Grad students ask UI to help curb rent hike

University of Iowa graduate students are calling on university officials to renegotiate a lease with a private development group that manages an Iowa City apartment complex on university land.

The graduate students argue that proposed higher-than-expected rent increases at the Aspire at West Campus complex are exploitative and are pricing students out of the only on-campus housing option available to them.

“As graduate students, we should be living modestly,” said Sam Lustgarten, a UI graduate student and an Aspire tenant. "When (the graduate employee union) works to lift our pay by 1 percent this year and 3 percent next year, that increase shouldn’t just get eaten up in rent.”

The request comes just two months after the Iowa Tenants Project, an Iowa City-based tenants rights group, filed a lawsuit against Aspire's management alleging its lease is illegal.

If the proposed rental rates for the 2016-17 go into effect, the price of a one-bedroom apartment at Aspire will have gone up 9.6 percent, from $875 in fall 2014 to $959 in fall 2016. By comparison, the average rental price in that section of Iowa City went up only 8.54 percent between 2011 and 2013, according to a 2013 survey of the local rental market.

The price of a two-bedroom, two-bathroom unit at Aspire will have gone up 12.6 percent from $1,100 in fall 2014 to $1,239 in fall 2016. The average price of a two-bedroom unit between 2011 and 2013 went up only 1.47 percent in that section of the city, according to the 2013 survey.

University officials say they are sympathetic to the graduate students’ concerns about the proposed rent hike at Aspire. But they also point out that Balfour Beatty Campus Solutions, the company UI partnered with to construct the five-building complex along Mormon Trek Boulevard, has the controlling vote in rental rates and other financial concerns.

“The University is always willing to facilitate ongoing conversations between students and Balfour Beatty,” said David Kieft, UI’s business manager and director of university real estate, via email. “… While Balfour Beatty leases the ground from UI, the company financed the construction of the complex and built the buildings on its own, and has all the risk for leasing the premises.”

Maureen Omrod, spokeswoman for Balfour Beatty, said the increase in rent is necessitated by the rising cost of utilities and real estate taxes.

"Obviously those are costs entirely outside of our control and are unfortunately much higher than we anticipated," Omrod said. "That promoted much of the increase that was being published for next year."

Flexing UI's muscle

The 270-unit Aspire complex, which opened in August 2014, is on land the university is providing to Balfour Beatty through a 41-year ground lease. The company is constructing a second phase of the development on the property that will add 252 units.

The property has historically been used as graduate and married student housing, which is why COGS and other groups representing UI graduate students have taken up the issue.

"What we are hoping is that we can come to some equitable decision how rate increases can happen,” said Joshua Schoenfeld, president of the UI Graduate and Professional Student Government. “It really is the only on-campus graduate student housing available. It should remain somewhat affordable.”

Schoenfeld said he recognizes the concerns at Aspire are part of the larger housing issues in Iowa City and that, as per the lease agreement, UI officials don’t have final say over the specific rental rates at the complex.

“But they do have influence over what happens,” Schoenfeld said. “We’re asking the university to flex its muscle.”

In statement Tuesday, UI President Bruce Harreld urged “Balfour Beatty to listen to the concerns brought forth by our students as it relates to the increase in their rent.

Harreld's sentiments were echoed Thursday when he and other UI administrators met with Schoenfeld, Lustgarten and other graduate students to discuss the rent increases.

“It’s promising that the university seems so willing to negotiate with Balfour Beatty,” Lustgarten said. “We are concerned, however, that we did not hear any specific short-term plans of action -- it was alluded to but not specified. We also have no firm dates for follow up.”

Balfour Beatty says Aspire offers a number of option to graduate students to help keep rents affordable. While a one-bedroom, one-bath unit will cost $959 a month in 2016, Omrod said Aspire also offers tenants the option of renting by the bed. For instance, a student can rent a room in a two-bedroom, one-bath apartment for $520 a month in 2016, or they could rent a bedroom and bath in a two-bedroom, two-bath unit for $620 a month. Omrod said Aspire also offers a roommate matching service to help accommodate those interested in that option.

The increase in rent doesn't appear to be slowing Aspire in filling apartment. Omrud said the complex is currently at 99.8 percent occupied, and 40 percent of the units are already leased for the fall of 2016.

Improvement over past housing

UI officials also say rent increases were inevitable in the switch two years ago from the UI-owned Hawkeye Court apartments to Aspire.

