Gap between low wages and high rents growing in South Dakota

RAPID CITY, S.D. – Like thousands of South Dakotans, Jade War Bonnett of Rapid City lives in constant fear of not having stable housing for her and her two children.

In a state where rents are rising far faster than incomes, the only way War Bonnett and many other low-wage workers can afford rent is to rely on government subsidies.

“It’s terrifying, and I worry about it every day,” said War Bonnett, 21, a single mother who made $9.50 an hour at Taco Johns until being laid off recently.

If forced to pay market value for a rental property, many state residents who work in tourism, the service sector, at fast-food restaurants or in other low-wage jobs have to pay an excessive amount of their income solely on housing. Experts use the term “rent-burdened” for anyone paying 35 percent or more of their gross income on housing. In every state, including South Dakota, the number of rent-burdened is rising steadily.

For many working poor, the need for housing trumps all others. When they spend too much on rent, it can be difficult to obtain health care or pay for food, transportation and utilities. Ultimately, the worry and stress can be devastating and lead to homelessness.

Government programs help, but only go so far. The Pennington County housing authority has a waiting list of 1,800 people who are seeking rental assistance but can’t get it. In Minnehaha County, qualified low-income applicants can wait up to four years to be accepted into subsidized housing programs. Homelessness is rising statewide and among children in the Sioux Falls school district.

The problem is worst among single mothers, minorities, the elderly and disabled residents.

“Especially having two children to worry about, that’s my biggest fear, not being able to get them food, heat and a place to live,” said War Bonnett, whose other housing options would be to live with family or at the Cornerstone Rescue Mission in Rapid City.

Housing officials across the state provide assistance but have been unable to help everyone in need of rental help. The Pennington County Housing and Redevelopment Commission offices are on the ground floor of the Jackson Heights Apartments Public Housing Project in Rapid City. (Photo: Bart Pfankuch / South Dakota News Watch)

A statewide and national concern

While the highest number of rent-burdened families live in Sioux Falls and Rapid City, rural regions of South Dakota are not immune.

According to U.S. Census Bureau data, 32.7 percent of all South Dakota renters pay 35 percent or more of their gross income in rent. Data from 2015 show that 56 percent of renters are rent burdened in Clay County, 48 percent in Day County, 46 percent in Tripp and Ziebach counties, 43 percent in Brookings County, 42 percent in Butte and Gregory counties and 41 percent in Potter County.

Despite those grim statistics, South Dakota renters are better off than those in many other states where rents have skyrocketed and wages have stagnated.

In a recent study by the National Low Income Housing Coalition called “Out of Reach,” the wage Americans must earn on average to afford a 2-bedroom apartment and not be rent burdened is $22.10 an hour. At the federal minimum wage of $7.25 an hour, a renter needs to work 99 hours a week to afford housing and not be rent burdened, the study concluded.

That report lists South Dakota near the top for affordability, with the hourly wage needed to safely rent a 2-bedroom apartment at $14.33, or about $29,800 a year. The minimum wage in South Dakota rose in January to $8.85 per hour, which equates to $18,400 a year. The minimum wage for tipped employees in South Dakota is $4.43 per hour.

“Many people give up. They simply drive around town looking for yard signs, hoping to stumble across an affordable place to live," – Augustana University housing study

Wages and incomes lag behind U.S. averages

The South Dakota unemployment rate hovers just above 3 percent, which is below the national rate. But a closer look at job data shows the state workforce is disproportionately made up of low-wage jobs driven by the tourism, food service and retail industries.

Of the roughly 420,000 South Dakota jobs classified by the U.S. Department of Labor, several sectors dominate. About 63,000 jobs are in office support positions, another 47,000 in retail sales, about 42,000 in food preparation and service, 17,000 in grounds maintenance, 15,000 in personal care and service and 11,000 in health care support. South Dakota is routinely among the top states in percentage of residents who hold more than one job.

Median hourly wages in South Dakota have steadily increased over the years, but growth is slowing. The state saw wage growth of 5.4 percent in 2013-14, but only 3.6 percent in 2015-16 and 2.8 percent in 2016-17, according to the U.S. Department of Commerce. With a median hourly wage of $15.55 in 2017 ($32,300 a year), South Dakota lagged behind the national average of $18.12 an hour ($37,700 a year.)

In the Sioux Falls metro market, inflation-adjusted median household income fell by 4.5 percent from 2008 to 2015; in the city of Sioux Falls, it fell by 8 percent over that time frame. Meanwhile, the number of households making $15,000 to $25,000 a year in Sioux Falls jumped by 50 percent during that period.

“Unfortunately, a lot of our economy is based on those jobs at big-box stores or in fast-food restaurants,” said Minnehaha County Housing and Redevelopment Commission Director Karl Fulmer. “The vast majority of people in our programs are doing those service sector jobs, and they really don’t hire at 40 hours a week so they have no health benefits or benefits of any kind.”

