For-profit businesses in, tribes out in housing infrastructure rules update

Rulemaking for $200 million funding pool will continue with public hearing Wednesday

By: - May 30, 2023 5:22 pm
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)

For-profit entities might have a shot at some of the $200 million in housing infrastructure funding, the Housing Development Authority’s board members learned on Tuesday.

Tribal entities, however, likely won’t be eligible unless the Legislature rewrites the law next year.

Those two changes to the proposed rules of the long-delayed workforce housing incentive program came as a result of public comments and legal reviews submitted through May 27 to the authority, which will hold a public hearing on the rules Wednesday afternoon.

It’s the latest in a series of events that began with a summer study on workforce housing in 2021. Lawmakers passed a bill allocating $150 million in state and $50 million in federal money to the authority in 2022, the goal being to deliver the money to developers to help them pay for curb and gutter, water and sewer, and other infrastructure. 

The authority did not award any funds in 2022 because its board members were concerned about the legality of doing so. Gov. Kristi Noem had warned lawmakers against rewriting the bill and funneling the money to the authority and not the Governor’s Office of Economic Development (GOED), as the original bill had.

Legislators returned to Pierre in 2023 to pass what they characterized as a legislative fix early in the session, but the authority reported in April – weeks after the abrupt resignation of former Executive Director Lorraine Polak – that the bureaucratic rule-making process would likely delay the release of the funds for another construction season.

Tuesday’s housing authority meeting saw Interim Executive Director Chas Olson walk board members through another round of changes to the program’s rules. GOED staff had already pushed for adjustments, a rulemaking speed bump that helped jettison hopes that the money would be available for the 2023 construction season.

Olson said Tuesday that the majority of the public comments from 10 groups and individuals focused on the prohibition against for-profit businesses.

Chas Olson, director of the South Dakota Housing Development Authority. (courtesy SDNet)
Chas Olson, director of the South Dakota Housing Development Authority. (Courtesy SDPB/

About a month ago, Olson told the Legislature’s Interim Appropriations Committee that his staff had written them out because for-profit developers interested in the money were likely to build regardless of incentives. 

The public comments in favor of including for-profit businesses, from groups like the South Dakota Homebuilders Association, were bolstered by a review of the rules by the Legislative Research Council’s Code Counsel. 

“The LRC doesn’t believe we have the authority to prohibit for-profit entities from applying,” Olson said.

Tribal entities had hoped to see themselves included in the list of potential beneficiaries, as well, and the draft rules included them. 

The LRC told the authority that lawmakers had, perhaps unwittingly, written tribes out of eligibility.

The definition of infrastructure in the law is “a right of way, water distribution system, sanitary sewer system, storm sewer system, lift station, street, road, bridge, curb, gutter, sidewalk, traffic signal, or streetlight, which is or will be owned, maintained, or provided by a political subdivision of this state.”

LRC’s view of tribal eligibility is tied to the words “political subdivision.” A city that takes ownership of a sidewalk after a developer builds it is a “political subdivision” of the state under the law. 

“Most tribal entities are not considered political subdivisions,” Olson said.


For tribes to be awarded housing incentives, he said, lawmakers would need to pass a bill allowing them to do so. One public comment suggested that the authority set aside a portion of the funds for tribes, but “we’re not sure that that’s within the scope of South Dakota Housing Authority,” Olson said.

“So again, we’re likely waiting on a legislative fix for that,” he said.

The only other major concern for commenters was differing caps for monetary awards. Developers in smaller cities would be eligible for up to $25,000 per home; their counterparts in larger cities could get up to $15,000. The rules will be adjusted to have a single dollar figure applied to all locales, Olson said, provided the LRC doesn’t overrule the authority on the matter.

“We received several comments with some valid points on why that should be perhaps straight across the board, the $25,000 limit,” Olson said.

The board took no formal action on the rules Tuesday. At Wednesday’s public hearing, the board will hear and consider comments, make adjustments as needed and vote on the rules. The document would then head to the Legislature’s Interim Rules Review Committee, which meets June 13. If that committee signs off, the authority would be set to begin handing out monetary awards in late summer or early fall.

The public hearing will take place at 1 p.m. Central on Wednesday at 3060 E. Elizabeth St. in Pierre. The meeting will also be streamed over Skype.

Below are the public comments submitted in writing to the Housing Development Authority on the draft rules.

HIFP Comments Received May 2023


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John Hult
John Hult

John is the senior reporter for South Dakota Searchlight. He has more than 15 years experience covering criminal justice, the environment and public affairs in South Dakota, including more than a decade at the Sioux Falls Argus Leader.