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Housing crunch 'No. 1 issue in Mitchell'

A "for rent" sign is seen in front of a property on East Second Avenue in Mitchell. A local development official says a shortage of quality, affordable housing is Mitchell's "No. 1 issue." (Chris Huber/Republic)

vMitchell has a "good bad problem" when it comes to housing, according to Bryan Hisel.

Hisel, the executive director of both the Mitchell Area Development Corp. and Mitchell Area Chamber of Commerce, said finding an open and affordable apartment or single-family home in Mitchell is becoming increasingly difficult.

"Housing is the No. 1 issue in Mitchell right now," Hisel said, but added the problem is also a symptom of economic growth.

Unlike much of the nation, where an overabundance of units has led to declining values, Hisel said Mitchell's housing market has failed to keep up with the city's economic growth since coming out of the recession.

"If we can accommodate the needs of working people, we're going to be adding dozens and dozens of people to our community," he said.

According to Hisel, housing markets tend to under-build until demand for new housing is undeniable, due in large part to the often exorbitant cost of housing development.

"For most of us, it's the largest investment we make," he said. "You then multiply that for a builder or developer, and the dollars kind of take your breath away."

The need for additional housing in Mitchell is becoming ever more obvious, Hisel said.

"Demand has now surpassed supply," he said. "Somebody is going to make some money, and that's always a good thing."

Past efforts to develop additional rental housing in Mitchell have yielded mixed results.

An income-restricted apartment complex proposed by Community Development Inc., of Caldwell, Idaho, received unanimous support from the Mitchell City Council in February 2010, but the project now seems unlikely to become a reality. Frederick Free, the company's chief development officer, said the project was not awarded a federal low-income housing tax credit that was to be the primary source of funding.

Free said the company applied for the federal tax credit -- allocated in South Dakota by the state Housing Development Authority -- numerous times, but was denied each time.

"It looked like we were beating our heads against the wall," Free said. "Certain things about that project weren't competitive enough, so we're just letting it go."

The state Housing Development Authority awards federal tax credits to applicants based on a point system using criteria including the local housing need, affordability of units, proximity of the project to local amenities, amount of local financial support, the quality of the developer's track record, efficient use of tax credits and the construction readiness of the proposed project.

The proposed 40-unit apartment complex was to be located along West 23rd Avenue, east of North Ohlman Street, and consist of six, two story walk-up and townhouse structures with rents between $415 and $693.

Community Development Inc. applied for the federal tax credit last spring, Free said, and does not plan to reapply this year.

The proposed project had been a reaction to what Free called a "continuing" and "ongoing" need for quality affordable housing in Mitchell.

Also responding to a perceived housing shortage, Mitchell Technical Institute leased land at its south campus in 2010 to Puetz Development to construct a $3 million, 45-unit apartment complex to accommodate 96 students.

The project was completed in August 2010 and was financed through private investments, as state law prohibits technical schools from owning on-campus housing.

MTI President Greg Von Wald said the on-campus apartments were built in direct response to the limited availability of housing in Mitchell.

"We were already running into a lack of good rental housing," he said. "I've seen students stacked three deep in one-bedroom apartments. It's very difficult to recruit in an environment like that."

Enrollment at MTI has swelled from 755 students in 2007 to 1,088 students this year.

Even after the addition of the on-campus apartments, which are leased only to students, Von Wald said housing can still be hard to come by.

"The minute a student leaves his or her apartment or one is vacant, it is filled almost immediately," Von Wald said of the on-campus apartments.

Von Wald is concerned about the availability of housing in Mitchell becoming a detriment to the school's recruitment efforts. Students have left MTI solely because of the lack of housing in Mitchell, he said.

"This should have been addressed in some sort of forward-looking plan years ago, but you depend on the markets to do that," Von Wald said.

The quality of a portion of Mitchell's rental properties, which Von Wald called "less than satisfactory," has also turned off potential students, he said.

"In the end, it's a Mitchell problem. The community of Mitchell and the governmental entities need to help drive the solution to this," Von Wald said. "It can't be said enough that we need to start addressing this as a community."

