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Housing Crunch Gets Worse Under Noem; Biden Infrastructure Plan Can Help

Between national campaign fundraising trips to sunny Texas and Florida last winter, part-time Governor Kristi Noem muttered something about wanting to make South Dakota housing more affordable. That statement was just a pretext for more gutting of local control branded as deregulation (not an original or effective idea, just another borrowing of ideological bushwah from the last guy in the White House).

But all the Snow Queen pretexts and retread summer studies and crony capitalist tax breaks in the world won’t change market fundamentals: demand is up, wages are not, and South Dakotans are being priced out of their own housing and rental market:

The frenzied market is pushing up home prices and making it more difficult for low- to medium-income residents to achieve homeownership. The $45,000 average yearly income in South Dakota cannot compete with the purchasing power of a six-figure, out-of-state salary. Those longtime residents who normally would be able to purchase a home are forced to remain in rental properties, further putting a limit to the available rental units for families in need of affordable housing.

“All of this demand doesn’t seem to be able to be fed with home purchases, so it’s going to the rental market,” said Bryan Achbach, director of the Pennington County Housing and Redevelopment Commission.

Many of the major complexes the coalition uses in Rapid City are at 100% capacity with waiting lists, which is not normal, Achbach said. The commission’s clientele has had trouble finding units to rent and existing renters are seeing rents rise rapidly, Achbach said.

“Families are being put in a really tough spot for circumstances that are really out of their control,” he said [Danielle Ferguson, “Frenzied Housing Market Putting Homeownership out of Reach for Some South Dakotans,” South Dakota News Watch, 2021.05.14].

Even the cheap houses the state builds with prison labor cost more due to tight supply of construction materials:

Last year, lumber for a house would cost Sioux Falls area builder Mike Schlapkohl about $30,000 on average. This year, prices are averaging more than $52,000, a 73% increase. Other construction material prices are also rising, especially those manufactured in parts of the country that shut down for longer periods of time during the pandemic, such as California. A lot of resin used to make PVC and OSB pipes is brought in from Texas, where a February deep freeze halted manufacturing.

“The mills shut down and were not producing material, but the demand stayed the same or went up,” Schlapkohl said.

…Costs for materials to build homes in the Governor’s House Program have gone up about 19%, said Lori Moen, chief operating officer for Grow South Dakota. Governor’s houses are affordable homes built at the Mike Durfee State Prison in Springfield for low- to medium-income families [Ferguson, 2021.05.14].

South Dakota could end up like Vail, with rich folks from elsewhere scooping up all the prime real estate and leaving its workers with no place close to live. Luckily for Vail and for South Dakota, the Biden Administration is willing to spend $213 billion on affordable housing:

Biden’s NHIA [Neighborhood Homes Investment Act] proposal is part of a $213B commitment to “Produce, preserve, and retrofit more than a million affordable, resilient, accessible, energy efficient, and electrified housing units. Through targeted tax credits, formula funding, grants, and project-based rental assistance, President Biden’s plan will extend affordable housing rental opportunities to underserved communities nationwide, including rural and tribal areas.” This includes $40B for public housing capital improvements, as well as “a $27 billion Clean Energy and Sustainability Accelerator to mobilize private investment into distributed energy resources; retrofits of residential, commercial and municipal buildings; and clean transportation. These investments have a particular focus on disadvantaged communities that have not yet benefited from clean energy investments” [Buzz Roberts, “The Biden Infrastructure Plan and Its Effect on Housing,” National Housing Conference, 2021.04.04].

The Biden infrastructure plan also recognizes that affordable housing is part of infrastructure:

“Housing is critical infrastructure,” Philip Stoker, a professor of landscape architecture and planning at the University of Arizona, said. Stoker’s research has looked at how housing affordability impacts commuting. If workforce housing stock isn’t available, he explained, that simply causes people to commute further and further distances, which puts a strain on the roads or public transportation.

And that’s not just academic theory to [Moab city manager Joe] Linares…. When he tries to hire someone to work for the city of Moab, it’s often difficult to get them to stay.

He’ll make them a job offer, they’ll accept, move to the city and live in a trailer or RV while searching for more permanent housing. But after two months go by, they give up and return to wherever they originally moved from. “They say ‘I can’t afford to live here. I can’t find housing.’ That happens a lot,” Linares said [Sofia Jeremias, “How an Infrastructure Bill Can Help Rural Communities in the West,” Deseret News, 2021.04.23].

…and infrastructure is essential to housing:

Biden’s plan also calls for investments in water infrastructure, including upgrades to drinking and wastewater systems and replacing lead pipes. The plan put forth by Republicans would also dedicate $35 billion for drinking water and wastewater, and $14 billion for water storage.

Planning for future water needs, and future availability amid warming temperatures and drought, is another key need for rural communities, experts said. Seth Arens is a researcher for Wester Water Assessment, a program funded through the National Oceanic and Atmospheric Administration. The goal of the program is to help regions understand, prepare for and adapt to changes in climate.

