Working for a living: Hunting for home

Iowa is known for its low cost of living, but for workers in the Corridor, affordable housing remains hard to find.


By Katharine Carlon

Ed. note – This is the second part of the CBJ’s new series on wages, housing and the workforce. Read the first installment at

Katja Liimatta doesn’t fit most people’s idea of what it means to be cost-burdened. A lecturer in Italian at the University of Iowa, she lived a fairly typical middle class life until two years ago. That’s when the financial fall-out from a divorce left her struggling to support herself and her daughter on a single income – and making the $1,000-a-month mortgage payments on her west side Iowa City home was the biggest drag of all.

“I realized my child support was going to end in three years and I only get [paid] just a little over $2,000 a month,” Ms. Liimatta said. “I thought, how am I supposed to pay for that mortgage with the bills on top of it? Say $1,500 [in all] and just be left with $600-$700 a month to live on?”

After depleting much of her reserves, Ms. Liimatta began looking at options. Too strapped to afford rent in Iowa City – which would have exceeded her house payments for anything but the direst of properties – yet not strapped enough to qualify for assistance, she decided to sell her home and use the proceeds for a down payment on a modest home or condo. She hoped to get her monthly housing payments down to a manageable $600-$700 a month, and when her home sold quickly, she set about searching for a home priced under $120,000, the maximum amount her lender said she could afford to pay.

The ensuing months were a sobering wake up call about the availability of affordable housing in the Corridor. With the clock ticking on the sale of her house, it was difficult finding listings to view, even when she expanded her search area to Coralville and North Liberty. Of those she could locate, many were in terrible condition. And when the rare promising property did pop up on the multiple listing service, it would often be sold within several hours, before Ms. Liimatta could even see it.

Katja Liimatta, in front of her newly purchased home.

“Anything in my price range, I made an appointment to go and see them and, boom, they were already sold by afternoon. It was crazy,” she recalled. “I would text my realtor and say, ‘I saw this on Zillow. Can we make an appointment?’ and even if I had an appointment for the same afternoon, an hour before, I’d hear, ‘I’m so sorry, it’s already sold.’”

After weeks and weeks of searching – a process that included multiple disappointments, including three offers that went nowhere and a pending sale that fell through when the property failed inspection – Ms. Liimatta eventually found a place: a small condo on the east side of town outside her daughter’s school district. Although it meets her basic needs and allows dogs, Ms. Liimatta said it’s far from her dream home.

“There’s tons of houses over $200,000, there’s tons of choices if you have money,” she said of her experience. “But if you want to be under $150,000, there’s nothing … and if you rent, it’s even worse. The same place that I am buying [with a mortgage of around $700 a month], if I rented it, it would be even more expensive, like $1,000. It’s crazy. I don’t know how people do it.”

Who is “cost-burdened?”
Ms. Liimatta, a professional with several advanced degrees, might not be the image that comes to mind of someone struggling with housing costs. But area affordable housing advocates say there are no stereotypes when it comes to who is “cost-burdened,” or spends more than 30 percent of their income on housing and related expenses, like utilities.

Sixty percent of Iowa City renters, 50 percent of Coralville renters and more than one-third of North Liberty renters are housing “cost-burdened,” according to a recent Federal Reserve Bank of Chicago study. In the northern half of the Corridor, the percentage of housing-cost burdened residents ranges from a low of 27 percent in Benton and Cedar counties to 38 percent in Linn County, where one in five families spend more than half their monthly incomes to shelter themselves, according to statistics compiled in the United Way of East Central Iowa’s 2017 Housing Stability report.

Sara Barron, executive director of the Johnson County Affordable Housing Coalition, said there is no “profile” of who is cost-burdened. Of the 10,000-plus Iowa City residents who fall into that category, for example, U.S. Housing and Urban Development figures from 2011-2014 show that while a large majority are renters, about 22 percent are homeowners. They are elderly, large and small families, and individuals, some receiving assistance and some not.

In short, Ms. Barron said, “It’s not easy to divide them into groups like those who qualify for assistance and those who don’t. A lot of people in the community work and don’t earn enough wages. We see a lot of people working 40-50 hours a week and not able to afford a modest two-bedroom apartment in Johnson County. Some people don’t work and are using SSI [Supplemental Security Income], and another group is cobbling things together through a mixture of work and assistance. Others have a decent-paying job, but they’re only scraping by because they’re the only adult working in the household.”

