A nationwide study estimates employees in Ames and nearby cities have to make around twice the minimum wage to afford current rental rates.
According to the National Low Income Housing Coalition’s 2018 report, renters need to make $13.65 per hour to afford a mid-range one bedroom apartment or $16.35 per hour to afford a two-bedroom if they live in the 50010 zip code.
That area generally encompasses the city east of University Boulevard and George W. Carver Avenue.
Workers in the 50014 zip code, which encompasses west Ames and parts of Boone County, have to make $15 an hour to afford a one bedroom apartment or $18.27 for a two bedroom.
The NLIHC is a Washington, D.C.-based firm that advocates for federal housing policy that benefits low-income workers. It based its figures on how much per hour an employee would have to make to pay the U.S. Department of Housing and Urban Development’s fair market rent estimate in the area with no more than 30 percent of their income. Under the department’s definition, households paying more than 30 percent for housing are considered “cost burdened.”
HUD’s fair market rental rate estimate runs from $710 to $780 for a one-bedroom apartment in the city, or $850 to $950 for two-bedroom apartments.
It’s not much cheaper to rent in the smaller cities surrounding Ames. Renters in the Nevada’s zip code need to make $13.08 per hour for a one-bedroom apartment or $15.77 for a two-bedroom.
The study did not include estimates for Boone’s zip codes.
Rentals in Ankeny are slightly cheaper than in Ames, with the average one and two-bedroom apartment requiring a $13.08 and $16.15 per hour wage to afford respectively for west side of the city, and $15 and $18.46 per hour needed to afford a one or two-bedroom apartment respectively for residents on the east side.
Ames is comparably cheap to other similar-sized cities with universities competing in the Big 12 collegiate athletics conference. One and two-bedroom apartments in Manhattan, Kansas, would require the renter to make $14.42 or $19.04 to afford the units respectively, while renters in Morgantown, W.V., would need to make $14.81 or $16.92 to afford a one or two-bedroom apartment.
The numbers paint a portrait of affordable rentals being out of reach for a lot of Iowans working low-income jobs. A minimum-wage worker making $7.25 an hour would have to work at least 65 hours per week to afford a mid-range one bedroom apartment at fair market value.
In the Ames metro area, the report estimates the average hourly wage for renters is $10.26. At that rate, a worker would have to work 68 hours a week to afford a 2-bedroom apartment at the current fair market rate.
Kelli Excell, a property manager at Triplett Properties, said the 30 percent of income figure used in the study isn’t feasible due to the city’s cost of living levels and the prevailing wage from employers for non-skilled work.
“That number seems low if you’re including utilities,” she said. “I don’t think that’s achievable.”
Excell argues some of the city’s decisions in the past decade have unnecessarily inflated rent prices. She points to an ordinance passed in May by the City Council capping rentals in seven neighborhoods near Iowa State’s campus to 25 percent, arguing that the policy arbitrarily constricts access to available housing stock.
However, she said one of the chief drivers of high rent prices in the area is caused by the city’s policy to tax any building with three units at the higher commercial rate instead of the residential rate. She argues those costs, along with the added costs of maintaining a rental property to city code, are passed onto the tenants.
“If they were to fix that problem alone, it would drive prices down because other people would have to meet each other (at rent prices) and it’d go lower, lower, lower,” she said.
Iowa State economist Dave Swenson said although a large percentage of Ames residents that would fall under the low-income category are ISU students, full-time residents making the minimum wage simply can’t afford to live in the city’s apartments without other sources of income.
That has driven up wages somewhat, particularly for employers that historically pay low.
“Fewer and fewer employers are able to get away with paying minimum wage,” he said. “They have to pay substantially higher than that for basic labor, whether it’s the service industry, fast food, Walmart, any other number of places advertising to workers at significantly higher rates than the minimum wage.”
But those rates aren’t high enough to cover the cost of rent without requiring workers to spend a considerable percentage of their income.
Swenson said the cost of housing are likely increasing faster because real wage growth for employees is slower than inflation for housing and other expenses.
He said recent growth in the U.S. economy has mostly benefited investors instead of employees, and those employees are less likely to be unionized and bargain with their employers collectively than in decades past.
“If you’re an average worker, like a newspaper reporter or like a teacher, your ability to negotiate better pay or pay that keeps up with inflation has deteriorated over the past 10 years,” he said.
Governments are also partially responsible for not raising the minimum wage to match inflation, he said.
Swenson said Ames will continue to grow in population in the near future because it’s an attractive place to live. That growth will spur demand for rentals and increase rental prices in turn.
The report also claims there is not a single state, metro area or county where a worker making the minimum wage can afford a two-bedroom rental at fair market value, and only 22 counties out of the 3,007 across the U.S. have one-bedroom units that can be rented at that rate.
Swenson said Ames’ housing affordability issues are similar to other U.S. metro areas, and it’s only going to become more of an issue for debate.
“I believe we’re in a period where housing is going to be one of the number one economic issues that we have to wrestle with over the next five to ten years, because it’s an issue everywhere — whether you’re declining or growing,” he said.