When it comes to infrastructure, Arens said in some cases additional water storage might be needed, although building dams is far more difficult today than it was in the 20th century [Jeremias, 2021.04.23].

Of course, the biggest thing the Biden infrastructure plan may do to put more South Dakotans and other workers back into the housing market is create millions of good-paying construction jobs. No matter what else we do, an affordable housing market depends on jobs and wages. South Dakota’s current housing shortage is driven by buyers who can import their  higher wages (and, in many cases, thanks to the Internet, their higher-paying jobs) to scoop up South Dakota houses for prices oriented toward depressed South Dakota wages. Raise South Dakota wages, especially for the working class, not just the trust lawyers and other wealth hiders, and a big part of the housing crunch disappears.

11 Comments

  1. cibvet 2021-05-16

    Moab is much like Jackson Wy. The wages for jobs which do not require much skill is quite good, but the affordable living conditions do not exist, so in come the immigrants who are willing to live 20 people to an apartment which makes it affordable. Immigrants work hard to get ahead where as white people want to start at the top and move up from there.

  2. Nick Krebs 2021-05-16

    Excellent reporting. Something else to consider, in addition to the challenges working families face in buying a home, is that a higher portion of renters incomes goes to state taxes. South Dakota gives a property tax break to those who own the dwelling they occupy. That break does not extend to the owner of a dwelling that’s rented out. Obviously the owner pays that higher tax, and then is likely to pass that cost on to the renter in the form of higher rent. This presents another challenge to hardworking South Dakotans in finding affordable housing. The lowest income group pays almost twice as much of their income in property tax than the top 1%.
    https://itep.org/south-dakota/

  3. Mark Anderson 2021-05-16

    cibvet, our congressman Matt Gaetz always likes crowded conditions with teenagers, a few drugs and trumpie American cheers.

  4. Joe 2021-05-16

    The sales price history of that home on North Haines in Rapid is just bananas.

  5. Donald Pay 2021-05-16

    Joe, that price would be a steal in Madison, WI. It all depends on housing prices where you live now. The market is hot all over the US.

  6. Arlo Blundt 2021-05-16

    South Dakota state government doesn’t seem to have a lot to do with the housing market, especially the single family home market. The Republicans curried favor with developers with their centralization of the residential zoning laws, which seems a bizarre piece of legislation aimed at greasing the skids for builders of large apartment complexes. Single family developments tend to sprawl, extending, streets, snow plowing, sewer and water lines. It seems the state will now be responsible for all those decisions that once were made, and should be made by local people who pay the costs of extensive urban sprawl.I can’t see how this centralization of zoning authority effects housing “affordability”.

  7. Richard Schriever 2021-05-17

    Friend of mine (from SD) recently sold his house in the DC suburb of Silver Spring Maryland for substantially more to his purchase price 5 years ago. One day on the market and 14 offers. That market is being driven by office workers who need more space to their traditional apartments so they can work from home. I can see how those DC apartment dwellers could be tempted to buy a heck of a lot more house in SD to work from home out of. While housing prices are going up, office space is in depression pricing.

  8. Richard Schriever 2021-05-17

    Arlo – the form of housing that puts the greatest stress on local government to provide services is RURAL RESIDENTIAL development. Precisely the type of living that attracts disproportionately high numbers of conservatives – who tend to like a great deal of distance between themselves and thein neighbors. I imagine that Qristi’s centralized zoning authority will prefer and approve MORE of said RR development despite local (county) governments realizing the stresses it brings and restricting it – to date.

  9. Cory Allen Heidelberger Post author | 2021-05-18

    Nick, interesting to see that South Dakota finds a way to make even its property tax regressive.

  10. Cory Allen Heidelberger Post author | 2021-05-18

    Richard, if office space is dropping in price, I’d like to think we could find some reverse migration in which South Dakotans priced out of their homes by out-of-state buyers would get great deals buying offices and converting them to funky modern dwellings.

    Richard makes a really interesting point about the cost of infrastructure and public services for less dense rural residential housing development. I noticed that when I lived in Russia: it seemed the Soviet Union was able to extend its meager finances by housing so many people in apartments. I remember being surprised to find that even hot water in St. Petersburg was centralized, but it occurred to me that it took less GDP to run one big water heating plant and pipe hot water to multiple buildings than to have hot water heaters in every apartment. Out here in the country, we end up running more asphalt and wire per household than in the cities, meaning the state gets less revenue per mile of infrastructure to patch potholes, clear snow, repair water mains, etc.

    I’ll bet some city manager has a really cool spreadsheet that shows some density tipping point, a certain density of housing where the additional tax revenue brought in by a new resident family is balanced out by the cost of providing services to that residence. Build houses on 1/10th of an acre or 1/8th of an acre, and streets are more affordable than houses on 1/4 acre… but I suppose more dense housing means more residents and more wear on the infrastructure requiring more maintenance.

  11. mike from iowa 2021-06-27

    Any chance Florida condo disaster will make magats get off their arses and vote for infrastructure funds? Ah, who am I kidding?

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