SIOUX FALLS, S.D. (KELO) — A plan to develop 65 single family homes described as affordable housing is getting a look from the city of Sioux Falls.

The city’s planning commission will review the proposal on Wednesday. The information included in the meeting packet describes the project for 39 single family lots and 13 twin home lots proposed by Nielson Development LLC and would be north of East Madison Street and east of Veterans Parkway. The access to the proposed housing project would be from East Paddington Street and North Harebell Avenue. The area is called the East Ridge District.

The houses are divided into three priced units that meet the South Dakota Housing Development Authority’s first time home buyer limits and meet affordable housing criteria, according to city information. The estimated prices would range from $232,000 to $323,000.

The houses do not have basements but the twin homes do.

Dustin Powers of the city’s planning department said the proposed development fits the Tax Increment guidelines and goals of the city’s Accessible Housing Advisory Board.

The project as it is proposed would use TIF from the city. TIF serves as a temporary delay in property taxes as money is diverted to eligible pieces of the project such as site work, utilities and similar.

Powers said Nielson has requested about $2.1 million in TIF funds.

The TIF is a way to fill the gap between the actual costs of developing the housing project and the price Nielson will sell them for.

In this particular development, “All the (units) would be at or below the (maximum) first time home buyers (program) price,” Powers said.

The housing authority listed an income limit of $90,700 for a family of two and a maximum income of $104,305 for a family of three for the first-time home buyers program in Minnehaha County and Lincoln County.

The houses would meet a need in the Sioux Falls area that has been discussed by community leaders. It’s also highlighted in a 2021 housing assessment by the Augustana Research Institute.

Powers said when the units are completed $300,000 in taxes would be generated on the 9.5 acres and right now, the ag land generates about $250.

The Augustana study said “Stakeholders generally agreed that TIFs could be a powerful tool for incentivizing and enabling affordable housing construction.”

City of Sioux Falls graphic.

Nielson said at the meeting he and his team began working on an affordable housing proposal during COVID.

Nielson owns 95 total acres in the area. He said it was important to have a mix of housing available in that entire 95 acres including the 9.5 acres of affordable housing.

The proposed project will be at a higher density than other housing developments.

“I worked with city staff on tweaking (setbacks),” Nielson said.

City council member Greg Neitzert said it ‘was great to see more density” in a housing proposal. Density is a more sustainable model for the city, he said.

Unit A is a 978 square-foot single family house with two bedrooms, one bathroom and a one stall garage in a two-stall driveway. The goal purchase price is $232,000.

Unit B is a 1,200 square-foot house with three bedrooms and two bathrooms. It has a one-stall garage with a two-stall driveway. The goal purchase price is $308,000.

Unit C is a 1,094 square-foot twin home with two bedrooms, two bathrooms and a two stall garage. There is lower level that can be finished in the future. The goal purchase price is $323,000.

The proposed schedule for the proposal includes the city council first reading of an ordinance to establish a TIF District on Sept. 20, If that advances, the second reading would be on Oct. 4.

The Augustana report said affordable housing can depend on income and housing is needed for those at various income levels. The report referred to the home value-to-income ratio in Sioux Falls in 2019 at 3.6 which suggests that owner-occupied housing was becoming less affordable. This was before the dramatic increase in home prices from 2020 through 2022. A ratio of 3 is generally considered affordable.

In Sioux Falls, the discussion about the need for affordable housing can often include workforce housing.

In many cases, workforce housing program are for those who make 81% to 120% of the median income in the area.

The term workforce housing can be controversial because people who make less than 81% of the median income in a community are working. That would include those who qualify for affordable housing programs that make 80% or less of the median income.

The United States Department of Housing and Urban Development (HUD) defines affordability as paying 30% or less of gross monthly income for housing costs.

While the South Dakota Housing Development Authority lists a maximum income of $90,700 for a family of two qualifying for the first time home buyer program, the 30% guideline also shows a different affordability level.

Lower income families that pay more than 30% of their income for housing also need affordable housing, according to the report from the Augustana Research Institute.

As the cost of rental and home ownership has increased, the overall wages of low or low middle income families have not kept up.