The median rent for a 1-bedroom apartment in the Sioux Falls metro market is $595 a month, while a 2-bedroom is $765 a month, according to a 2016 comprehensive housing study by Augustana University.

Some of the lowest paid South Dakotans fall into the category of extremely rent-burdened, those paying 50 percent of gross income or more on rent, rose 26 percent over the past decade to 23,000 households in 2017, according to the federal Center on Budget and Policy Priorities. Nearly three quarters of those households are led by non-elderly, non-disabled people who hold jobs. Nationally, more than 11 million families are extremely rent burdened, a 20 percent hike over the past decade, the policy center report said.

The Augustana study drew several conclusions:

That the housing shortage for low-income residents is worsening in Sioux Falls. The study notes that for every 100 families making 30 percent or less of the local median family income, only 39 affordable housing units are available.

That while Sioux Falls has a wide range of programs to help people in need of housing, providers do not work in concert, leading to unnecessary gaps in assistance. “Sioux Falls is program rich, but systems poor,” the study noted.

That the process to gain access to affordable housing or government help is so complex that many needy families and individuals don’t engage in the system. “Many people give up,” the study said. “They simply drive around town looking for yard signs, hoping to stumble across an affordable place to live.”

Rising rents and stagnant incomes are one reason the Sioux Falls School District saw the number of reported homeless students jump nearly 30 percent in the past year, from 984 in 2016-17 to 1,275 in the latest school year. That figure includes students who do not have “fixed, regular, and adequate nighttime residence,” according to the district.

Based on a one-day snapshot, the statewide homeless count increased by 21 percent from 2017 to 2018, with children making up 20 percent of that group.

Rent-burdened South Dakota counties

According to U.S. Census Bureau data, 32.7 percent of all South Dakota renters pay 35 percent or more of their gross income in rent. Data from 2015 show:

  • 56 percent of renters are rent burdened in Clay County
  • 48 percent in Day County
  • 46 percent in Tripp and Ziebach counties
  • 43 percent in Brookings County
  • 42 percent in Butte and Gregory counties
  • 41 percent in Potter County

Source: U.S. Census Bureau

Government provides help

Most government assistance programs fall into two categories: rental assistance vouchers, or tax incentives for developers to build low-income housing units.

Developers in South Dakota can qualify for significant tax breaks for 10 years if they build housing and keep rents affordable for 15 years or more, said Mark Lauseng, executive director of the South Dakota Housing Development Authority. That program averages about five significant housing developments each year, Lauseng said.

The state also offers a first-time homebuyer program to get families into stable housing, he said. Almost all of the funding appropriated by the agency comes from the federal government, Lauseng said.

Despite his best efforts, Lauseng acknowledges that trying to create affordable housing opportunities to keep up with the growing need is nearly impossible.

“I think it’s getting worse every year just because costs are going up so much, especially in rural areas, and incomes aren’t rising as fast as those costs are increasing,” he said. “That gap is growing.”

The Section 8 housing program run by the U.S. Department of Housing and Urban Development and administered by county agencies requires qualifying participants to pay 30 percent of their rent, with the rest paid in the form of a government voucher.

In most areas, the need for vouchers far exceeds the number available.

“We have waiting lists for pretty much every property and program we operate with few exceptions,” said Doug Wells, director of the Pennington County Housing and Redevelopment Commission. “It’s very clear there is a need.”

The agency owns about 650 affordable housing units, and provides roughly 1,350 HUD vouchers a year, Wells said. The need for assistance is greatest among the elderly, disabled, military veterans, Native Americans and anyone who doesn’t have the education or job skills to land a good-paying job.

“It boils down to incomes,” Wells said. “More inexpensive rentals would be nice, but when you’re under that $20,000 a year range, there just aren’t going to be any rentals available to you.”

About 2,000 families a year in Minnehaha County get some type of housing assistance, said Fulmer. The agency administers Section 8 vouchers, but also develops and manages housing of its own.

This year, in conjunction with Sioux Falls Community Development and the state, the agency plans to bring 17 single-family homes to market for purchase by income-qualifying residents. The agency will also open 12 condo units and 40 apartments, Fulmer said. The agency also offers education, job training and childcare assistance for low-income residents to help them obtain housing self-sufficiency.

Fulmer said 92 percent of the clients aided by the agency hold jobs, often multiple jobs. He said the worry felt by his clients is palpable.

“It’s just the sheer stress of, ‘How are we going to make it this month?’ And that’s month after month after month,” Fulmer said. “I would hate to think that if I were working 60 hours a week and have to deal with multiple children in school, how would I make that work?”

