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HB 1084: Five-Year Tax Break for Building “Affordable” Apartments

To address the lack of affordable housing in many communities, South Dakota once again doesn’t take the direct approach of increasing wages so workers can afford more housing. Instead we take the Rube-Goldberg approach, subsidizing slumlords with tax breaks and hoping they’ll build more apartments.

House Bill 1084 specially classifies “any new affordable housing structure” for property tax purposes. Build an apartment complex with for or more units, charge rent no higher than “the annually calculated rent for the state’s sixty percent area median income being used by the South Dakota Housing Development Authority,” and the county can lower your assessed value for taxation purposes for five years.

My best guess from HUD’s 2018 South Dakota guidelines is that the maximum qualifying monthly rent for a two-bedroom apartment in Sioux Falls is just over $1,000. Ditto here in Brown County. Out in Rapid, the max two-bedroom rent would be around $930. If you’re providing for your family on minimum wage, it’ll take over a hundred hours of your monthly labor to keep that roof over your head. That’s “affordable” in HB 1084.

One hitch in HB 1084: it promises a tax break for five years, but it requires that rent be kept under the 60% AMI threshold for ten years. Maybe other statutes govern how the county comes back in 2029 and demands a refund for tax breaks given in 2024, but HB 1084 itself does not make clear how it claws back five-year incentives given for ten-year requirements.

And of course, HB 1084 says nothing about what we’ll do to raise the median income to help more families afford apartments. When Governor Kristi Noem said she’s waiting for South Dakota’s Next Big Thing, I don’t think she meant tax breaks for cheap apartments.

16 Comments

  1. jerry 2019-03-07 12:37

    Affordable housing at $900.00 to $1,000.00 a month? Yikes. No reliable public transportation makes owning a vehicle a must. Has anyone checked out what the interest rates are on vehicles? 6.19 percent, up almost two points from this time last year while vehicle prices jumped 4.2%. Damn man, doesn’t sound like winning to me.

    “The average interest rate on new vehicles rose last month to 6.19 percent — the second highest in 10 years — from 4.99 percent a year ago, according to Edmunds. And Kelley Blue Book said the industry’s average transaction price rose 4.2 percent to $37,149. Combined, those factors mean a big jump in the monthly payment for many consumers interested in trading up.”https://www.autonews.com/sales/jan-new-light-vehicle-sales-slide-1

    It’s the economy stupid. The reckless, feckless republican has led us into another box canyon with a leaky, worm riddled boat that is taking water big time.

  2. Wayne B. 2019-03-07 13:28

    Cory, I don’t think you’ve got the right info at your disposal. You may be better served by calling and asking someone at SDHA to get the right info.

    Rent Jungle places the average rent at $858 for a 2 bedroom apartment in Sioux Falls

    A quick check on Zillow for 2 bed apartment rentals shows a healthy number of units available under $600 in the Sioux Falls region. The cheapest I see is $390 a month for a 2 bedroom apartment. That’s about 43 hours at minimum wage (not accounting for withholding). There are 113 discrete listings (with multiple units available) for under $858 on Zillow.

  3. jerry 2019-03-07 14:23

    Maximum amounts Wayne B. are what I read.

  4. jerry 2019-03-07 14:25

    Wayne B., send links to what you’re seeing. Thanks

  5. Debbo 2019-03-07 15:26

    I looked at Jerry’s links, thanks, and thought, wages are So Far behind the cost of living! $15 isn’t going to put anyone on Easy Street, but it will lower the stress levels and maybe enable a little saving.

  6. Cory Allen Heidelberger Post author | 2019-03-07 18:43

    Wayne, those may be calculated average rents on the market; I’m looking at the HUD standards, based on area median income, that it sets for rents that qualify for assistance. I’m assuming those HUD figures would be used to calculate the rents for which developers could qualify for this tax break.

  7. jerry 2019-03-07 19:20

    Indeed Ms. Debbo, add in the cost of transportation and you can see what is going on. We are tapped out completely, even with more than one job. Our costs of living have increased dramatically more so than wages and it’s getting worse instead of better.

    The tariffs are making us go further into credit card debt. Can you see 2008 on the near horizon? The only thing that is clear is that the media is only blathering about the stock market that was goosed by stock buybacks, not by anything productive. Affordable housing, food and healthcare should be a part of basic living, not to be treated as a luxury.

  8. Debbo 2019-03-07 21:04

    Yes Jerry. I’ve heard more economists make the statement that GNP, stock markets and a few of the other remote marks linked as indicators of our economic health are bunk and ought to dumped. Instead, basic cost of living indexes compared with income are urged as being more appropriate.

  9. Wayne B. 2019-03-08 07:49

    Jerry, hopefully this link works:

    https://www.zillow.com/homes/for_rent/apartment_duplex_type/2-_beds/0-217212_price/0-858_mp/paymenta_sort/43.62278,-96.585445,43.404424,-96.942501_rect/11_zm/

    Cory, I just can’t understand why the legislation is needed if there are so many properties available under that threshold. Maybe there are fewer units available in other corners of the state? Sioux Falls’ builders declared recently that they thought there was a glut of rental units on the market, so new builds would be slowing down in favor of twin homes and single family units.

  10. jerry 2019-03-08 08:11

    Wayne B., I saw them, thanks. You do know that the lowest prices of these few are low income units and if you go to each one, you can see what a two bedroom is in the $800.00 per month range. I did note that the first one listed has a 3 month bonus signing and then after that $800.00 a month.

    New construction costs have gone through the roof (pun intended). Site development seems to be where the real money is so developers have got to recoup their investments. The only way to do that is with tax incentives that can come from the legislation. I don’t know if any of this even makes sense as the jobs here are not for professionals or the middle class. Most of the jobs available are not well paying future jobs, they are low wage and in order to keep bodies on these jobs, they have to have a roof over their melons. The state needs to subsidize those developments to hold down the costs for the workers.

  11. jerry 2019-03-08 08:14

    There is one posted that has been posted for over a year and many others that have been listed for months. Whats up with that one wonders?

  12. Daryl Root 2019-03-08 13:38

    Housing, like politics, is local. When I last rented in 1998, I paid $450 for a 2BR apartment in south-central PA, which was cheap in that area. In today’s dollars, that’s $693. A 3RB house rental went for $800 ($1,232 in today’s dollars). When I moved here (Clear Lake), I purchased a home for 2/3rd of what I sold my old home for, despite getting 30% more house and property. Had I moved to Watertown, I would have paid much more. The old standard, which I lived by, was yearly rent/mortgage should equal about 30% of household income after taxes. Hence, $750 monthly rent would require $2500 take home pay, or around $600 per week.

  13. Cory Allen Heidelberger Post author | 2019-03-08 18:26

    Ah, Wayne, now that’s a different way to use the valid stats you’re looking at. Indeed, if there is lots of affordable housing, why should we give builders of new housing (a.k.a., South Dakota’s wealthy landed class) another tax break?

  14. Jenny 2019-03-08 20:04

    Wayne, I know Sioux Falls pretty well and if you can get a two bedroom apartment for under 600 bucks, then it’s probably a dive.

  15. Jenny 2019-03-08 20:10

    When I lived in Sioux Falls 20 years ago, my husband and I were paying 650 a month for a one bedroom apartment and it was a very average place, Nothing fancy. South Dakotans need to get their heads out of their asses And stop thinking that Sioux Falls is a cheap place to live.

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