Officials looking for housing solutions in Black Hills

RAPID CITY, SD (AP) – As the number of homes for sale shrinks and prices rise, many are wondering if affordable housing will become a relic of the past in Rapid City.

Tom Johnson, president and CEO of Elevate Rapid City, has some ideas he believes could help solve the problem.

“I think it’s no secret that (housing has) been alive for the past six to nine months and that housing is an issue across the board from affordability to availability,” said recently declared Johnson.

Economic indicators for April showed a decrease in active real estate listings from 128 in March to 118 in April. The median listing price fell from $ 234,000 to $ 302,000.

Affordable housing is defined as 30% of a household’s income. The Rapid City area’s median income was $ 49,000 in 2019, which would mean $ 14,700 would be spent on housing and utilities per year, according to a city presentation on a housing strategy plan.

One solution to getting affordable housing is to subsidize the cost of construction, which would lower costs for developers and builders, the Rapid City Journal reported.

Johnson said there could be programs to subsidize the cost of development so the developer can build homes at a lower cost, still make a profit and allow the buyer to see an affordable rate.

CNN Business reported that random-length lumber futures reached an all-time high of $ 1,615, a seven-fold gain from a low of around $ 300 in April 2020.

The second option is to subsidize the borrower, which could also be done through a program in which a non-profit organization offers lower interest rates or equity requirements to buyers of the loan. ‘a first home.

Single-family homes have increased an average of $ 35,872 over the past year with increasing lumber prices, according to the National Home Builders Association.

Johnson said the third solution is to ask nonprofits and governments to look at infrastructure to help eliminate costs for the borrower and developer. He said developers needed water pipes, sewers and roads to build houses.

The fourth solution is for local governments to embark on development, although Johnson has said this is not an ideal solution.

He said local governments would come in artificially and affect the market rate by building houses and setting prices. He said it works in the short term, but can create problems in the long term.

“Building houses can become a source of corruption,” Johnson said. “Ongoing maintenance issues, cost issues – this is the fundamental question of whether this is the right philosophical approach to compete in the private sector.”

He said that a more appropriate solution is for the nonprofit sector to come up with creative solutions between developers and borrowers.

Active real estate listings in the region have been declining since August 2020, according to previous economic indicators from Elevate Rapid City.

A graph showing active real estate listings from July 2020 to April 2021, according to economic indicators figures from Elevate Rapid City.

However, Johnson said it’s not just Rapid City or the Black Hills when it comes to affordable and available single-family housing. He said he had seen him in Denver, Minneapolis and Wyoming.

He said the housing dilemma is fueled by federal interest rate policy and the stimulus package.

Joel Kan, vice president of economic and industrial forecasting for the Mortgage Bankers Association, said on Wednesday that mortgage rates were slightly higher last week and that purchase requests had fallen for the second week in a row. He said the average loan amount increased for each type of loan.

“This is a sign that the competitive buying market, driven by low housing inventories and strong demand, is pushing prices up and weighing on activity,” Kan said. “The higher prices are also affecting the composition of the business, with stronger growth in loans to purchase with above-average balances.”

Johnson said silver has never been cheaper in the United States, so there are plenty of first-time homebuyers on the market.

“On the other side, sellers are realizing that people want to buy houses, which is causing upward pressure on prices,” he said.

Johnson said many economists believe this is not sustainable and could lead to inflation as prices rise not only in housing but also in corn, wheat, flour, circuit board shortages and more. again.

He said if inflation rose too high, interest rates would be raised to tighten the market, which would affect borrower capacity, less home purchases and fewer people in the market.

Johnson said people were fleeing to suburbs and small towns due to the pandemic, which is a “double whammy for the market” and is also affecting prices.

He said that another aspect to consider is single-family housing versus multi-family housing. Multi-family dwellings would be density driven.

Johnson said the rental market is also a problem, with a high development cost up front. He said single-family dwellings affected the price of apartments with two to three bedrooms. If the rent for an apartment is so expensive that it is cheaper to buy a house than to rent, someone can just buy a house.

Bryan Achbach, executive director of the Pennington County Housing and Redevelopment Commission, said the commission plans to develop more social housing in the near future with increasing demand and declining affordable housing.

“There are 331 million people in the country and there are 331 million definitions of affordable housing,” he said.

The commission is a low-income housing authority that exists to provide housing assistance to families who make up 80% of the region’s median income and less. It has units in Wall, New Underwood, Hill City and Rapid City.

Achbach said the solutions Johnson discussed for housing could apply to the commission. He said the agency would accept any help it can get with regard to development grants.

He said the commission is working to figure out how to serve as many people as possible through development and may consider expanding the housing it already owns.

“I see we have a plan here for the next few months,” he said. “We’re really trying to quantify (the need). We don’t want to build a $ 5 million resort and find out we don’t have any customers. “

Achbach said they will be looking at their numbers to help determine the next move. According to the April 29 waiting lists, there are 1,971 people on the commission’s list for a bedroom for social housing with an estimated wait time of nearly two years. There are 2,475 people on a two-bedroom list with a 28-30 month wait, 1,441 on a three-bedroom wait list with a 16-18 month wait, and 424 on a four-bedroom wait list. with a wait of just over two years.

Johnson said the area needs more housing and affordable housing now. He said the pandemic, coupled with inflation and the availability of cheap housing finance, has caused something that hasn’t been seen for a long time.

“Add to that the fact that Rapid City is having the biggest growth in the Black Hills with the base and what’s going on,” he said. “We are forced to see challenges and think of creative solutions. It’s not easy, but we get up every day and try.

Housing availability and affordability are concerns in all counties in South Dakota, said State Representative Roger Chase, R-Huron, who is a real estate agent. He will chair a summer legislative study to identify how the state can help communities strengthen their local housing markets. The group’s first meeting is scheduled for June 9 in Pierre. More meetings will likely take place on the west and east sides of the state, Chase said.

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