Fulmer said that in addition to the growing gap between stagnant wages and rapidly increasing rents, macro government policies, such as recent tariffs on wood purchased from Canada, have driven up the cost of new housing construction, costs typically passed on to the consumer.

Providers of housing assistance and other charitable endeavors in Sioux Falls are working together more closely of late in order to streamline services and avoid duplication, Fulmer said. Groups like Sioux Falls Thrive and the new housing Action Teams are trying to improve access and assistance for needy clients, he said.

In eastern South Dakota and across the state, many working families or single parents are one crisis away from losing a place to live, said Dane Bloch, director of The Community Outreach of Sioux Falls.

Bloch’s group is a non-denominational Christian outreach agency funded in part by the United Way that provides emergency assistance to people who encounter a medical condition, employment change or other short-term issue that knocks them out of the workplace and potentially out of their home. Payments made by the agency directly to landlords or utility providers can help those people stave off homelessness, he said.

Bloch said apartment construction remains steady in Sioux Falls, but that most new units are priced at market value and are out of reach for low-income residents.

In 2015, the agency aided 4,444 clients in one way or another. That number jumped to more than 8,100 in 2016 and to 8,500 last year, Bloch said. Even people who are making a good wage can suffer a crisis that puts their housing at risk, Bloch said.

“Most of our clients in Sioux Falls are living paycheck to paycheck,” Bloch said. “But what many people don’t realize is that it can happen to anyone and happen very quickly.”

An Army veteran in Rapid City found that out the hard way. While holding a good job as a concrete finisher, the man suffered a massive heart attack at age 46 in 1991 and has been fully disabled since. The man, who did not give his name, said that on a fixed Social Security income of $1,200 a month, he would be homeless without the option of renting a 1-bedroom subsidized apartment in Rapid City at $360 a month for himself and his 17-year-old Pomeranian named Maggie.

“I’d be out on the streets,” he said.

War Bonnett, 21, dropped out of high school after she became pregnant at 17. After having a second child two years later, she had a decent job working at Taco Johns but lost it. During a time of desperation to find housing, she paid market value of $725 a month for an apartment, which consumed her entire monthly take-home pay.

She now qualifies for government subsidized housing in North Rapid City and pays $204 a month plus utilities for a 3-bedroom apartment. With a solid employment record, War Bonnett is confident she’ll find another job, though likely for about what she made at Taco Johns. But even if she clears $700 a month, she knowns she won’t be able to make it out of government housing for some time.

“It’s a problem for a lot of my family and friends,” she said.

Good rental properties can be found across South Dakota, such as this rental house on the west side of Rapid City, but rents often are unattainable for many low-wage workers and families. (Photo: Bart Pfankuch / South Dakota News Watch)

Small city finds success

If there is a model for fighting the burden of high rents, it may exist in the Beadle County city of Huron.

In 1991, facing a housing shortage, Huron officials hosted a regional summit to gather input and ideas on how to create more units with reasonable rents or purchase prices.

City officials in 1993 successfully pushed the Legislature to pass a tax-credit program for creation of affordable housing. In the quarter century since, a comprehensive and aggressive effort to provide affordable housing has paid off in Huron.

The Huron Housing Authority now manages more than 400 affordable housing units in a city of about 13,000. The city has about 250 Section 8 housing vouchers available and no current waiting list. The housing authority has developed several affordable apartment complexes over the years to stay ahead of the need, said authority director Andrea Del Grosso.

One such project is the Lampe Estates complex of five, 8-unit apartment buildings that feature 2-bedroom and 3-bedroom units that rent for $690 a month. The city has diversified its offerings to include some single-family homes as well as housing for elderly and severely disabled residents.

Many of the efforts are centered around creating affordable housing for current and future employees of major employers such as the federal government and Dakota Provisions, a massive turkey processing plant near Huron that is undergoing an expansion, Del Grosso said.

Furthermore, the city has taken steps to ensure housing is obtainable for the many immigrants it has welcomed from Burma, Taiwan and recently from hurricane-ravaged Puerto Rico. The city is opening 150 new rental units this summer alone, Del Grosso said. Housing agencies and charitable groups meet quarterly to discuss challenges and share ideas, she said. Interested housing authority clients are educated in handling the challenges of home ownership. As far as she knows, there are no homeless people in Huron, Del Grosso said.

“It’s kind of a well-oiled machine,” Del Grosso said.

The larger goal has been to encourage private sector development of housing by proving to developers that the housing need exists in Huron and that units can be filled. That effort has appeared to pay off with the arrival of new privately funded apartments, including the Wheatgrass Village complex developed by the Costello Companies of Sioux Falls. Monthly rents range from $490 for a studio to $1,200 for a 4-bedroom.

“Our community is very involved and proactive in these things, so that we make sure if someone wants to settle down here that they can,” Del Grosso said. “We absolutely want you to stay if you want to be here.”