance because of the mix of people competing for housing — University of Iowa students looking to rent and residents looking to buy, housing and urban planning experts say in an IowaWatch report.
Students sharing rent with roommates can afford to live there, making rental property valuable and squeezing out potential homebuyers and single-family renters.
Four students sharing an apartment, for example, can have more buying power than one family entering the housing market.
“So these four students can outbid a young couple for a rental house or apartment in the locations close to downtown,” said Jerry Anthony, an associate professor in the UI School of Urban and Regional Development.
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The median sales price for all homes in the Iowa City area market was $202,950 in November, the Iowa City Area Association of Realtors reported. That’s the highest in the state, ahead of $189,000 in the Des Moines area. The state median was $153,250, the state Realtors association reported.
Johnson County also has the highest rate in the state of people who are housing-cost burdened, Anthony said. Households that pay more than 30 percent of their gross income on housing costs, including utility expenses, are considered to be housing-cost burdened.
Using 2010 census data, Anthony said one of three Johnson County households, or 34.7 percent of both renters and homeowners, were considered housing cost burdened. The rest of the state’s rate is just 25.5 percent.
Story County, where Iowa State University is located, has Iowa’s second highest housing cost burden rate at 32.9 percent. The median sale prices of homes in the Central Iowa area that includes Ames was $170,000 in November, the Central Iowa Board of Realtors reported, although that median includes rural nearby counties with less expensive properties.
The amount of available affordable housing is a larger concern than a lack of income or jobs, Anthony said. The problem especially is apparent in young families or households with a stay-at-home parent or young professionals such as teachers.
Previously in horticulture, Knights recently switched to carpentry.
His wife, Jen Knights, who works as a nonprofit fundraiser for the Iowa Brain Injury Alliance, said as a student at the UI she knew she wanted to live in Iowa City.
After moving to Chicago briefly, the couple returned to Iowa City and bought a house on the south side of town, where they lived 10 years.
“We kept getting in the car to go downtown and do stuff, like go to the library, go to the Englert, you know,” Jen said, referring to the theater.
The couple looked to move closer to downtown Iowa City, but every house within their price range was barely within their budget, needed too much work and was not right for a family of four.
They purchased their home on N. Gilbert Street three years ago this coming February through a program in Iowa City called the UniverCity Neighborhood Partnership for $218,000.
It’s been a dream come true, Jen said.
The partnership buys houses in neighborhoods where more than half the housing is rental. The program repairs houses and sells them below market value to income qualifying buyers.
The program has sold homes to teachers, UI employees, people moving to Iowa City for the first time or people who’ve rented but are looking to buy, said Lucy Joseph, an enforcement specialist with the city. It especially is popular with young families and first-time homebuyers.
Houses purchased by the UniverCity Neighborhood Partnership include rentals from landlords looking to downsize and homes from families who bought a house so one or more of their children could live there while attending the UI.
The city partners with banks to buy the houses and places a second mortgage on the house for $50,000. That money goes to repairs such as updating kitchens, bathrooms, roofs, flooring, electricity and plumbing.
The city then sells the house, and the program places a deed restriction requiring that the home be owner-occupied for 20 years, said David Powers, a city housing inspector. If the family who originally bought the UniverCity program house lives in it for five years, the city forgives the $50,000 second mortgage for repairs.
A buyer’s income must fall below 40 percent of the median income to qualify to buy a UniverCity home, but the program also will take into consideration factors such as student loan debt or medical expenses, Powers said.
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But Anthony said programs like the UniverCity Neighborhood Partnership are not fixing the housing problem because students previously renting get displaced and find another house to occupy.
Both the university and Iowa City are conducting private studies of student housing needs. Also, a progressive bloc was elected to the City Council in 2016 and began making policy changes to encourage affordable housing development, Anthony said.
Earlier this month, the Iowa City Council adopted an ordinance limiting rental housing permits for single-family homes and duplexes in neighborhood immediately surrounding the UI.
Under the rules, current permit holders are grandfathered in, but new rental permits will be limited to 30 percent of the homes in a given neighborhood.
At the same time, developers have seen an opportunity in and near downtown Iowa City for boutique apartments that students can rent for as much as $979 per person per month. A market exists even with the high rents Anthony said.
Moving top-end paying students into housing like this will make more options available at more affordable prices for buyers, he said.
“But a lot more steps have to be taken, and that momentum has to be carried for a very long time before we see any tangible difference in the reasonableness of the process here,” Anthony said.
This story was produced by the Iowa Center for Public Affairs Journalism-IowaWatch.org, a nonprofit news website that collaborates with Iowa news organizations to produce explanatory and investigative reporting.