What we talk about when we talk about Sioux Falls' housing crisis

Simplified: Sioux Falls needs more housing, but the solution isn't as simple as building more homes. Here's a look at the challenges to find housing across incomes, but especially for people who make the least money.

Why it matters

Affordable housing is a pressing issue as Sioux Falls' population grows. Between January and November, the Helpline Center reported more than 15,000 people needed housing assistance. That's about 20 percent of all identified needs in the city this year.
While homelessness is certainly part of the discussion – and perhaps where the mind goes initially when the topic of affordable housing comes up – it's not the entire picture.
There are increasing gaps in the system in what the city calls "workforce" housing, or housing in low to middle-income brackets (Think: folks who make about $16-ish per hour as a starting point). There are also significant gaps among extremely low income households, according to an Augustana Research Institute study released this year.
There are housing challenges across incomes, but solutions will be easier for people who have more money, said Jeff Eckhoff, planning director with the city.

"Those folks are being housed," Eckhoff said. "The concern gets to be about what about those folks who just kind of fall through the gaps, who don't qualify for the (housing assistance) programs, and even folks who do qualify but (assistance) isn't enough."

What does "affordable housing" mean?

The general definition – coming from the U.S. Department of Housing and Urban Development (HUD) – is that affordable means housing costs no more than 30 percent of the household income.

Eligibility for most affordable housing programs (both federal and local) starts when people make about 80 percent of the median family income.
For Sioux Falls, the median household income is nearly $60,000, per census data.

Another way to look at what makes housing affordable is HUD's definition of fair market rent. In Sioux Falls, the fair market rent for a two-bedroom apartment is $897 per month.

What are the challenges to finding housing?

It depends, at least in part, on how much money you make.

For people who are extremely low income

(i.e. people who make less than 30 percent of the median family income.)

There's a significant gap – about 4,500 – between the affordable housing units available and the people that need them.

"Now we're talking people making $10 per hour," Eckhoff said, giving the example of a family of four with a household income of $26,500 per year.

An even bigger challenge is creating more housing units to serve this population because, Eckhoff added, at that level of rent, there's not really a way for a landlord or builder to make any money without some sort of tax credit program or subsidy.

There's a limited amount of state funding, he added, but that generally funds one or two projects per year, which isn't enough to help house these 4,500 people/families in need.

That generally leaves people with a few options:

They pay more than 30 percent of their income on housing – way more, in some cases.
They live in substandard conditions.
They find themselves at an increased risk of becoming homeless.

For people in the low to middle income ranges

(i.e. folks who fall between 30 and 80 percent of the median family income)

There are a few dynamics at play, depending on whether folks are renting or looking to own their own homes.

For homeowners (or aspiring homeowners), the median home price is rising at a faster rate than the median income. That means houses are getting more expensive, and wages aren't keeping up, according to the Augustana study.

For renters, the study found that rent costs don't match incomes. For example, Sioux Falls has fewer than 5,000 households with incomes that would put a rent between $600 and $850 in the "affordable" range. But there are more than twice as many units in that price range.

This is all without mention of the historically low vacancy rates in apartments.

Another dynamic at play, here, is accounting for people who could – based on income – afford an apartment with a higher rent but instead opt to live in one where they're spending less than 30 percent of their income on housing, per the study.

For people with high incomes

It's a building problem, not a housing problem, Eckhoff said.

The pandemic has caused supply chain issues, lumber shortages and labor shortages, all of which require more money and more patience for homebuilders.

Houses are still going up by the thousands in Sioux Falls. Last year, the city permitted construction of about 2,700, and this year, the number surpassed 3,000 new homes.

Some people are even more vulnerable to housing challenges, beyond any income barriers, according to the Augustana study. This includes:

People who have a felony on their record
People with mental health issues
Immigrants and people of color
People with disabilities
People with substance use disorders
People with poor credit.

What are some possible solutions?

There are a lot of people in town asking this same question.

The city reworked its affordable housing board last spring and merged with the county homeless advisory board to work together on housing solutions.

Here are some of the options they're looking at, Eckhoff said:

Tax incentives for builders who create a certain number of units at the fair market value
Funds to help restore or redevelop existing homes – this could include funding for, say, a homeowner who needed a furnace repair but couldn't afford it.
Ask state lawmakers for more help in providing funding assistance.

Additionally, the Augustana study proposed more possible ways to help the housing crisis. Those include:

The city working with residents to make the case for housing density in an effort to combat "NIMBYism" that the study found is "preventing more widespread construction of multifamily units."
Work with landlords to maintain existing properties so people aren't in substandard housing.
Help find more landlords who accept tenants regardless of criminal history or poor credit.
Support housing stability (i.e. offer rental counseling and eviction prevention services, as well as looking at housing as one piece of a broader puzzle of needs including child care, transportation, access to food, etc.)

What happens next?

The city's accessible housing board is expected to present its findings from the past year to the City Council next week.

From there, it'll be months (if not years) of continued conversation among city leaders, elected officials, nonprofits, state and federal governments, and the community about how to make sure people who live in Sioux Falls have a roof over their head.