UI students drive up local rents

BY DANIEL SEIDL | MARCH 28, 2014 5:00 AM

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Many students at the University of Iowa have to pay rent every month, but they may not realize the effect they have on the cost of rent citywide.

According to a report published earlier this week by the National Low Income Housing Coalition, the cost of living in Iowa is significantly below the national average. The national average hourly wage needed to afford a two-bedroom rental unit is $18.92. In Iowa, the average is $13.26.

Though Iowa as a whole is relatively affordable, Iowa City is the most expensive metropolitan area in the state when it comes to rent, according to the report. The average wage needed to afford housing in Iowa City is $16.37.

Iowa City’s relative expense can be attributed mainly to the University of Iowa, said Steven Rackis, Iowa City housing administrator.

“The University of Iowa dominates the housing market in the city of Iowa City,” he said. “Of the total enrollment, [around 80 percent] live in rental units.”

The large number of students flooding the city’s housing market drives up prices because of the high demand for housing in the area near downtown, especially near the campus, said Casey Cook, managing partner with Cook Appraisal.

“As you get closer to … the university and downtown, the land becomes more scarce,” he said. “There’s a preponderance of [two-bedroom] units built on very expensive land [near the university].”

The scarcity and expense of building near the university creates a dearth of supply, which couples with the saturation of students looking for housing to create a disparity of supply and demand, Cook said.

There is another effect the students could have to increase the cost of living, said UI economics Associate Professor Martin Gervais, in an email. The dense population caused by students, in a city with fixed limits, can cause prices to rise.

“Adding around 25,000 people to a relatively small town makes that town more densely populated, I suppose,” he said. “I presume that the population of Iowa City has increased over the last few decades, but the stock of housing is in relatively fixed supply, which tends to put upward pressure on the price of existing structures.”

Though Iowa City may not have the cheapest housing, the rest of the state is doing fairly well on a national level. Compared with the surrounding states, only South Dakota has cheaper housing than Iowa.

The low prices of Iowa housing are caused by the lack of large cities, Rackis said.

“Take a look at the average population for Iowa’s incorporated areas,” he said. “We’re not a major metropolitan state. Out in the rural areas, cost of living is not very expensive.”

Gervais agreed the lack of densely populated areas drives the cost down, noting that this reduces the average cost of land.

“Land is relatively scarce in densely populated areas, and so the price of land tends to be high in those areas,” he said. “Most areas in the state of Iowa aren’t very densely populated: hence land prices tend to be low.”

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