Who can rent this? Affordable, workforce rental housing all part of the puzzle

KELOLAND.com Original

(KXAN)

SIOUX FALLS, S.D. (KELO) — Residents of Sioux Falls who need affordable rental housing aren’t only those who may be working at the new Amazon distribution center. They are residents who are working a minimum wage job or an elderly person on Social Security.

Sioux Falls Housing has 1,880 people on a waiting list who qualify for at least one of the organization’s six housing assistance programs, said Diane Hovdestad, the recently retired deputy director of the Sioux Falls Housing and Redevelopment Commission. Hovdestad continues to do consulting for the commission.

Most of those on the waiting list qualify for Section 8 housing which means in most cases the tenant will not pay more than 30% of their monthly income for rent and utilities, Hovdestad said.

“Back in the 1980s two-bedroom units were our biggest need,” Hovdestad said.

A two-bedroom unit was often needed by a single head of household with one or two children, Hovdestad said.

In 2021, the majority of people who need affordable rental housing assistance are elderly and disabled persons who need a one-bedroom unit, Hovdestad said.

As health care providers in Sioux Falls grew, so did the population of those needing that health care, Hovdestad said. “More and more people moved to Sioux Falls for health care services,” Hovdestad said.

Sioux Falls Housing administers rental assistance to more than 2,000 households, Hovdestad said.

A tight real estate market and a 6.6% vacancy rate in rentals in the Sioux Falls housing market continues to keep the pressure on the affordable rental housing market.

The assistance and the need at the lower end of the income scale differs from those who may fit the affordable housing description used in other situations.

Affordable as it applies to workforce rental housing will mean rents at price points that differ from affordable rent as it applies to a very low income renter.

Jake Quasney of Lloyd Companies said the company uses affordable housing as it applies to tax credit housing when tenants make 60% or less of the median income in the city.

Lloyd uses the term workforce rental housing for those who make up to 80% to 120% of the median income, he said.

The median income in Sioux Falls in 2019 was $59,912, according to the U.S. Census Bureau. Community Development programs in Sioux Falls lists percentages based on household size for 30% to 80% of median income levels.

“When you look at that you need to provide a wide range of housing,” Quasney said.

Monthly rents for units in the workforce category range from $775 up to $1,300 for a three-bedroom unit, he said.

Monthly rents for units in tax credit programs range from $400 for a one-bedroom up to $1,200 for a four-bedroom, Quasney said.

While Lloyd Companies want to provide a wide range of rental housing in Sioux Falls, it can be challenging to develop units that meet rent tax credit programs, Quasney said.

The tax credit program awards tax credits to a developer who sells them to an investment group and that payment is used in the housing project, said Mike Case, a private developer in Sioux Falls. South Dakota requires developers who use the tax credit program to have rents in the affordable target range for 40 years, Crane said.

Although the federal government has increased the amount of money states receive for the program in the years since the program started under President Ronald Reagan, it’s not enough, Crane said.

Developers are vying for a small pot of money, he said.

And as construction costs increase, it’s more financially difficult to build the project and charge the target rents, Crane and Quasney said.

“For the 60% and below medium income… that’s really a challenge for us without subsidies,” Quasney said.

Crane has worked with tax credit housing programs since the late 1980s including recently with the Lloyd Companies. He returned to private development.

The tax credit program for affordable housing is a niche market, he said.

Sioux Falls has a good history with developers willing to to use the tax credit program but beyond the cost challenges, there are others, he said.

The time involved can also be challenging.

“From the time you come up with the idea to the time people can move in, it can be a 2 1/2 to 3-year deal,” Quasney said.

Applications for the 2021 tax credit program are taken in July and will be approved in the fall, Crane said. It would take 2022 to build an approved 40-unit complex and move-in wouldn’t happen until spring of 2023.

Meanwhile, “the demand didn’t stop,” Crane said.

Local discussions

There has been a lot of discussion in Sioux Falls about the need for workforce housing, particularly since Amazon announced last year it was building a huge distribution facility that could hire as many as 1,000 people. The talk increased after Schwan’s Food Company and CJ Foods, both owned by CJ CheilJedang (CJCJ), announced in January it would be building an Asian foods plant that could employ 600 people.

But, often, it seems, the lower wage earners and those who can’t work have been left out of the housing conversation, Hovdestad said.

In Sioux Falls and in South Dakota, there can be a mentality that people just “need to pull themselves up by the bootstraps,” Hovdestad said.

Or, “There is a public perception that people who need affordable (low income) don’t want to work and that’s not necessarily the case,” Hovdestad said. “These are people with the lower-paying jobs in the community. Usually, it’s elderly on Social Security or with some small pension. Most of them don’t have the ability to work or don’t have the ability to earn their way out of poverty.”

Crane said there are discussions happening within the city about how to meet the need for lower income and workforce housing.

A key recognition is that “this is a long-term thing,” Crane said.

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