Political squabbling stalls vital housing investments

January 8, 2023 5:00 am
Houses in a new development on Oct. 28, 2022, in Harrisburg. (John Hult/South Dakota Searchlight)

Houses in a new development on Oct. 28, 2022, in Harrisburg. (John Hult/South Dakota Searchlight)

The Federal Reserve’s interest rate hikes and inaction by our state’s political leaders have had a dramatic negative effect on South Dakota’s real estate market.

A series of interest rate hikes has caused residential sales to decline while the price per single family home is up. Additionally, the inventory of houses available for sale is near historic lows thanks to a slowdown in building.

These statistics make it all the more important for the South Dakota Legislature to act quickly on releasing nearly $200 million in stalled housing infrastructure money

The federal and state money is intended to help communities expand infrastructure to make new development more affordable. Developers now must bear much of the cost, which ultimately is passed on to homebuyers. 

The Legislature authorized spending the money last year but bickering between Gov. Kristi Noem and the Legislature derailed it, causing a construction season to be missed. 

Noem originally wanted her Governor’s Office of Economic Development to review applications and make funding awards, but legislators have little faith in the leadership of that office. They feared it would become a Noem slush fund.

So, they shifted the money to the independent South Dakota Housing Authority, but the authority felt the legislative language was unclear and declined to move forward.

A 2023 consensus bill, reportedly agreed to among legislative leaders and Noem, is expected to be a top priority when the legislative session begins Tuesday. The money is expected again to be funneled through the South Dakota Housing Authority. 

We would be one year closer to solving our housing problems if government officials had done their jobs right last year.

The Senate is expected to pass it by  Jan. 13 and the House will pass it by Jan. 20, according to leaders in both bodies. The governor is expected to quickly sign the emergency legislation, allowing it to take effect immediately.  

About half of the money will be in a revolving loan fund and the lion’s share will be earmarked to communities with less than 50,000 people.

Getting immediate help to the housing industry is critical. A shortage of affordable workforce housing is a near universal problem in South Dakota.

Higher interest rates combined with a lack of homes for sale caused mortgage applications to drop to their lowest rate in 27 years in December, according to a Jan. 4 report on

The price increases being witnessed across South Dakota are startling: 

  • In Sioux Falls, year-over-year prices ending in November 2022 jumped 22.7 percent with a median list price of $176 per square foot. The average home there is listed at nearly $325,000.
  • In Rapid City, prices climbed 17.6% in one year with an average listing price of about $360,000, or $194 per square foot. 
  • Aberdeen’s prices climbed 17.4 percent but with only 22 homes on the market in the city limits in January, it lacked housing in all price ranges. 
  • Brookings had the least inflation with only a 6.4 percent increase while Watertown had the greatest inflationary list price increase of 25 percent. 
  • Mitchell’s climbed 10.6 percent.

What is dramatic about the market is the decline in the number of sales, especially in the Aberdeen, Brookings and Watertown markets, according to the Multiple Listing Service. 

Sales activity in the Aberdeen market dropped 15 percent from 635 sales in 2021 to 540 in 2022. 

Activity in Brookings declined nearly 20 percent from 588 transactions in 2021 to 466 in 2022, and in Watertown it also dropped about 20 percent from 412 to 328. 

The infusion of state infrastructure money won’t solve the problem, but it will spur development as developers and home builders can focus their resources on construction. It’s a case of better late than never. 

It’s also a testament to the fact that government squabbling and inaction can have real, harmful consequences on people. We would be one year closer to solving our housing problems if government officials had done their jobs right last year. 



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Brad Johnson
Brad Johnson

Brad Johnson is a Watertown real estate appraiser, former newspaper reporter and editor, and longtime opinion columnist. He is president of the South Dakota Lakes and Streams Association, vice president of the South Dakota Wildlife Federation and served 16 years on the South Dakota Board of Water and Natural Resources.