PIERRE, S.D. — The $200 million housing investment that headlined the early portion of the 2023 legislative session, supposedly the end of a nearly three-year saga to jumpstart development in the state, is once again in administrative limbo.
In fact, the lengthy rulemaking and application process ahead likely means the bulk of grants and loans targeted for housing infrastructure will miss the 2023 construction season, the South Dakota Housing Development Authority told the Legislature’s Executive Board on Thursday, April 20.
“None of us are really happy with the timeline,” Senate Majority Leader Casey Crabtree, of Madison, said after the meeting. “We want to get those funds out and make sure we’re putting infrastructure in the ground and getting houses built.”
In Mitchell, that means another slowdown for the South Lake Estates development project, a $3 million, 55-lot development that’s hoping for a grant of about $900,000 from the state funding pool designated for roads, sidewalks, streetlights and other expensive investments for communities hurting for housing stock.
“It’s disappointing. But I’ve got to be real positive because it's going to really help us make our project goal if we get a grant,” Terry Sabers, the president of Mitchell Area Housing, Inc., the non-profit organization overseeing the development, told Forum News Service in an interview on April 21. “With the cost of infrastructure today, there's a lot of these projects [around the state] that without that money may not go forward, and we're in that same boat.”
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Outside of the grant, Sabers says the development expects to take on an outside loan of around $2.1 million, mentioning tax-increment financing as one potential method of paying it back. Once completed, he plans to keep the home prices at or below $250,000.
Following a 2022 construction season that saw a hold-up to these same housing dollars, mainly due to a disagreement between Gov. Kristi Noem and lawmakers over which entity should handle the disbursement, legislative leaders made it a priority early in the 2023 winter session to get the $200 million investment, $50 million of it from federal coronavirus funds, out the door and into communities around the state.
“We already lost one construction season, and we don’t want to lose another one,” Rep. Roger Chase, of Huron, told Forum News Service following a Jan. 12 hearing on the bill.
Sabers said he and developers around the state had similar hopes after coming out empty-handed from the application process last year.
However, in a tense question-and-answer session in front of the 15-member Executive Board on April 20, Chas Olson, the interim director for the South Dakota Housing Development Authority, confirmed the worst fears of lawmakers as he laid out the crawling pace ahead of the dollars.
Olson said the Housing Development Authority hopes to get its proposed rules — a draft verison of which were approved at the board’s March 14 meeting — in front of the Legislature’s Rules Review committee in July.
If all goes well, the authority’s board could begin approving applications in August — in most cases, too late for any 2023 groundbreaking.
“If somebody doesn't have a contractor lined up at this point, and we're in April, you know, as someone coming from the housing industry, usually by now a contractor is going to have their whole summer planned out already,” Olson said.
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Sabers agreed with this calculation but noted that even scheduling a contractor for late summer or early fall in anticipation of these dollars would be risky.
“We almost need to wait until we can verify that the funds have been approved and how much we've been approved for so that we are comfortable that we’ll be able to raise the funds to do the project,” he said.
One sticking point, according to Olson, is that the 2023 housing law, Senate Bill 41, required the South Dakota Housing Development Authority to create administrative rules “specifying the criteria and process for the application, approval, and disbursement of loans and grants provided.”
The rules creation and review process is one the authority is usually exempt from, with their projects instead often taking the form of less process-intensive allocation plans. That reality has already led to some minor process issues, according to Tim Engel, the counsel for the Governor’s Office of Economic Development, though those appear to be in the rearview.
For some lawmakers, the accumulating roadblocks are a symptom of the hurried process behind the bill.
“Instead of working these issues out during the legislative process, this bill was rushed through,” Rep. Jon Hansen, of Dell Rapids, who had opposed the housing dollars over lack of “guardrails,” wrote in a tweet on April 20.
Still, supporters of the legislation say the more involved administrative process is necessary for the size and scope of the investment.
“It’s a large number of dollars, and we want to make sure there's accountability with that, and make sure that it's addressing the need that the Legislature overwhelmingly saw,” Crabtree said. “The delay is frustrating. There's no doubt about that. But we're not going to just work our way out of this in one construction season, either.”
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Jason Harward is a Report for America corps reporter who writes about state politics in South Dakota. Contact him at 605-301-0496 or jharward@forumcomm.com.
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