South Dakota communities have until this Friday, August 18, to get in line for grants from the state’s new “Bulldoze, Build, and Beautify” program. The Governor’s Office of Economic Development is offering one million dollars of federal money (you don’t think South Dakota’s going to pay for a new program like this on its own dime, do you?) to help towns, counties, economic development corporations, and others knock down and replace houses and apartment buildings that are too rundown to renovate.
To use BBB money, a local entity must own the blighted property, match the grant one-to-one (in-kind contributions count), and replace the wrecked dwelling within two years with an affordable house. “Affordable” is defined either by the general wage level for the community or a specific wage for a specific job at a specific business in town. GOED told the Legislature’s interim workforce housing study group that covering demolition, hauling, dumping, digging, filling, and black dirt with government money could knock $17,150 off the cost of building a home on a currently blighted lot. If we take $115.76 per square foot as a basic construction cost, a 1,200-square-foot house would cost about $139,000 to build; the BBB money would knock about 12% off that price.
Recall that last week, I calculated that South Dakota’s average wage, adjusted for regional price parity, is 14% lower than the national average. So South Dakota employers could make new homes just as affordable for far more workers by raising wages to give our workers the same purchasing power as the national average.
The document due Friday is just the “Intent to Apply” package. GOED will review those initial apps and invite communities with good plans to complete full applications starting August 28. Communities can boost their chances of getting an invite by proposing to knock down more houses.
But don’t wait until next year: if Donald Trump has his way, GOED’s Bulldoze, Build, and Beautify will be a one-time deal. GOED’s bulldozers will roll on federal Community Development Block Grants, which the Trump budget would eliminate. 63% of mayors surveyed by Politico in April said eliminating Community Development Block Grants would be “devastating“; another 27% say such a cut will be “very harmful.”
Who gets to hire the bulldozer and at what price? Do bulldozer owners bid on the job? Are bulldozer owners subject to nepotism regulations?
At first glance this seems like a worthy project. We love new things, don’t we. :0)
Porter, one would think it’s worthy, but one has to ask: why didn’t the labor and housing markets drive renovation and maintenance of the 3,000 houses targeted by this program in the first place? Why aren’t market forces driving demolition and rebuilding in these neighborhoods now?
Perhaps because new home buyers want a new home on a fresh piece of land with new sod and new little trees. An old dilapidated house is no doubt in an old dilapidated neighborhood with old elementary schools and old people for neighbors. Building rental homes with few building regulations and a gov’t subsidy on old land may service a population of Vo-Tech students or seasonal workers. Plus, it’s hard to pass up half priced anything.
There’s a significant flaw in this plan, Porter. Who is the market for these homes? If a town buys and bulldozes a couple crappy houses to make way for new construction but the surrounding neighborhood is still craspville, the bank isn’t going to be eager to extend a loan for a house whose value will be pulled down by its location. Is subsidizing the demo cost, shaving 12% off the acquire/build price, really going to entice enough workers to gamble their home equity on these used lots? Maybe these houses will be affordable up front, but if towns aren’t careful, they’re going to see these investments lose value and end up with houses that won’t move on the market and will end up in the same shape as what they’re destroying on our dime now.
Big flaw, unless Pierre gives them a ten year extension – a builder levels a whole block across from a park – the block is rezoned multi family or commercial- it’s donated to a church – the owner builds a duplex and rents out one side and lives in the other – Think about Madison. Lots of old houses, lots of old people, lots of students??? I’d bet on the extension. Some Republican will make money off Washington.