The city already has issued a record $524.3 million in construction permits this year, slipping past the previous mark established in 2007.
â€œCan we imagine any other city across America that wouldn’t want to trade places with Sioux Falls today?â€ Mayor Mike Huether said last week, when he and city planning director Mike Cooper announced the record.
As I have mentioned in the past, this is a good thing, on SOME levels, on others not so much. The one thing that stuck out in the article was the hesitant public buying homes;
In the early 2000s, every new house going up in Sioux Falls was matched by a corresponding new apartment unit, he said. But the 928 multifamily units permitted this year is a record, and combined with 265 townhome units is twice the number of single-family housing permits issued.
Part of that apartment push is tied to a low vacancy rate in the city, a reality shared in places such as Omaha, Rochester, Minn., and Des Moines, developer Craig Lloyd said. People hit hard by layoffs and the housing bust see opportunity in Sioux Falls with jobs and the quality of life, Lloyd said, but often are wary of taking out another mortgage.
â€œWe’ve had people over the last couple of years say, â€˜If I never see another house payment, I’ll be happy’ … because they lost their shirt with the last house payment they had,â€ he said.
Part of the multifamily construction surge is changes in lending laws and downpayment requirements, said Steve Van Buskirk, director of land development for Van Buskirk Cos. For younger residents and potential first-time homebuyers, the downpayment requirements are just too high, Van Buskirk said. And the tightening of financial regulations on credit scores and histories makes it difficult as well.
â€œThe starter home market is the weakest point in this market,â€ Van Buskirk said. â€œPeople are choosing apartments rather than the new starter home, which averages in the $150,000 to $180,000 price range. Right now, they’re going to the monthly rent route.â€
To me this says a couple of things. 1) a cautious public, people got their asses handed to them during the economic downturn, mostly because they were sold houses they could not afford, that they paid too much for to begin with. 2) People really can’t afford to buy a home in SF.
I know what you are thinking about my second statement, but believe it or not, while the developers in SF are getting bank loans to build everything from hot dog stands to luxury hotels (and TIFs to boot) the average Joe is just happy he didn’t lose his entire retirement, and he is certainly not looking to be chin deep in a mortgage.
What does this all really mean? Well, if you are investing in an apartment building, you are gonna make some money. Developers are also doing well by building new properties that are leased before the paint dries and paying off their bank loans with the use of TIF’s instead of paying property taxes.
While I could go on a very long rant about money these folks are making using public incentives, I really am not in the mood for a novel comment from Craig 🙂
I will say this, we have learned NOTHING from the last time we went full boar on development, the market dropped, platting fees went in the toilet, and sales tax payers were left holding the bag for arterial roads.
My bigger question is whether this growth is sustainable? Remember, as taxpayers (sales, property and enterprise funds to utilities) we pay the lion’s share to infrastructure maintenance and new construction. Is all this new growth sustainable 10-15 years down the road? Are we creating new annexation that is unneeded?
But the real question to come from this announcement is “When is the development community going to pay their fair share towards infrastructure?” It’s one thing to brag about a half-billion dollars in growth, it is entirely something else to brag about how this growth is helping to supplement our infrastructure. All I hear is crickets on that front.
But I guess that’s not how we do things in Rome, uh, I mean, Sioux Falls.