May 25, 2023 - Real Estate

Out-of-state landlords seize the Des Moines metro

Illustration of apartment doorbells with an intercom shaped like a dollar sign.

Illustration: Brendan Lynch/Axios

Rental properties across the metro have become a hot commodity for out-of-state investors, real estate and housing officials tell Axios.

Why it matters: It's a factor in higher area rents, advocates for low-income families contend, though some local realtors say the investments contribute to the local economy and can lead to property improvements.

What's happening: A nearly $57 million purchase of six local apartment complexes by the New York investment firm Spruce Properties in late 2020 sparked a metro "investment craze," according to Rockval, a Florida-based commercial real estate services firm.

  • Rockval's marketing materials claim that the 507-unit deal — which included apartments in Ankeny, Polk City and Waukee — was the first time DSM had seen Wall Street money enter the housing market.

Zoom in: Metro multifamily property sales increased from $225M in 2020 to a peak of over $500M in 2021, according to Rockval.

  • Last year's was $440M.

State of play: DSM rents for a two-bedroom apartment are up 21% year-over-year — roughly $190 a month — to a median of $1,090, according to recent data from rentals site Zumper.

  • Meanwhile, nearly 15,000 families across the state are "very likely" to be evicted from their homes in the next two months, according to a May Household Pulse Survey from the U.S. Census Bureau.

What they're saying: Rents generally increase but improvements to apartments purchased by out-of-state investors "may or may not" happen, Angie Arthur, director of Homeward — a group coordinating homeless prevention efforts in Polk County — tells Axios.

The other side: While more assistance is needed to develop affordable housing options, nonprofit groups that help plan and finance projects like the Polk County Housing Trust Fund alleviate metro problems, Kevin Crowley, a commercial manager at NAI Iowa Realty, tells Axios.

The big picture: Out-of-state investors are being linked with recent higher rents and evictions across the U.S., including some companies that own thousands of single-family homes.

  • An investment group lost 3,200 apartment units to foreclosure last month in Houston, Texas, in a situation linked with surging interest rates, the Wall Street Journal reports.

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