There’s no doubt Spearfish is one of South Dakota’s up-and-coming communities. It’s been dubbed “the coolest small town in South Dakota” by Far & Wide, one of the “10 most beautiful towns in South Dakota” by Culture Tripp, and a “top 100 best small town” by Livability. With Spearfish’s proximity to the northern Black Hills, the community’s awe-inspiring natural beauty attracts visitors and new residents from all over the country. And as South Dakota’s 10th largest city, Spearfish maintains the small-town feel while also offering plenty of good restaurants and places to drink coffee, an expanding hospital, and good schools and daycare centers.

But all of the fanfare isn’t without its problems. Spearfish recently wound up on a less enviable list for being one of the most expensive cities to live in South Dakota – all because of housing prices.

Just take a home built in 1979 in northern Spearfish for example. In 2020, the 2,300-square-foot, 3-bedroom home listed for $285,000. Today it’s on the market for $424,000. Even with interest rates increasing, it’s sure to be gone within a few days.

This is a familiar story almost anywhere in the country, but the increases have been particularly painful in Spearfish, which already had a hot housing market. Kory Menken, Executive Director of Spearfish Economic Development, says housing prices have been top of mind for city officials for a long time.

“Incentives and tax rates used to be the top items on the list when we would have discussions with new business prospects. Now it’s workforce across the board,” said Menken. “’Will we have enough workers?’ is the question on prospects’ minds and when housing is expensive, it makes things a little more difficult.”

After conducting a housing study, the city decided to take action. That’s how the public-private partnership began with Dream Design to construct high-quality homes at Sky Ridge – 40% of which will sell for $197,000, though they are appraised at approximately $300,000. The homes are for those who are at or below 125% of Lawrence County’s median income and agree to a covenant involving a time restriction of when homeowners can sell the home and make a profit. The development located off Exit 17 south of Colorado Boulevard is now beginning to take shape with the construction of the first home completed this week and a closing date set for the end of the month.

First Completed Home at Sky Ridge

“While nearly every community talks about workforce housing, Spearfish is a community that is doing something about it,” Menken added. “We don’t want to become a Ketchum, Idaho, or Jackson Hole. We want the people who work in Spearfish to be able to live here. It’s better for them and it’s better for us as a community.”

As Menken often emphasizes, Sky Ridge is affordable housing for new and existing workforce, rather than low-income housing. Dream Design built the houses using high-quality and energy efficient materials to increase the livability and longevity of the homes. Sky Ridge houses include sprinkler systems, 2×6 exterior walls, efficient heating and cooling systems, insulated garage doors, and fiber-optic wiring.

The Sky Ridge arrangement is a true public-private partnership. The city is building the infrastructure through a TIF and in addition to the increment, Dream Design is paying the city $23,000 per lot to help with the recovery of the infrastructure costs.

Though the process of the project has been smooth, it hasn’t been immune to the pandemic-induced snags that others in the industry have faced. In November of last year, Dream Design had to slightly increase the price tag on the homes to contend with supply chain issues and inflation. Still, Dream Design has been able to keep the price of the homes in the $100,000 to $300,000 range – staying within the maximum price point of the South Dakota Housing Development Authority’s First-Time Homebuyer Program and maintaining prices much lower than other developments in the city.

Dream Design has been able to keep the costs of the homes low by working with local suppliers to identify materials with dimensions that are in less demand. Floor plans were then built off of those dimensions. Dream Design has also maintained the low price tag by buying in bulk and purchasing lumber directly from the local sawmill.

According to Hani Shafai, President of Dream Design, the Sky Ridge model is one that can be used elsewhere.

“There are many communities throughout South Dakota that can follow Spearfish’s example so nurses, teachers, police officers and others can afford to live in the communities where they want to work,” Shafai said. “As South Dakota continues to gain a reputation of unmatched quality of life and unparalleled business climate, this type of public-private partnership is sure to be a much-needed thing.”

For more information on Sky Ridge, go to dreamdesigninc.com/sky-ridge-spearfish.