The Deadwood Ridge Apartments in Deadwood. (Courtesy of Black Hills Pioneer)
A loan from South Dakota’s Housing Infrastructure Financing Program could keep a 63-unit apartment complex in Deadwood from sitting empty.
The Housing Development Authority Board’s approval this week of a $2.1 million loan to rebuild the water lines at the now-vacant Deadwood Ridge Apartments marks the first time the group has voted to pay for infrastructure money on a building that’s already built.
Lawmakers created the $200 million pool of funding in 2023 to address a statewide shortage in workforce housing. Half took the form of low-interest loans. The other $100 million — half federal dollars, half state dollars — was earmarked for grants.
The money was meant to cover up to a third of a developer’s cost on things like roads, water and sewer lines, and sidewalks through loans, grants or a combination of the two.
It’s been two years since the fund began to disburse money across South Dakota. Thus far, the program’s aided 78 projects in 41 cities. The initial pool of $100 million in grant funding is gone, but the program still has $65 million available for loans.
Projects funded by South Dakota’s Housing Infrastructure Financing Program. (Courtesy of South Dakota Housing Development Authority)
The fund earned $5 million in interest this year, and is meant to be rebuilt as projects repay their debt.
Fourteen projects have been completed, according to Amy Eldridge, director of rental housing development for the authority. Several others “are done, but they’re working on completing the documentation” to certify as much.
Another 64 projects are being built now, Eldridge told the board.
Tuesday decisions
All the loans and grants must first be approved by the state’s Housing Development Authority Board. When that board met Tuesday in Sioux Falls, its members approved an $814,000 loan to help cover the infrastructure for a $2.4 million, 94-rental unit project in Spearfish and an $846,000 loan to help a $2.6 million, 68-lot development for single family homes in Crooks.
The third ask for infrastructure funding was more expensive and complicated.
The Deadwood Ridge Apartments in Deadwood are already built, at a cost of $11 million. The initial project didn’t ask for or use any infrastructure funding, and was meant to open its doors to tenants in 2024 but didn’t. The initial developers and engineers failed to submit their drinking water and wastewater plans to the state’s Department of Agriculture and Natural Resources before the building began. When the time came to open, the unreviewed project failed to pass regulatory muster.
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As a result, the infrastructure needed to be redesigned and rebuilt. Fixing the error and putting the apartments onto the market in the historic West River tourist community will cost another $6.5 million.
On Tuesday, the housing board reviewed owner Daniel Henderson’s request for help covering that cost. He asked the state to waive an infrastructure program rule that limits how much loan money can be used to cover labor costs, which in this case included fees for a new engineer.
Henderson’s request, for a $2.1 million loan, was $1.5 million more than the board would typically allow for labor costs on a project of its size.
Board member Mark Roby, of Watertown, wanted to know what would happen if the board said no.
“There would be a building that sits in Deadwood that doesn’t get leased out,” Eldridge said.
Chas Olson, the authority’s director, said there’s enough funding to offer the loan, and the apartments “are really badly needed” in Deadwood.
The board first approved the waiver, then the project application, after assurances that the complex owner was in a strong position to repay the loan. Both votes were unanimous.
Remaining funds
After the meeting, Olson told South Dakota Searchlight that loan applications have slowed down in part because major builders are working on approved projects. Developers are also likely waiting to gauge how those projects will impact demand for housing in their respective areas.
The fund was launched to address what a legislative summer study concluded was a 10,000-home shortage in workforce housing across the state.
So far, the infrastructure program has distributed or committed funds for more than 7,000 single-family home lots and more than 5,000 multi-family units.
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Projects funded by South Dakota’s Housing Infrastructure Financing Program. (Courtesy of South Dakota Housing Development Authority)