Affordable Housing Is… Expensive

Affordable Housing Is… Expensive

This is the first post in a five-day series I’m running on why affordable housing costs so much to create here in central Iowa, and what that means whether you’re buying, building or just trying to follow your own hometown’s housing conversation. Want the rest of the series without having to go hunting for it? Subscribe to the blog below and I’ll send each new post straight to your inbox as it goes live.

A few weeks back I was having coffee with a friend in a small town north of Ames, and she said the thing I hear at least once a month: “This town just needs to build more affordable housing.” I set my cup down and asked her a question I ask a lot of people. “Okay, who’s going to pay for it?” She looked at me like I’d changed the subject. I hadn’t. That question is the subject, and it’s the reason I’m writing this five-day series.

Here’s the short version, right up front. Affordable housing is expensive to create. Not because anyone’s greedy or lazy, but because every path to a new roof, whether that’s building new, rehabbing old, going rural or going tiny, carries real costs that don’t shrink just because the buyer’s budget is small. Over the next five days I’ll walk through those paths one at a time with real central Iowa numbers, so the next time this comes up at the coffee shop or a city council meeting, we can argue from the same set of facts.

What “Affordable” Actually Has to Cover

When people say affordable housing in central Iowa, they usually mean a decent house somewhere in the $150,000 to $220,000 range, or rent that doesn’t eat 40% of a paycheck. Fair enough. Now look at what has to fit inside that number.

Materials. Lumber, concrete, shingles, windows, HVAC, wire, pipe. Material costs jumped hard between 2020 and 2023 and never fully came back down. A basic materials package for a modest single-family home in Iowa runs well into six figures before anyone swings a hammer. These are general estimates that move with the market, but nobody in the trades will tell you materials are cheap right now.

Labor. Iowa has a skilled trades shortage, same as most of the Midwest. Fewer framers, fewer electricians, fewer plumbers, and the good ones are booked out months in advance. Scarce labor doesn’t get cheaper. It gets scheduled later and billed higher.

Permits and code compliance. Building codes exist for good reasons. Egress windows, smoke detectors, proper wiring, radon mitigation (Iowa’s one of the worst radon states in the country, so that last one matters here). But every code requirement is a line item. Permits, inspections, engineered plans and impact fees add up before the foundation’s poured.

Land and infrastructure. A house needs a lot, and a lot needs water, sewer, electric and a street. In a small Iowa town a developed lot might run $25,000 to $50,000. On the edge of the Des Moines metro it can run double or triple that. Somebody pays for the pipe in the ground. Always.

The Part Nobody Wants to Hear: Subsidies Aren’t Free Either

Here’s where it gets uncomfortable. When government programs step in with tax credits, subsidized financing or grant-funded projects, the cost per unit often goes up, not down. Prevailing wage requirements, extra reporting, environmental reviews, longer approval timelines. I’ve watched subsidized projects in Iowa take two or three years just to break ground. Time is money in construction, and delay compounds every other cost on this list.

That’s not an argument against every program. USDA Rural Development loans and the Iowa Finance Authority’s FirstHome program genuinely help buyers in our area, and I point clients to them regularly. It’s an argument for honesty. The subsidy doesn’t erase the cost. It moves it, to taxpayers, to lenders or into the timeline.

So What’s the Point of This Series?

Not to depress anybody. The point is that “just build more affordable housing” isn’t a plan. It’s a wish. A plan requires picking a path and eyes-open accounting for what that path costs. Over the next four days I’ll take the most common proposals I hear and run the actual numbers.

• Day 2: Building new single-family homes: cost per square foot, lots, timelines and builder risk

• Day 3: Building on an acreage: the rural dream, the teardown surprise and why barndominiums aren’t the bargain people assume

• Day 4: Rehabbing older homes in town: what “just fix up the old houses” really costs

• Day 5: The other options: tiny homes, modular, manufactured, 3D printed and shared living

I’ve sold a lot of homes across Story, Boone, Hamilton and Hardin counties for over 20 years, and I live on an Hamilton county acreage myself. I’m not writing this from a spreadsheet. I’m writing it from experience, mine and my clients’. If you have questions or comments I’d love to chat!

Quick Questions I Hear All the Time

Why is affordable housing so expensive to build in Iowa?

Because the cost of materials, labor, land, permits and infrastructure doesn’t drop when the sale price does. A modest house and an expensive house share most of the same fixed costs. The modest one just has less margin to absorb them.

Doesn’t government funding make housing cheaper?

It makes housing cheaper for the buyer or renter, but the total cost per unit often rises once program requirements, reporting and longer timelines enter the picture. The cost gets shifted, not deleted.

What’s the cheapest way to add housing in a small Iowa town?

There’s no single cheap way. That’s the honest answer and the reason for this series. Each option trades money for time, risk or compromise. Days 2 through 5 break down each one.

Tomorrow: we start with the most obvious path, building new single-family homes, and I’ll show you why the math on a “starter home” barely works in central Iowa right now.