With a vacancy rate of 2.14 percent, affordable rental housing is definitely in demand in Cedar Rapids and Iowa City. But developers are not flocking to build new apartment complexes in either community.
A study of the housing market and projected demand commissioned by the city of Cedar Rapids and released in July found pent-up demand for new market rate and subsidized apartments.
“The difficulty, however, is that rents are very low,” stated the report by Maxfield Research of Minneapolis. “New rental housing that would be developed must have rents that would be significantly higher than most of the existing properties.
“This makes it difficult to increase the overall rents in the market with the large number of low-rent properties.”
The Maxfield Research report found that rents have increased very little in the Cedar Rapids area — including Hiawatha and Marion — since September 2011. Of those apartment complexes that had raised rents, rent increases were generally less than 3 percent.
Joe Lock, executive director of the Affordable Housing Network in Cedar Rapids, said there is a shortage of affordable rental housing in the Cedar Rapids area, particularly three- and four-bedroom units. Market rates for those apartments range from $650 to more than $1,000 per month, not including utilities.
“The Affordable Housing Network has more than 765 rental units across town, and our occupancy rate has been at 98 percent across the board over the last 12 months,” he noted. “There is a genuine need, and that’s why we’re working in Wellington Heights to create more housing, especially for those families needing three- or four-bedroom units.”
Lock said his organization also has launched a home ownership incubator program in Wellington Heights that enables renters with less-than-sterling credit histories to set aside $100 per month from their rent to accrue as a down payment to purchase the home. In order to obtain a conventional home mortgage loan, however, credit scores would need to be raised to the level a lender would require.
Lower income households are defined by Cedar Rapids, Iowa City and the Iowa Housing Finance Authority as those with an annual income at or below 80 percent of the area median household income. Affordable housing for renters is defined as paying no more than 30 percent of gross household income for housing expenses including rent and utilities, regardless of income level.
Vern Zakostelecky, land development planner with the Cedar Rapids Department of Community Development, said there’s not a significant difference between rents for market rate and affordable apartments in Cedar Rapids.
“In Chicago, there’s a fairly large gap between market rate and affordable housing units,” Zakostelecky said. “In Cedar Rapids, that gap is far less.
“We’ve had developers from Chicago tell us that our rents are too low to make projects economically feasible.”
Caleb Mason, housing redevelopment specialist with Cedar Rapids Housing Services office, said there are several apartment projects that have recently broken ground or will be starting construction shortly, weather permitting.
“There is an apartment project west of Edgewood Road and south of Ellis Boulevard that will create 168 units,” Mason said. “The developer is hoping to get the foundation and some of the flatwork done before the weather changes.
“There’s also a project east of Edgewood Road and south of Glass Road in a wooded area that will have 119 apartments in one building. The architect has put out the bid documents and they hope to put concrete in the ground before the first snowfall.”
The Maxfield Research study also cited the need for additional senior housing as the Baby Boom generation moves from single-family homes into independent living apartments as well as assisted living facilities. Zakostelecky said several independent living apartment complexes are planned for the community.
“There are a lot of companies from outside Cedar Rapids that are interested in building senior housing,” he said. “Construction has begun on Legacy Manor of Cedar Rapids at 1350 A’Hearn Dr. NE, which will have 60 independent living apartments.
“We expect the developer of Village Cooperative of Cedar Rapids to break ground very soon for 65 units near Boyson Road and Creekside Drive NE.”
Irving Point, a 55-unit affordable assisted living complex at 910 Seventh St. SE, opened in September 2008. It was the last affordable assisted living facility built in Cedar Rapids.
A Chicago developer’s plan to build 48 units of affordable senior housing in the 1400 block of Third Avenue SE was rejected early this month by a 9-0 vote of the Cedar Rapids Planning Commission. Construction of the complex likely would have resulted in the demolition of five homes, four of which sit in one of only two special historic districts in the city.
The developer, Richard Sova of the Landover Corp., Lake Barrington, Ill., can take his case to the Cedar Rapids City Council and ask it to change the future land use map and rezone property.
THE REASONS WHY
A 2007 market analysis of affordable housing in the Iowa City metropolitan area found much the same need for affordable housing. Approximately 12.8 percent of workers were employed in industries with entry level wages of less than $15,000 annually, and another 40 percent worked in industries with entry level wages between $15,000 and $20,000.
The total projected affordable housing demand for the Iowa City metropolitan area was 2,355 dwelling units in 2007. That number included 924 units affordable to extremely low income households, 571 units affordable to very low income households and another 860 units affordable to low income households.
As a result, demand for affordable housing exceeded projected demand by a ratio of 1.3 to 1 in 2007 in a community with 17,144 apartments.
While it would appear that developers of multifamily housing would see opportunity in the unmet need for affordable housing in Johnson County, the study contended that has not occurred for several reasons.
Most, if not all, of the land currently zoned for multifamily housing in Iowa City is either developed or not on the market. Affordable housing developers are unable to make projects work financially on the few parcels that have been available because the land is too expensive, or it is not zoned to an adequate density.
Rezoning requests from multifamily housing developers have drawn opposition from neighboring property owners who don’t want to be next to an adjacent vacant lot being developed, or who oppose the higher density needed to make a proposed affordable housing development financially feasible.
Lock said similar obstacles have prevented development of new affordable rental housing in Cedar Rapids. He also pointed to failure of several proposed projects to receive approval from the Iowa Housing Finance Authority for federal tax credits.
On the plus side, Lock said, the Affordable Housing Network on Nov. 1 took over management of Geneva Tower, an independent senior housing complex in downtown Cedar Rapids. He said the 185-unit tower should be fully leased by the end of the year.
“We also will be looking at developing more senior housing over the next five years,” he said. “It’s really too early in the process to say whether it will be independent or assisted-living housing.”