Statewide, about 31 percent of households struggle with housing costs, according to preliminary findings from the United Way’s ALICE (Asset Limited, Income Constrained, Employed) Iowa study. It’s a struggle that’s not likely to end soon, according to Deann Cook, executive director of United Ways of Iowa, with low-wage jobs paying less than $20 an hour representing nearly 70 percent of all jobs in Iowa. Those types of jobs are expected to grow far faster than higher-wage jobs over the next decade, she said, widening the affordability gap as the cost of living increases.

“When ALICE households cannot make ends meet, they are forced to make difficult choices such as forgoing health care, accredited child care, healthy food or car insurance,” Ms. Cook said in a letter accompanying the report. “These ‘savings’ threaten their health, safety and future – and they reduce productivity and raise insurance premiums and taxes for everyone.”

IC rental costs lead state
For years, Johnson County, particularly the Iowa City area, has led the state when it comes to onerous housing expenses. HUD data shows a typical three-bedroom unit suitable for a family of four rents for about $1,391 a month in Johnson County versus $1,095 in somewhat more affordable Linn County and $840 in Benton County, the cheapest location in the Corridor.

The University of Iowa’s massive student population is largely responsible for pushing rents higher and vacancy rates into the basement, according to multiple studies, including a Brailsford & Dunlavey analysis of the Iowa City/Coralville/UI housing market released in January. That study found UI students occupy more than half of the area’s general rental market, driving overall vacancy rates down to around 2 percent or so – far below the 5-6 percent that characterizes a stable, balanced rental market.

But relief for renters – and an end to the good times for landlords – may be on the way, according to Casey Cook, managing partner of Cook Appraisals, which periodically surveys the lay of the rental land in the Iowa City area. Mr. Cook says vacancy rates within what he calls “the Pentacrest mile,” close to downtown and campus, crept up to 4.7 percent in his last survey of the area, although they remain around 2 percent or less elsewhere.

Vacancy rates in the Pentacrest mile could climb even higher, perhaps up to the 9-10 percent range, he said, thanks to the addition of more than 2,200 new privately-developed rental units this year in Iowa City, North Liberty and Coralville, including massive projects like the 322-unit, 15-story Rise at Riverfront Crossings student apartments, set for completion this summer. Those units come atop more than 1,500 privately developed units added in 2017, and two new UI dorms (Catlett and Peterson), which have added 1,549 “new beds” to the housing mix over the past two years.

A chart showing the average mortgage and rent prices in Linn and Johnson counties (click to enlarge).

“That’s something we haven’t seen in a long time in this area,” Mr. Cook said of higher vacancy rates, which he expects to disproportionately affect older properties downtown. “It’s kind of like a buzzsaw with so many teeth whirring. There are probably a dozen projects underway and the pain [for landlords and property leasing companies] won’t be clear until people start renting things in the fall of ’18.”

Monica Hayes, president-elect of the Iowa City Area Association of Realtors, said the expectation is the situation will push rents down and relieve some of the pressure on non-student renters – and even would-be homebuyers – seeking affordable housing.

“The main client those landlords are looking for are the student-based population, so as they flock to those new units, our current vacancy rate of about 1 percent or less is going to be increasing,” she said. “I also think some of those owners will be selling, which will open those properties up to [buyers of] affordable housing.”

Mr. Cook said the influx of new housing, mostly aimed at young professionals, grad students and undergraduates in the upper third income-wise, could well help promote lower rents as well as encourage landlords to spruce up aging units and offer concessions to existing tenants.

“Iowa City landlords have kind of been spoiled since about 1985, I would say,” he said. “It’s been easy to take for granted everything would be hunky-dory, so this will be a challenge to them.”

Even so, Mr. Cook sounded a note of caution about expecting greater supply to lead to lower rents.

“People washing cars, doing dishes, preparing food – doing everything to make this city run would like to be closer in,” he said. “But it’s really hard, once you ratchet rents up to the current level, it’s not quite as downwardly mobile.”

If the Johnson County rental picture is improving, the home buying one is not. Prices are rising both there and across the Corridor. According to the Iowa Association of Realtors, the average Johnson County home sold for $228,053 in 2017, up almost 6 percent over the previous year. In Cedar Rapids, the average price of a home rose nearly 5 percent from $182,794 in 2016 to $191,489 in 2017.

