SIOUX FALLS, S.D. (KELO) — There’s more than a billion dollars of construction happening in Sioux Falls but where in all that money does affordable or workforce housing fit in?
It doesn’t so far.
“I just looked at the projects and we’re adding over 3,000 (housing) units,” said Jill Madsen, the president of the South Dakota Multi-Housing Association (SDHA). “From what I see I don’t see low income or workforce. I don’t see any tax credit housing and that has been workforce housing.”
The SDMHA uses an income and rental guideline of a person needing an income that is three times their monthly rent, Madsen said.
Madsen used a $15.50 per hour wage which totals a yearly income of about $32,000 to illustrate the rent. That is about $2,700 a month. “If you divided that by three we (SDMHA) say you’d need to rent of $800 to $900 a month for an apartment. That’s a lot of income,” Madsen said.
Madsen said that some households will have two incomes to pay that rent.
Sioux Falls recorded $470.8 million in apartment building permit values through September of this year. That’s double from last year’s $203.1 million and nearly six times more than the $81 million through the same period in 2020.
The city of Sioux Falls reported that through September, there were $216.6 million new residential building permits issued. That’s compared to $246.5 million at the same time last year and $184.7 million in 2020.
Joel Ingle of the Homebuilders Association of the Sioux Empire and the C-Lemme Company, said while residential building permit values are strong, the number of permits must be considered.
Sioux Falls issued a total of 7,246 building permits in 2021. There were 7,355 in 2020 and 7,222 in 2019.
The city has averaged about 600 new single family house permits for several years, Ingle said.
The number of permits was around 700 in 2021 and is about 600 so far this year, Ingle said.
“There is still a lot of building going on but it’s more expensive houses that are being built,” Ingle said. “The (permit) valuations are going up because we are building more expensive homes.”
Roughly five to six years ago, contractors were building more homes in the $200,000 range, he said.
But today there is demand for the $500,000 to $700,000 house, Ingle said.
Those increases make it harder for younger families to buy a house, Ingle said.
The dollar value listed by the city for single family housing in 2015 was $133.5 million. It was at $143.7 million in 2016 and 2017. By 2020 it was $174 million and climbed to more than $200 million in 2021.
Increases in land prices, wages, materials and the like also contribute to the higher costs of houses but it’s also a demand for more expensive homes, he said.
Incomes have not kept pace with inflation, he said.
“It’s a problem,” Ingle said of potential first-time and younger home buyers being left out of the market. “The same problem is happening with renters…”
Yet, “There is tremendous demand for lower priced homes,” Ingle said.
Ingle said builders may want to construct a $150,000 house but they can’t afford to do it with today’s costs. And programs that help make homes affordable may still have houses that are too expensive for some buyers, Ingle said.
What would have been a first-time home buyer 10 years ago is now a renter, Ingle said.
And renters are experiencing higher rents now, he said.
Vacancy rates for all multi-family housing units are low. “We do need units of all types, not just workforce,” Madsen said.
Still, workforce housing is a concern, Madsen said.
Amazon is set to open next year with a total of 1,000 jobs at some point. The company has promoted a minimum starting wage of $15 an hour for various jobs.
Commercial projects are also increasing to a staggering $301.5 million through September compared to $25.5 through September of last year. That is an indicator of job growth.
Growth south and east
Although there is new construction in the northwest and other portions of Sioux Falls, much of the 2022 growth is happening in the south and eastern part of the city.
That growth is not close to where Amazon and other companies are building or expanding in a city industrial park.
“That’s been the trend for several years,” Madsen said of growth to the south and east in the city.
Madsen isn’t sure why because there are fewer restaurants and other amenities in that area, at least a few years ago. Amenities have been added as rooftops have been added, she said.
But, as job growth is happening in the northwest side of the city, developers are becoming more interested in that area, Madsen said.
“There has been growth in that area,” she said.
Why not build houses instead of apartments?
With 3,242 units attached to building permits as of Sept. 30 this year, why aren’t there more houses?
Ingle said as Sioux Falls continues to grow at its rapid pace, apartments are the most efficient way to house the new residents.
In general, “Home builders are building as much as they can build,” Ingle said.
Is $1.7 billion too much?
The city has already passed the record year of $1 billion in building permit value in 2021.
Despite the lack of certain housing opportunities and the pressure for contractors to keep up with overall demand, $1.7 billion in building permit value is good for the city and the area, Ingle said.
There are businesses and industries making “huge capital investments” in the city, Ingle said. “That’s awesome. That’s exactly where you want to be.”
It’s roughly $280 million away from $2 billion.
“I don’t think we will hit $2 billion. I really don’t,” Butch Warrington, the city’s chief building official, said on Monday.
Warrington said he knows of four larger projects of more than $10 million a piece that could get permits this year but those aren’t big enough to reach the needed $280 million.
Ingle said building has its cycles. Eventually, residents will be able to buy houses and more residential homes will be built, he said. Then, fewer apartments will be built.