The Iowa City Council heard from Eric Fulmer, of the consulting firm who has been responsible for the report for The City of Iowa City, in collaboration with the cities of Coralville, North Liberty, Tiffin and University Heights (collectively referred to as the Iowa City metro area) to examine existing and future need for housing among lower income households.
The purposes of the Affordable Housing Market Analysis:
• Identify demographic and economic trends that affect the demand for housing
• Define the supply and demand characteristics of the housing market as a whole
• Analyze the demand for affordable housing
• Determine if there are any barriers to affordable housing
• Recommend actions and initiatives aimed at expanding the supply of affordable housing
For this study, lower income households are defined as those with an annual income at or below 80% of the area median household income. Affordable housing for renters is defined as paying no more than 30% of gross household income for housing expenses including rent and utilities, regardless of income level. Affordable housing for home owners is defined as paying no more than 50% of gross household income for housing expenses including mortgage, utilities, insurance and taxes, regardless of income level.
Here is a link to the report.
Among the highlights:
Households grew faster than the general population: During the 1990s, population in the Iowa City metro area increased at a rate of 13.6% while households grew by 22.8%.
New residents continue to move to the area: In 2000, more than 35,000 persons had migrated to Johnson County from their previous residence in 1995, while only 11,000 persons had migrated out.
Housing prices have outpaced incomes: Real median household income in Iowa City decreased 4.5% from $42,694 in 2000 to $40,772 in 2007. Median sales price of housing increased 8.2% from $134,000 in 2001 to $165,000 in 2006, after adjusting for inflation.
Many cost burdened households are active members of the region’s workforce whose salaries are not keeping pace with housing costs: Approximately 12.8% of workers are employed in industries with entry level wages of less than $15,000 annually. Another 40% work in industries with entry level wages between $15,000 and $20,000 annually.
Household growth is expected to add more than 2,600 households by 2012 with most growth occurring at higher income levels: Another 2,618 new households are projected between 2007 and 2012, with most projected to be in the $100,000 and higher income range.
Continued household growth and higher median household income fuel the demand for new housing. However, the Iowa City metro area is producing many more higher-priced housing units than moderately priced units: Between 2005 and 2006, the number of single family housing units that sold for less than $100,000 in the Iowa City area decreased from 186 units to 155 units. Meanwhile, the number of single family housing units that sold for more than $200,000 increased from 751 units to 764 units.
Other highlights:
- Existing demand for affordable housing exceeds projected demand.
- Projected housing construction activity is not expected to address affordable housing need.
- Experienced affordable housing developers in the region are struggling against many barriers to create new affordable housing units for lower income households:
- Developable land zoned for multi-family housing and available for purchase in Iowa City
- State and Federal funding for financing affordable housing
- The high cost of land and construction
- In high growth areas such as the Iowa City area, market rate developments offer higher profit margins to builders and developers
- Capacity of Non-profit developers to be self-supporting
- The ability for consumers to successfully make the transition from renting to home ownership can be daunting.
The study offers nine recommendations to allow more affordable housing to be built: the most controversial will likely be the call for mandatory inclusionary zoning. However the recommendation calls for incentives to offset the costs of building affordable housing.
Bottomline:
The Iowa City metro area will be short almost 4,000 affordable housing units by 2012 unless action is taken.
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