Builders shy away from low-income housing

Ana Callejas’ hunt for affordable rent ended in compromise.

The part-time Walmart employee pays more than she wants for an apartment in a neighborhood she doesn’t think is safe. Not something Callejas, 27, wanted to do, being a single mom with a 17-month-old daughter.

“I didn’t like the location, but this is the only one I could afford,” Callejas said, holding her daughter on her lap.

Her income is low enough to qualify for the highest level of government housing subsidies and the cheapest monthly rates. But the wait for a voucher in Sioux Falls is four years, and any apartments built for her income bracket – 30 percent of the median income or less – were full.

Housing needs for Sioux Falls’ poorest residents are going unmet, but state officials hope new funding from Congress can make a difference.

Thousands in the Sioux Falls area are stuck on a waiting list for low-income housing subsidies. Most fall into the same category as Callejas, earning a small fraction of the median income. Meanwhile, federal tax credits have done little to encourage builders to add apartments for families who need financial help more than anyone else – those who qualify as “extremely low income” under guidelines set by the U.S. Department of Housing and Urban Development.

The state has added just 46 rental units in five years through the program. Of those, 25 have Sioux Falls addresses.

That’s units, not buildings.

The process of adding to Sioux Falls already limited pool of affordable housing moves at a snail’s pace. Buildings with rental units targeting low-income renters require the developer to put more money in up front. Getting the money can take years, with months-long application processes for grant funding and tax credits, said Les Kinstad, affordable housing division manager for the city of Sioux Falls.

“It takes a ton of money over and above what you need in a typical setting,” Kinstad said. “The supply of 30-percent-or-below-income units doesn’t equal demand.”

The state gives away $25 million in tax credits each year for low-income apartment projects, and the competition for those dollars is fierce. Officials have tried to incentivize builders by giving them an edge if they commit a unit to families, though it doesn’t mean they get more money, said Mark Lauseng, executive director for the South Dakota Housing Development Authority.

“Just with the waiting list that Sioux Falls and some of the larger cities were having with these Section 8 waiting lists, we knew that there was a need out there,” Lauseng said.

Congress re-opened funding for another federal program that will bring $3 million to South Dakota for builders willing to include units for extremely low income renters. Money from the Housing Trust Fund means there will be direct funding available to builders who target that particular need, Lauseng said.

Affordable Housing Solutions, a Sioux Falls nonprofit, specializes in providing low income families with a place to live. The organization helped open six apartment buildings for low-income renters between 2010 and 2014, including the addition of 24 units for extremely low income families.

The nonprofit didn’t open a building last year because of time constraints and the work needed to fund each project. The hurdles can seem even higher to for-profit developers, said Wayne Wagner, housing development director for the group.

“It’s really hard for them to do,” Wagner said. “It’s really hard for anybody to do.”

Leon Adams, 31, spent two years on the waiting list for a voucher. Adams was born three months premature and mental health problems drove him to Volunteers of America’s worker rehabilitation program.

He relied on the same group for housing until his name was called. Finally moving out gave him more privacy and independence, Adams said.

“It just felt really great,” Adams said.

Giving people a roof over their head is important for quality of life, and the kind of projects being encouraged by the state are the ones that can mean the difference between being homeless and not,  Lauseng said.

“Home is so important for people,” Lauseng said. “It’s important for family, it’s important for kids, for their education and being raised right.”