A variety of factors contribute to Rapid City’s shortage of affordable housing. They include a shortage of high-income housing, wage stagnation, growing demand for single-person homes, and an overdependence on tourism.
A 95-page report released Tuesday morning by Jared McEntaffer, Ph.D., economist and director of the Black Hills Knowledge Network, demonstrates the local need for affordable housing is growing. Since 2010, median household incomes have risen statewide and nationwide — up 4.6 percent and 7.8 percent, respectively, when adjusted for inflation — but Rapid City’s median household income has declined 3.2 percent from $50,380 in 2010 to $48,784 in 2016.
The aging population, rising numbers of one-person households, and an overdependence on tourism-related jobs, which have experienced slower- than-average wage growth since the Great Recession, were cited as the main contributors to Rapid City’s wage stagnation. According to the report, 11,800 Rapid Citians – 25 percent – are employed in the retail, accommodation, food service, and/or arts and entertainment industries, which cater toward tourists. These industries provided a median annual income of $19,900 to $24,820 in 2016.
With lower-than-average household incomes and increased demand for one-person units from young and old people alike, the demand for small, cheap, low-income housing — rent from under $500 per month up to $899 per month — has far outpaced supply. For owner-occupied properties, demand for units with a monthly cost from below $500 to $899 exceeds the supply by almost 3,500 housing units. In the rental market, demand for units with rents below $500 per month exceeds the supply by 1,459 units.
Interestingly, demand for high-priced units — monthly rents at $1,250 and above — also exceeds supply by 1,853 units. In the owner-occupied market, demand for a home with a mortgage payment at $1,900 and above exceeds supply by 4,586 units.
The result is people from low- and high-income households being forced into the middle-income — median household incomes between $35,000 and $74,999 and monthly housing payments between $900 and $1,899 — housing market. The likely winner in such a battle for limited housing resources is easy to predict.
After highlighting the facts and figures surrounding Rapid City’s housing situation, McEntaffer offered potential solutions. As the city’s core housing stock reaches the end of its usable life, recycling those units will become paramount. Increasing housing stock in the $400 to $600 per month range is also needed, as is adaptability in Rapid City’s codes to accommodate the city’s changing demographics and housing preferences.
McEntaffer also noted the tools already available to developers and city planners looking to build affordable housing, including the Department of Housing and Urban Development’s HOME and Community Development Block Grant programs, as well as approximately $12 million available annually from the South Dakota Housing Development Authority. Improved coordination between the city and developers to keep development costs low and create incentives for affordable housing development was also mentioned.
Finally, McEntaffer pointed toward the formation of a nonprofit developer/property manager group as another outside-the-box solution. A month ago, as part of The Garage’s morning fill-up speaker series, Deidre Schmidt, the CEO of CommonBond Communities, spoke about the potential of such an endeavor in Rapid City. CommonBond Communities is the largest nonprofit provider of affordable housing in the Upper Midwest, with more than 6,000 affordable rental apartments and townhomes serving more than 12,000 people in 56 cities throughout Iowa, Minnesota, and Wisconsin. To start an organization like CommonBond in Rapid City, Schmidt said, leaders with humility and a desire to benefit the community — sometimes in direct confrontation with profit motive — are necessary.
“Pigs get fat,” she said on May 24, “and hogs get slaughtered.”