SIOUX FALLS, S.D. (KELO) — If you’re struggling to find housing in the Black Hills, it could be due to the shrinking vacancy in the market.

The South Dakota Multi-Housing Association (SDMHA) released its bi-annual survey on vacancy rates in the Black Hills. Their report shows that from December of 2021 to June of 2022, vacancy rates dropped from 1.84% to 1%.

“I mean, we didn’t expect quite that big of a difference,” Denise Hanzlik, Executive Director for the SDMHA, said. “But you know, we’re such a tight market out there that, you know, there’s not a lot of room either way. So, I guess we were, we weren’t surprised that the vacancy went down. It was bigger than I thought it was gonna be.”

The Black Hills has seen an increase in population over the last few years for a variety of reasons according to Hanzlik: Air Force development in Box Elder, retirement, scenery, weather, and political reasons related to the pandemic.

“I mean, you know, states closed down, and we didn’t, so those people were looking for a place that, you know, their kids could go to school, they could do things. And South Dakota was one of the few states that was open,” Hanzlik said.

With the lowered vacancy rate has come an increase in rent in that area. According to the SDMHA’s report, a one-bedroom in the Black Hills has an average rent of $1,001. The average rent for a two-bedroom was $899 in 2018 and has increased to $1,226 in 2022.

“I pulled some data back the last two decades and rent growth has not seen this type of percentage growth in those 20 years,” Todd Hollan said. 

Hollan is the president of the NWE Management Co. in Rapid City. He added that in addition to rent, other costs are rising as well such as water and garbage fees.

“The other things that I have to speak about is the expenses that come along with this, you know, our tax base keeps rising and rises quicker now than it has because obviously, of comp sales of things, compressed cap rates up those sales, all that interesting stuff. The amenities, you know, our cities had to increase substantially over several years,” Hollan said.

Hollan added that they are also seeing an influx of tech professionals moving to the Black Hills region and working remotely. That combined with the growing health care industry and people moving to Box Elder with the development at the Air Force base means the region is seeing growth.

“I’ve got a few employees that I brought in that have basically just said, we’re out here, because it’s a smaller community, and it’s a better place to raise kids,” Hollan said.

Hanzlik pointed to the pandemic and the rent moratorium that prevented evictions and capping rent prices as another reason for rent increases. Other costs such as utilities and taxes continued to rise during that time, Hanzlik said, so property owners are now playing ‘catch-up’ with rental properties.

“And then you that’s why you’re seeing some of the rent increases you’re seeing, as well as the economics of supply and demand. I mean, the supply is not there. The demand is definitely there. So that’s also pushing rents up,” Hanzlik said.

Of course, the rental market isn’t the only area in a tight spot. Hollan said that like the rest of the state and country, the Black Hills area is seeing an increased cost for buyers.

“So, the other part of that is, you know, we’re seeing pressure from investors buying single-families to turn them into rentals,” Hollan said. “We’re seeing families that want to retire in the next 10 years, saying now’s the time to buy there if we can afford it. So, it’s not completely driven just by the local need for purchasing homes, we’ve got a lot of outside pressure going in that part, too.”

Rapid City has been working to build more affordable housing in the city to meet the growing demand. As more units become available, Hanzlik hopes the vacancy rate increases again.

“You know, there’s we’re still having the need for that workforce, affordable housing. And the workforce, affordable housing funds that went through the legislature last year, however, or unfortunately, have hit some roadblocks,” Hanzlik said. “And only 50 million of that is going to be made available out of the 200 million. Which is unfortunate, because there were a lot of programs or projects that were looking forward to having some of those funds available, so that they could hopefully, you know, use those funds to reduce development costs, which will reduce the rents potentially.”

To the east, Sioux Falls is also feeling the need for affordable housing. While the SDMHA won’t release their report on the state’s largest city for another month, the need for housing can be tracked in the building permits issued in 2022.

Butch Warrington, the City’s Chief Building Official, said that permit values have exceeded $1 billion in 2022 so far. Apartments make up part of that record-setting number.

In 2021, 1,821 apartment units were issued according to Warrington. So far in 2022, 2,224 units have been issued with the year just a little over halfway over.