“Those units were built in the 1960s” Kieft said of the Hawkeye Court apartments. “There is no way the units could have been rebuilt without substantially increasing the rental rates.”

With rent previously at about $435 a month for a one-bedroom apartment, Lustgarden said the price was right for the old complex and the location allowed him to get by without a car.

After UI and Balfour Beatty decided to replace Hawkeye Court, Lustgarten said rent for a one-bedroom apartment has more than doubled. He moved into the new complex, he said, because the location still allowed him the best access to work and classes.

But tenants said they never expected to their rents to go up by nearly 13 percent over a two-year period -- a rate than faster than increases in inflation, in their tuition or the in pay for graduate assistants.

Because Balfour Beatty had to absorb the full costs for constructing and operating Aspire, Kieft said, the company has the right to set the rental rates based on the project costs for the new development.

“The university repeatedly looked at rebuilding the complex itself over the past several decades and the rental rates would have been even higher if UI designed, built, owned and operated the complex itself,” Kieft said.

Casey Cook, the founder of Iowa City-based Cook Appraisal, said the construction and labor costs involved in replacing a 50-year-old apartment complex with modern units is significant, so a hike in rent would be necessary to offset that investment.

Students looking for other rental options in Iowa City, however, have few options. The area typically has nearly non-existent vacancy rate, meaning students often begin apartment hunting the fall and winter before the following academic year.

"It's a burden for graduate students to have to pay higher rents, especially because their incomes are relatively low," said Sally Scott, the founder of the Johnson County Affordable Homes Coalition. "And there are not many alternatives in the wider community, so I imagine they're faced with having to go out and finding something cheaper or adding onto their debt, which is already for many people really substantial and something they'll have to cope with for years after they graduate."

According to a 2013 rental market survey by Cook's real estate appraisal company of the Iowa City area, the vacancy rate was the just 0.6 percent — a historically low level. In a market with a healthier balance of rental supply and demand, vacancy rates are typically in the 5 percent range, experts say.

Lease issues

In addition to the rent hike, Aspire is facing a lawsuit over it's lease. The lawsuit, filed in October on behalf of tenant Elizabeth Reetz, claims Aspire's lease contains provisions that illegally shift liability from the landlord to tenants in a number of circumstances, including issues arising from parking, thefts, fires, storms and assaults.

The Iowa Tenants Project has been fighting similar provisions in leases with other Iowa City-area landlords and has found success in the courts. It July, for instance, a judge certified a class-action case against Apartments Downtown, Iowa City's largest private student housing provider.

The lawsuit involving Aspire names BBCS-Hawkeye Housing as a defendant, an LLC apparently established by Aspire's ownership and the company listed on the lease, Iowa Tenants Project attorney Christopher Warnock said. The lawsuit is asking the court to grant class-action status for tenants affected by the lease.

Warnock says the conversion of what previously had been university-owned housing for graduate students to a privately run business has created a number of problems for tenants.

"The bottom line is this is part of the university's privatization," Warnock said. "They've turned this over and are saying they don't have responsibility over what's happening."

Omrod said Balfour Beatty was aware of the lawsuit and unable to comment on pending litigation.

Reetz, the plaintiff in the lawsuit, moved into Aspire when it first opened in August 2014 with a roommate in a two-bedroom apartment for $1,100 a month. Reetz said she opted to file the lawsuit with the Iowa Tenants Project after she attempted to sub-lease her apartment earlier this year but received conflicting information from management regarding deposits when compared with her lease.

Reetz, 36, a UI staff member who recently purchased a house, said she ultimately didn't lose out in any deposit money and was able to sub-let the apartment, but her frustrations prompted her to reach out to Warnock for help in getting management to make its policies more "concise and understandable."

"They were skewing the definitions of things that aren't in the residents' favor," Reetz said.

Reach Jeff Charis-Carlson at jcharisc@press-citizen.com. Reach Josh O'Leary at joleary@press-citizen.com.

Online petition

Tenants at Aspire at West Campus have created an online petition (http://chn.ge/1U3Zwng) calling on the University of Iowa to work with Balfour Beatty Campus Solutions to restrict rent increases at the apartment complex. The land along Mormon Trek Boulevard is owned by the university, but Balfour Beatty is responsible for constructing, maintaining and managing the complex.

As of Wednesday afternoon, the petition had 453 of the 500 supporters requested.

Public-private partnerships

The public-private partnership for Aspire at West Campus was the first of its kind for the University of Iowa, but several UI projects with private developers have emerged since: