High Rents in Bloomington: It’s Not About Supply. Seriously. It’s Not.

By Peter Dorfman

In an article in the April 25 Herald-Times, local realtors complained about the lack of houses available to sell in Bloomington. It would be unfortunate if this chorus of woe bolstered a more general perception that we have high housing costs in Bloomington because of a lack of supply. That would be an unfortunate misconception (or a cynical ploy).

Realtors are in a cyclical business. In the current cycle (especially given the choice a lot of people have made to hold off on relocating during the pandemic), supply is down. It will get better as a matter of course. It always does. 

If there is a concern about the supply of homes for individual ownership, the last thing we want to do in Bloomington is upzone.

Even the mayor’s planning staff admits that upzoning will further constrict the supply of homes to buy in Bloomington, which our own Housing Study recognized as a critical shortage. It’s a direct result of houses being converted to rental and thus taken off the ownership market. The opportunity to double the rental stream by duplexing the houses will accelerate these conversions by corporate buyers, who will easily outbid individuals or families for the houses. We could easily become a 90% rental city by 2030.

Moreover, it is proven by the data in the studies that both sides in the upzoning debate are citing that there is no actual shortage of housing in Bloomington. We’re ahead of schedule building the rental apartments we are projected (by Bloomington Economic Development Corp.) to need in coming years. In fact, if you focus specifically on market-rate apartments, the BEDC numbers suggest we’re already overbuilt in that category. But that’s what upzoning will invite developers to go on building, whether we need them or not.

We do have a lot of people here saying they can’t find housing they can afford. Every city has that problem. Bloomington has it because wages are low here — much of our workforce doesn’t make enough to live in Bloomington. But there’s a more direct reason for high rents in the city.

Housing is expensive in Bloomington for the same reason healthcare is expensive in the US: The people who use it are not the ones paying for it, and don’t care what it costs. Rent is high because market rates for rent in Bloomington are set by many thousands of student tenants whose (remote) Moms and Dads are paying the bills. We probably have thousands of IU students who don’t even know what they’re paying for housing. Increasing market-rate supply is not a solution for this.

If we want affordability, we’ll have to achieve it through rent/down-payment subsidies and public housing. Upzoning is useless before we have those things; it matters in what order you do things.

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