PIERRE, S.D. (KELO) — A state panel now wants to let for-profit entities participate in South Dakota’s new program offering government subsidies to spur housing construction.

That was one of the changes made Wednesday after a public hearing by the South Dakota Housing Development Authority board on rules proposed for the $200 million infrastructure program.

It would allow government loans and grants for up to one-third of a project’s total cost, with caps of $25,000 per single-family lot and $10,000 per multi-family rental housing unit.

The government subsidies must be used for public infrastructure, which the new law defines as “a right of way, water distribution system, sanitary sewer system, storm sewer system, lift station, street, road, bridge, curb, gutter, sidewalk, traffic signal, or streetlight, which is or will be owned, maintained, or provided by a political subdivision of this state.” The law also allows the money to be used for “excavation, compaction, or acquisition of land for such purposes.”

The revised package, intended to help ease a tight labor market by making more housing available to workers, now goes to the Legislature’s Rules Review Committee on June 13 for final clearance.

The process that began with a legislative study in 2021 has taken parts of three years to get this far. Republican Rep. Roger Chase chaired the study and then led a days-long effort last year to get a bill passed through the state House of Representatives. He was in the room Wednesday for the public hearing at SDHDA headquarters in Pierre.

“I think we’re headed in the right direction,” Chase told KELOLAND News afterward. “While it would be nice to have funds out, we need to be sure we’re doing it right.” He added, “I still think this is the right place to have the funds distributed from.”

Chase was referring to a dispute last year between legislative leaders and Governor Kristi Noem about which state government agency should run the program. She wanted the Governor’s Office of Economic Development to administer it. But Republican Sen. David Wheeler wanted the housing authority.

The House refused to pass the senator’s bill. The Senate then rewrote the governor’s bill and designated the housing authority to administer it. Noem reluctantly signed that bill into law but issued a letter critical of it. Then the authority and its board, whose members are appointed by the governor, declined to distribute any of the $200 million.

The Legislature came back in January and passed a new measure, sponsored by Senate Republican leader Casey Crabtree (who had co-chaired the 2021 study) and Chase, that had Noem’s approval. She signed it into law on February 1.

One of the lawmakers who consistently voted against the 2022 and 2023 legislation, Republican Rep. Jon Hansen, attended the public hearing Wednesday too. Hansen, who serves on the rules committee, watched but didn’t testify.

Altogether there were about two dozen people in the room and another half-dozen on the phone for the hearing. One was Julie Johnson, a legislative lobbyist who represents several housing groups. Among a variety of points she raised was a question whether the subsidies could be used for demolition.

“The law does not say anything about demolition,” replied Chas Olson, the authority’s interim director. He said it was difficult to infer from the new law that demolition could be covered.

Olson highlighted revisions made to the proposed rules prior to the hearing. They were partially in response to written comments received beforehand. The board added another change after testimony from Greg Powell of Chamberlain, representing Brosz Engineering. He told the board the words “and sealed” should be removed from a section.

Olson said tribal governments won’t be eligible to apply, because they aren’t defined in South Dakota law as political subdivisions of state government. However, Olson added, there could be a work-around where an eligible group applies on their behalf. He said the ultimate solution on that point was up to the Legislature.

Olson said groups that applied last year will need to re-apply with updated cost information, as well as market studies and resolutions from their local governments. Olson said they’d also be wise to have letters of support with their applications.

Mike Gerates, a Dell Rapids farmer representing Colton Economic Development Group, asked about grandfathering Colton’s previous application to this round. “We spent quite a bit of time and money into this effort,” he said. Olson said the applications last year were for a totally different program. “You’ll be pretty much able to re-use it,” Olson said. “Okay,” replied Gerates, “I understand, thank you.” 

Olson said the authority won’t be able to consider any incomplete applications, although the staff will try to help that process along as time allows. “I can’t stress that enough – make sure the application is complete,” he said.