PIERRE, S.D. (KELO) — A state government program that for decades has made low-interest loans to bring new businesses to South Dakota and help existing companies expand could soon be branching into a new finance area: Assisting development of workforce housing.
The state Board of Economic Development agreed Wednesday that some of its members should work with staff from the Governor’s Office of Economic Development to develop some rule proposals for the board to consider later this year.
Jeff Erickson of Sioux Falls is the board’s chairman. The retired executive for Great Western Bank also serves as chairman for the state Banking Commission. He said the economic development board’s credit committee would start putting “meat on the bones” of a concept Governor Kristi Noem announced Tuesday in her State of the State speech to the Legislature.
Her theme: ‘South Dakota is open for business.’
“For employers and employees alike, my goal is to make sure folks across the country and around the world know that South Dakota is THE PLACE to do business,” Noem said.
The governor said she asked Commissioner Steve Westra to support multi-family workforce housing with loans from the Revolving Economic Development Initiative fund. Governor George S. Mickelson started REDI loans in 1987 with a temporary one-percent increase in the state sales tax.
Businesses apply to the Governor’s Office of Economic Development. The governor-appointed Board of Economic Development makes the final decisions.
“Having suitable housing is economic progress. I’m confident that opening up this fund will get developers to invest in communities where additional housing units are most needed,” Noem told lawmakers.
Erickson talked Tuesday with commissioner Westra and deputy commissioner Mary Lehecka Nelson about how they could start to take the idea forward. One of the first steps was presenting the concept to the rest of the board. “Today we’re going to advance the ball,” Erickson said Wednesday.
He said South Dakota has “a wonderful problem” of low unemployment, but that’s created another problem of too few people available for jobs that are open, especially in communities with populations under 50,000, which is all of South Dakota with the exceptions of Sioux Falls and Rapid City.
Lehecka Nelson told the board Wednesday that the state administrative rules for the REDI program were “vague” about making loans for workforce housing. State law says the REDI fund’s purpose was to make “grants and loans for economic development.” The proposed rules would be specific.
State government also has the South Dakota Housing Development Authority. Erickson said the REDI housing loans would be similar to REDI business loans, with features such as five-year balloon payments, and communities would need to show they have shortages of worker housing.
Erickson said the board’s credit committee would work on details such as capping amounts on REDI housing loans and avoiding conflicts with local lenders.
The REDI fund’s total assets as of November 30, 2019, were $118 million, with about $56 million unrestricted. Erickson said he’d like to see 20 to 25 percent of the fund used for loans on workforce housing. “This is really part of our mission, because we don’t have seven percent unemployment, we have two percent,” he said.
He added, “I look at this as part of our mission, as long as we control it.”
The Legislature has four non-voting members assigned to the board. Senator Craig Kennedy, a Yankton Democrat, praised the Republican governor’s concept as “a great idea” and suggested from his experience that the state board should consider subsidizing rent.
Erickson took a different view. “This isn’t affordable housing. This is housing so we can get workers in,” he said. He added that location and businesses’ need for workers would probably affect rent and said the governor was trying to solve “a real housing crisis.”