According to Hisel, Mitchell's students may already be adjusting to the city's apparent housing shortage.

"One of the choices that students are beginning to make is that students are not releasing their apartments for the summer because they might not be available next fall," Hisel said.

Trail King Industries President Bruce Yakley estimated his company has increased its production workforce in Mitchell by more than 50 employees in the past year.

Yakley said potential employees have turned down job offers due to a lack of suitable housing in Mitchell. Those who do accept a job are often stuck living in less than ideal conditions.

"We have guys that have been living in a hotel for three months," he said. "As we continue to build our workforce, (housing) is becoming a bigger and bigger issue."

Competition for any housing openings can be fierce, Yakley said.

"As soon as something goes on the market, it's almost like a feeding frenzy," he said. "Two, three, four guys are jumping on it, trying to land anything."

The future growth of Trail King will depend on being able to bring in more production workers, Yakley said.

"We've got a very golden opportunity to be able to go out and take market share," he said. "But I can't do it without production employees."

Action taken by the Davison County Commission in December could help alleviate the problem of housing affordability for some in and around Mitchell.

On Dec. 6, the commission signed a joint-powers agreement with the Mitchell Housing Authority that will eventually allow the authority to offer its services to anyone qualified and living in Davison County. Currently, the MHA is only allowed to serve Mitchell city residents.

The MHA provides financial assistance to low-income families, as well as elderly and disabled people through the federal Housing Choice Voucher Program. Through the program, a portion of rent is paid on the tenant's behalf. Landlords must agree to participate in the program, and each rental unit must meet standards set by the federal Department of Housing and Urban Development.

MHA Executive Director Tammy Frost said she is waiting on approval of the expansion from the HUD Regional Office in Denver, Colo.

When Frost met with Davison County commissioners in December, she said the MHA was spending only about $21,000 of the $24,000 it was budgeted per month.

That was partly because potential tenants were unable to find housing that met HUD's rent and quality standards. At the time, she told commissioners about 10 percent of available units in Mitchell did not meet quality standards.

Frost said in an interview that with the addition of new voucher holders and funding cuts due to HUD restructuring, the MHA is now using its entire budget and serves around 100 people each month.

But finding units that meet HUD standards remains an issue among voucher holders.

"Some of them really struggle to find qualified affordable housing," Frost said. "Tenants that have larger families have a hard time, too, because the majority of units are two-bedroom units and some of them need larger."

Frost said HUD quality standards require units to be "decent, safe and sanitary."

The most common issue, she said, is chipping and peeling paint on units built before lead-based paint was banned in 1978.

Other requirements include working smoke detectors on each floor, handrails on any stairway with four or more steps and working locks on windows on the first floor or lower, she said.

"They aren't all expensive fixes. Some of them might be very simple," Frost said. "Most of our landlords will do the repairs to make the unit pass."

Roger Jacobs, field office director for South Dakota's HUD office in Sioux Falls, appeared alongside Frost at the County Commission meeting in December.

Jacobs said in an interview that a shortage of affordable housing is becoming an issue in a number of South Dakota's rural communities.

"When you're looking at expanding communities such as Mitchell, housing becomes a large issue," he said. "Someone within the community needs to rise to the occasion and say there is a need."

Housing development can be difficult to get started, Jacobs said.

"You need to look at the needs of the community and identify resources that might be able to come to the community to help," he said.

Local real estate agent and member of the Davison County Housing Commission, Cindy Hockett, said despite the challenges some face when searching for a suitable rental unit, Mitchell has a strong and active real estate market for those looking to buy a home.

"We have a lot of qualified buyers looking for homes in their budget and in their price range," Hockett said.

She said in most cases, those residents looking to move from a rental unit into their own home are able to find something that suits their need, although price can sometimes limit their choices.

"Price ranges under $100,000 are going to be quite popular with those folks, and we've never had a lot of inventory in that range," she said.

According to Hisel, Mitchell's future growth, and the growth of the companies doing business in the city, will depend on the ability of the housing market to meet the needs of those looking to become residents.

"It is the future of this community. If we don't fix these problems, then we lose the chance for growth."