Area government leaders on Thursday got a first look at a state pilot program to build multi-family housing units.

A presentation from Mike Harsma, of the South Dakota Housing Development Authority, gave local officials an idea of how the state government and Gov. Kristi Noem plan to rollout the Dakotaplex housing facilities. The state expects to pick a couple of communities as pilot sites later this year. The presentation was part of the District III Planning and Development regular committee meeting at the Highland Conference Center in Mitchell.

The program is based off the Governor's House program that South Dakota has had since 1996, and the multi-unit homes will be built at Mike Durfee State Prison in Springfield. The modular units will follow a similar style and size but will be custom-built to be used as duplexes, triplexes, and quadruplexes. The program is geared toward communities of 5,000 people or fewer, which covers every community in the area's 16-county membership area except Mitchell and Yankton.

The apartment homes, according to Harsma, would most commonly come in two- and three-bedroom alignments, with living areas around 800 square feet. Those facilities could be put together in "pods," of two, three or four, which leads to the names for the homes.

Harsma used the example of a small town that could provide rental housing for a nurse at a local hospital or nursing home, or potentially for new teachers at the local school. He noted that in many small rural communities, they don't need 30 rental units but two or four can go a long way.

"It's a good, clean, highly efficient rental unit for young people," Harsma said. "We're trying to stay away from the idea that it's a townhome or a condominium, and more that it's a good, clean, affordable, modern rental, with not a million bells and whistles but it remains affordable for someone in the community."

Noem spoke about the pilot program during her State of the State address on Jan. 8, tying the need for housing as something that would help South Dakota fill its open jobs.

"As governor, I want to break down barriers to help fill these shortages," Noem said in the speech. "I'm confident this new project will help our smaller communities expand housing options for workers."

Harsma said the idea comes in part from the South Dakota Housing Development Authority's own assistance with more than 50 housing studies across the state. Those studies illustrated that the state is in need of 2,700 additional rental units in the next five years, primarily in smaller communities, with Harsma admitting the program is merely "a finger trying to plug the dike" when addressing that need.

The state won't be able to mass produce the multi-family, modular homes, estimating that the workers at the prison would be able to produce about 12 to 15 units per year.

"It's going to be more of a custom build than the Governor's Home," Harsma said.

The primary issue with that for private developers, he said, is that small town rental units could be tough to make from a cash-flow standpoint if they end up sitting empty for a few months between renters.

"That can be difficult," he said, adding that while property managers in larger communities like Sioux Falls or Rapid City can have an open unit for a few weeks and fill it, smaller towns can go months before filling a rental again.

The Dakotaplex program homes won't include garages, but will include utilities and will be energy efficient, much like the most recent Governor's House structures. That program produced 95 houses in fiscal year 2018 (July 1, 2017 to June 30, 2018), and has averaged 114 houses per year over the last five years.

"We're working through the thousand little things that make it replicable," Harsma said. "That's something we want to figure out before we really roll it out."

The per month rent figure will likely depend on the community and the renter, Harsma said, likely around about 30 percent of the renter's monthly income. He said the rent rate will mean more to organizers than specific income qualifications, which are a key part of the single-family home program.

Harsma said some of the priorities will be making sure they find a developer or local community that is financially stable for the project, noting that they will want to find a developer who can make money but have it remain affordable. The goal is to identify the first pilot communities by the end of March.

District III Executive Board Chairman John Claggett, who also serves as a Davison County Commissioner, said he sees a lot of applicability for the idea in small towns.

"I think without the economic restrictions, and the rent-based approach, that will be the golden part," Claggett said. "We see a lot of smaller communities under that 5,000 that have a hard time developing these units because there's not a lot of developers and this should help with that."