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June 2015 Policy Study, Number 15-6

   

The Nanny State Is Expanding And Private-Property Rights Are Decreasing

   

Housing Cost Issues

   

 

In order to have properties available for people to rent, you must have owners with properties, whether houses or apartments, willing to rent to them.  Building of rental properties in the last few years has not kept up with demand, resulting in “lower vacancies, higher rents, and higher (quality) construction levels.”[4]  As a result by 2011, 50 percent of renters were considered housing burdened, paying over 30 percent of their income for housing.  Of these over half are “severely” burdened, defined as paying over 50 percent of their income in rent.[5]

 

For people making $30,000 or less a year, under the one-third of income to housing cost standard, they should be paying less than $750 per month.  Unfortunately, for new apartments built since 2007, the median monthly rent is $1,000.  Few rental units are available in the under $800 a month category.[6]  Those which are priced at $800 and below a month are mostly older units, and many are being torn down and removed from the inventory.  Increased regulatory and zoning requirements, such as those in Iowa City on the number of residents per bedroom (no more than two), has contributed to both the destruction of low-income rentals and a lack of new units being built.[7]  The costs to build to the demanded standards are too high for owners to charge rents under $1,000 a month. 

 

A 2013 report by RDG Planning & Design and Gruen Gruen Associates on Iowa housing issues estimated that a new one-bedroom apartment, of about 800 square feet, would cost between $93,000 and $115,000 to build.  That is a cost of $116 to $145 per square foot.  The rent to make this profitable for an owner, at a 10 percent return, would be between $850 and $1,000 per month, plus utilities.[8]  The rental rate deemed acceptable for the very lowest income categories is closer to $500-$600 per month.  Today’s building standards make that almost impossible to charge and still make a profit.  At the same time, most of the current housing stock in Iowa is over 50 years old, meaning it requires significant upgrades to meet today’s regulatory standards for things such as disability access.

 

   

 

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