Nearly all grant money from state’s $200M housing fund is awarded; loan money remains • South Dakota Searchlight

A state board has awarded nearly all of the grant funding for the state’s Housing Infrastructure Financing Program, while much of the program’s loan money remains available.

The program uses a mix of state and federal money to ease the burden of high inflation for homebuilders and address a need for workforce housing. Lawmakers created the program in 2023, after legal wrangling held up the funds the previous year. It covers up to one-third of the cost of a development’s roads, sewer lines, street lights and other costs associated with building new neighborhoods. 

The funding pool included $50 million in federal COVID relief funding for grants, $50 million in state funding for grants, and $100 million in state funding for loans.

There are just over $1 million in remaining grant funds designated for Sioux Falls and Rapid City projects, but that’s due to interest income rather than the original allotted amount of funding, said Chas Olson, executive director of the state Housing Development Authority. Two applications for projects in those cities are on the waiting list for the remaining funds, one of which will be considered at the next board meeting.

The authority’s board awarded other returned and remaining grant funds to three projects at its Oct. 17 meeting.

“We’ve had a couple projects on the waiting list in the event that additional funds become available,” Amy Eldridge, director of rental housing development, told board members.

The board approved additional grant funding for Alpha Omega Subdivision in Box Elder, which was approved in September 2023 for over $3 million in grant funding. Due to an increase of $3.5 million in construction project costs, the project was awarded an additional $520,873 in grant funding.

Another $107,340 in grant funds were awarded to a housing project planned by the Pierre Economic Development Corporation, since its original project increased in costs by $322,000.

The remainder of the grant funding was awarded to a new project: River Park in Brandon, to develop infrastructure for 174 units of multi-family housing and 265 single-family homes. The board approved grant funding of $3 million, and $3.6 million in loan funding for the project.

If any other grant funding is returned from other projects, River Park could receive that funding for its $19 million project. 

That’s because the authority has to spend all of its federal funds, allocated from the American Rescue Plan Act, by the end of 2026 or return them to the federal government, Eldridge told board members.

The board also approved $96,613 in loan funding for the Huron Cul-De-Sac, which was approved for $269,667 in grant funding in November 2023. Project costs increased by $289,836 since then.

About $87 million in loan funds remains available, with around $29.3 million earmarked for Sioux Falls and Rapid City and the remaining balance flagged for the rest of the state. The board has awarded about $18 million in loans to 12 projects so far. The loan funds have grown with interest earned since they were established.

With 70 infrastructure projects in motion due to program funding – an estimated 12,000 new housing units statewide – developers and contractors are less interested in loan funds right now, Olson said. There is also anticipation that lower interest rates will come along from banks.

“As a result, contractors are occupied, and developers without ongoing projects might be waiting to see how quickly these new units are absorbed,” Olson said.