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Affordable housing becoming more elusive for locals

RAPID CITY, S.D. (RCJ) – South Dakota’s status as a relocation destination is a boon for the region’s construction industry, but a challenge for some locals shopping for homes.

Gov. Kristi Noem touted the robust housing industry in her 2021 State of the State address, calling South Dakota the perfect place to “live your life as you see fit.”

“Residential home sales are up all across the state and home construction in South Dakota is especially strong. New home construction in South Dakota is more than one-and-a-half times greater than the national average. And over the past 10 months, construction employment in South Dakota is up 10% compared to a year ago,” Noem said.

Rapid City ended 2020 with $275,254,669 in permit valuations, the fifth highest in the city’s history after four consecutive years of more than $300 million in valuation.

Hani Shafai is CEO of Dream Design International in Rapid City. His company, which develops and builds residential and commercial projects, sold twice as many lots in 2020 as in 2019. In Rapid City, he said his company has about 1,000 lots at price points between $35,000 and $1 million in different stages of development.

Kristi Lyon, co-owner of Cousin Construction in Piedmont, said her company’s custom home design build business was about 30% busier in 2020 than 2019 and most of the homes they build are in the price range of $400,000 and higher. Cousin Construction is a small company and one of its struggles as it gets busier is finding enough employees, she said. Another is helping clients find their dream property as more people move into the area.

“Our biggest obstacle right now is helping people find land or lots. Affordability is always an issue,” Lyon said. “Finding that special piece of ground that has acreage in the Hills, three to 10 acres of property, that’s what people are looking for.”

“We have a list of buyers in every price range throughout the Black Hills area. The issue has now become a lack of inventory,” said Lori Barnett, the owner and a broker at VIP Properties in Rapid City.

Cher Rhoades, a broker associate at VIP Properties’ office in Spearfish, said Northern Hills communities are experiencing the same trend. Rhoades said some of her first-time home-buyer clients put in offers on several houses but are outbid.

“The inventory is definitely a shortage, so when something comes on the market, it does not last long. It’s hard for local clients. For first-time buyers, it’s very difficult. Pretty much every time there’s a house that comes up, it’s got multiple offers. Most of the time (the successful offer) is always over asking price, and the first-timers don’t always get the house,” Rhoades said.

According to United Van Lines 2020 National Migration Study, about 90% of their customers who relocate to South Dakota earn annual incomes of $75,000 or more. Rhoades said most of the houses she sells are priced between $400,000 and $1 million.

“It’s sad because people are all coming into this area and we have a shortage of inventory. They’re causing prices to increase in the market. For first-time home buyers or people who live in the area, that’s the tough part — to watch a lot of locals and it’s impossible for them to find a house,” Rhoades said.

Tammy Ackerman, owner and broker of New Heights Properties in Rapid City, said her clients often end up moving to or near Rapid City because they need reliable phone and high-speed internet. Ackerman also said some locals are trying to move out of apartments and into houses in the area, too, because of low interest rates. Military families are buying newer homes around Box Elder.

As home prices increase, Black Hills Habitat for Humanity is getting more inquiries about its program, executive director Scott Engmann said. Locally, the average asking price for a house is $330,000, meaning homeowners would need an income of $54,000 a year to afford a home at that price.

“What we’re seeing is the largest employment sectors are administration, sales, social services and food services, and all of those would be less than $40,000 a year, usually closer to $30,000,” Engmann said. “With the influx of people moving here, it’s driving up the cost of housing. … You’re seeing a real dearth of affordability at this point.”

“The reality is that it’s the people that take care of us, that cut our hair, that keep our streets safe, that are getting priced out. Ninety percent of our applicants are single parents … and the way they’re making it work is grandma and grandpa live with them, or cousins live with them because they help cover utilities. We can only get that mortgage payment so low,” he said.

Construction and materials costs are up as much as 80% from where they were a year ago as well, Engmann said.

“I wouldn’t say there’s any one cause, but increase in the demand we’re seeing is driving the crisis on the affordability side,” he said.

Shafai agrees that higher construction costs are driving up prices. However, he’s optimistic about the benefits of local growth.

He’s seeing both individuals and companies that are new to the area choosing South Dakota. New residents can help fill voids in the labor force, he said. He’s also seeing interest from businesses in fields such as value-added agriculture, modern technology and health care. The B-21s coming to Ellsworth is attracting more people as is the pandemic.

“The governor’s office of economic development has been aggressively marketing our state and we could see some of that impact,” Shafai said.

“I hope we as a community welcome those people who are moving here. They’re bringing in a lot of talent and a lot of needed services and they’re providing for a lot higher wage than what we’re accustomed to. I hope our local government invests more into infrastructure needed for projected growth because definitely we are being discovered,” he said.

Copyright 2021 RCJ. Published by Rapid City Journal on January 16, 2021. 

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