Ms. Hayes said it was becoming increasingly difficult for new buyers to climb on the first rung of the property ladder and for others, like Ms. Liimatta, to find a foothold on the way down.

“Anything under $150,000, very little inventory comes around and because of lack of inventory, prices keep rising,” she said. “Oftentimes, there are competitive offers for those homes, and that raises comparable sales, which raises prices. There are definitely far more buyers than listings for really anything under $250,000.”

The only real solution to the inventory problem is to build more houses, “but we can hardly build a small house for under $300,000,” Ms. Hayes said, citing the rising cost of materials and labor. State figures indicate 41 percent of Iowa’s skilled labor and manufacturing workforce is over the age of 55 with just 16 percent aged 18-24.

Pressure growing in CR
While cost-of-living expenses, including housing, have traditionally been less burdensome to those in the northern part of the Corridor, a draft copy of the 2018 Maxfield Research and Consulting housing analysis for the Cedar Rapids market also shows rental costs on the rise and vacancies on the decline.

The study, commissioned by the city to guide housing development decisions, shows rents rose a healthy 7.9 percent for the average two-bedroom apartment in 2017 while the vacancy rate tightened slightly to 2.3 percent overall, and slipped to 1.8 percent for lower-income units, many of which have waiting lists.

“Compared to Iowa City, absolutely we’re more affordable, but it’s all relative,” said Jennifer Pratt, the city’s community development director. “We know we need to keep working to have enough supply and honestly, affordable housing has been our focus since the flood of 2008. That was our first priority in our disaster recovery. We knew we had to help households rebuild, but workforce and affordable housing is an absolutely critical piece for all of our employers as well.”

New Cedar Rapids Mayor Brad Hart, in his first State of the City speech two weeks ago, highlighted those efforts, pointing to the growth of affordable housing options downtown, “which were almost nonexistent five or more years ago.” In partnership with the Iowa Economic Development Authority, the city replaced or added 655 affordable units in the flood zone, he said, as well facilitating the construction and sale of 864 single-family homes to income-qualified families through the ROOTS – Rebuilding Ownership Opportunities Together – program.

“The program provided opportunities for families who would otherwise not had the opportunity to purchase a home and it also helped revitalize our core neighborhoods,” Mr. Hart said, adding that affordable housing “continues to be on ongoing need.”

As part of that effort, Mr. Hart vowed to reinstate the city’s Affordable Housing Commission, as well as launch a Neighborhood Finance Corporation, based on a successful model in Des Moines, to revitalize aging neighborhoods through “unique lending opportunities” for home purchase and repairs.

“We see this as an opportunity to continue reinvesting in our established core neighborhoods,” Ms. Pratt said of the public-private lending pool, which the city plans to fund with $1 million annually over the next five years.

Solutions sought
Affordable housing advocates say initiatives like those in Cedar Rapids and the Iowa City Council’s 15-point Affordable Housing Action Plan, which includes requirements that developers include affordable units in projects in the Riverfront Crossings district, are part of the solution. So, too, are funding mechanisms like low-income housing and workforce tax credits.

“I would say the magic bullet is two-pronged: one is funding and the other is policy,” said Tracey Achenbach, executive director of the Housing Trust Fund of Johnson County, at a forum on affordable housing last month. It’s an opinion echoed by Maryann Dennis, executive director of the Housing Fellowship.

“The biggest way, in my opinion, to lower the cost of housing is to lower the debt developers have, lower the cost of materials or fix some of the regulations developers have to go through to meet city code,” she said.

G.T. Karr, vice president of the Greater Iowa City Homebuilders Association, said a National Association of Home Builders study of regulations and codes on new construction showed they added up to 14 percent of the cost of projects.

“We certainly need codes and regulations, but when you start looking at housing and what rent is … you’re talking about a national crisis adding $60,000-$80,000 to the overall cost,” he said. “So every time we add a regulation, which I’m not against, there are some unintended consequences and some things that need to be weighed.”

Bob Welsh, who served on Iowa City’s first very first housing commission, said he’s been encouraged in recent years by the attention paid to the affordable housing issue and the level of conversation it has generated in the region.

“I’m 91 and have lived in this community since ’65, and at the present time … there is more conversation about housing than in my lifetime in this community,” he said. “Having said that, let me tell you what my goal is – and I really don’t expect to live long enough to see this happen, but number one, I hope that we’ll sometime have housing where the people who work here can afford to live here.”