Iowa ranked No. 1 for affordability in the nation, according to a study by the Common Sense Institute. Yet in Iowa City, housing demand is outpacing supply, driving up housing prices for local residents. While families across the state keep more of their income after essentials, city residents struggle to find homes that fit their budgets.
According to the study, Iowa also ranked 4th for housing and utilities, 4th for childcare, 8th for gasoline, and 12th for groceries.
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Gov. Kim Reynolds also shared the study on the social platform X, highlighting Iowa’s rankings.
While those numbers show Iowa’s overall affordability, they don’t reflect the pressure Iowa City residents feel from a limited housing supply and high demand. Tracy Hightshoe, neighborhood and development services director for the City of Iowa City, said the nearly 30,000 University of Iowa students increase that demand.
According to a June 2025 City of Iowa City Council Information Packet, from 2020 to 2030, there is expected to be 10,200 new residents, which will require the construction of 4,610 new housing units to accommodate the growth.
It’s estimated the city will need to build 360 units per year to catch up with demand, and Hightshoe said current production falls below that target.
David Cooper, an economics professor at the UI, said the primary driver of affordability rankings is housing.
“For most people, the single biggest item in their budget is their housing,” Cooper said. “So if you have cheap housing, you’re starting out pretty far ahead of the curve.”
Much of what makes Iowa affordable, whether groceries or child care, comes down to land costs, Cooper said, which shape prices across the board. Using the example of a grocery store, Cooper said if buying the land for the store and parking lot costs more, the business will charge more for the groceries.
Cooper said cities can improve affordability by making it easier to develop properties and if local laws make it more difficult to build, real estate prices will be high.
Hightshoe said the city uses tax increment financing — captures future taxes for development — and fees from the Riverfront Crossings project to boost affordable housing and plans to launch a housing tracker this May to monitor new permits against annual demand.
Recognizing that market-rate construction rarely meets low-income needs, Hightshoe said, and the city’s housing authority is stepping into a developer role, using federal and local funds to build 36 affordable units on North Summit Street and managing a recently acquired 15-unit complex for unhoused veterans in partnership with the county and the Veterans Administration.
According to the U.S. census, North Liberty had the fastest-growing population in Iowa between 2010 and 2020. Cooper said developments like North Liberty raise prices.
“The medical center brings in a lot of high-income people who can afford to buy housing. They’ve built some big offices out in North Liberty. All that is going to mean that there are people coming into town who can afford it, who want to buy a house. All that’s going to push prices up,” Cooper said.
While Johnson County is one of the more expensive counties in the state, Cooper said it’s not expensive by national standards, and residents have to choose if they want to pay more to live in Iowa City.
According to Cost by County, a cost-of-living database, Johnson County is the third most expensive county in Iowa, with the average monthly rent being $1,104.
“There are a lot of places in this country where you have to commute 30 or 40 minutes to work,” Cooper said. “People do that all the time to get cheaper housing. It’s a lot cheaper to live in Cedar Rapids than it is in Iowa City.”
Cooper said being extremely affordable is not always a good thing and can signify slow economic growth.
“Johnson County is less affordable than other places in Iowa,” Cooper said. “But that’s because you have this giant driver of economic activity, which is the medical center. You wouldn’t want to say, ‘Let’s get rid of the medical center so housing prices go down.’”