Defining the housing affordability crisis in Bloomington: supply, demand and the economy

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Editor’s note: This is the first part of a series about housing affordability in Bloomington.

Bloomington’s housing market has already been deemed inaccessible by many in the city. Renters feel they’re paying too much, and homebuyers often feel constricted.

It’s hard to describe the crisis or define it accurately because of its many causes. But experts and people impacted by high costs alike say something needs to change.

Average income, above-average housing prices

According to Zillow, Bloomington’s average rent in June was nearly $2,000 (sources vary, however). Average home listing prices have risen by around $66,500 in five years, more than 16%. In eight years, they’ve risen by almost $130,000, almost a 38% jump. The apartment-reported vacancy rate is around 4%.

Neilsberg Research found that average household income in Bloomington was near-stagnant at around $60,000 between 2020 and 2023, the last year with available data. By July 2024, statistics compiled by Atlantafed.org show Bloomington residents were spending over a third of their earnings for homeownership.

American financial services firm Morningstar says, “A general rule of thumb is that the most you should spend on housing is 28% of your income.” So, why is housing so expensive in Bloomington? What is causing housing prices to explode? There are countless reasons why the city’s housing market isn’t accessible for a large portion of its population.

Housing supply

The amount of available housing is one of the most critical factors in the nation’s rental and home affordability crisis. A recent report by National Public Radio found that America simply hasn’t built nearly enough to keep up with population growth. “There’s a massive shortage of homes — somewhere between 4 and 7 million.”

There have been nearly 4,500 new unit permits since 2020 in Monroe County. Between then and last year, the county’s population grew by about 1,000. But it’s possible that the growth of units, though outstripping population growth, is still falling short of a gap left by previously low construction rates.

Ben Daniels, a researcher at the Indiana Business Research Center, said new construction in Bloomington never returned to the levels before the 2008 financial crisis.

Daniels is currently working on a housing study of Monroe County for the IBRC. So far, he’s found clear signs of a “missing middle” in housing — row homes, duplexes and similar units.

Local trends: Lack of affordable housing keeps workforce building careers and family out of Monroe County

In the building permits unit data, there are more permits for single-family or five+ family buildings than for two- to four-unit family buildings.

“If you’re a graduate student right now, or you’re 35 and work for the hospital or something, your options for housing right now are either a single-family home or you have to rent,” Daniels said.

Those people usually have to rent in an apartment complex, he said. And he said they often get stuck there. For people trying to climb up the ladder, the missing middle means bigger and bigger gaps they need to jump.

Single-family homes that were previously rented out have also become increasingly homeowner-occupied since the pandemic, said Brian Thompson, a longtime real-estate agent at F.C. Tucker/Bloomington.

Thompson said the Green Acres neighborhood east of IU’s campus currently has “probably got a higher owner-occupied community than it has in the past 20 years.” Those conversions take rentals off the market.

The question of students

Students make up quite a bit of Bloomington’s population when they’re in town. And many of them can afford higher prices if their parents are footing the bill. So rental prices targeted toward them could be higher.

Enrollment at IU has also strained the city’s housing supply. IU Bloomington’s enrollment grew by nearly 6,000 from 2014 to fall last year.

During that expansion, the university demolished several deteriorating and decades-old student housing complexes. And a Herald-Times investigation in January this year found that dozens of IU rentals sat vacant for months, some for years.

Vacancy Indiana University rental homes have been vacant for several years

Bottom-line issue: new home construction

Thompson, a longtime real-estate agent, said much of the issue comes down to how hard it is to construct new homes in Bloomington and Monroe County. That means, he said, people are moving to surrounding counties and commuting in, because it’s easier to build homes elsewhere.

“Bloomington is not an easy place to build and develop single-family homes,” he said.

But the root cause of the issue, Thompson said, is the nature of Bloomington’s economy. He described it as service sector-dominated, which means lower incomes. That makes people more likely to have to rent, and less likely to own homes.

At a city planning commission meeting early this year, Anna Killion-Hanson, the Bloomington Housing and Neighborhood Development department’s director, said around 60% of Bloomington’s housing stock is rentals, and 60% of renter households are rent-burdened.

As with the reasons for unaffordability, the outcomes are just as complicated. Patricia Basile, an IU geography professor and co-founder of the tenant advocacy group Indy Housing Project, said Bloomington’s affordability impacts everyone from students to IU faculty to longtime residents.

Tenant rights in Indiana

One of the reasons people in Bloomington feel so impacted, Basile said, is that tenants have fewer rights in Indiana than many states. That can take many forms, she said. But one example is Indiana’s status as one in only a handful of states that doesn’t allow tenants to withhold rent for repairs.

Ultimately, Thompson said, the crisis is pushing people out of Bloomington. When those people leave, that takes away the taxes they would have paid and their part in the local economy.

“I’m hearing some people say, ‘next two to three years,’” he said. “I’m like, ‘you don’t have two to three years!’”

Contact Andrew Miller at AMiller@gannett.com.

This article originally appeared on The Herald-Times: Why even Realtors struggle with housing affordability in Bloomington