Ever since the Reagan administration introduced trickle-down economics governments across our country have experimented with it. It simply doesn’t work. The concept is that if you give tax breaks to the very top it somehow will help the ones below in better jobs and housing. In fact it has done the opposite, expanding the wealth gap.

The cat was let out of the bag during this interview yesterday that the TIF sponsored housing development in SW Brandon was depending on the tired old broken system of trickle-down;

Meanwhile, Karl Fulmer, the executive director of Affordable Housing Solutions in Sioux Falls, told DNN that these TIF-paid city developments are an effective way of addressing affordable housing.

“The benefit of just building more houses in the $250,000 to $400,000 range still provides the unit, and you can see the transition out of more affordable units from those who might make enough to buy homes in that price range”, Fulmer said.

In other words, these new houses in new “accessible housing” developments actually are not for those most struggling to find affordable housing the most. They are far those who bought smaller, older “starter houses” in town that cost less than $250,000 and are ready to move out of them.

The true affordable housing comes in those starter houses. And the more new “accessible” houses funded by city TIFs that are built, the more those older, smaller houses become available to lower income people.

[insert laughter]

If you speak with anyone in the real estate business they will tell you that these homes are usually owned by lower income people, families, retired folks or rental property, they are not the Jeffersons moving on up. And even if what he was saying was true, most of the homes being sold in this development will go to NEW homeowners not people looking for a step up. In fact, I have argued that many of the starter homes in the lower price range (mostly in the core of the city) have more square feet and bigger yards (and basements) than what these new homes will have.

A better approach would be addressing the housing crisis we have with the people who are having the crisis;

Pat Starr, who represents the northeast district, also told Dakota News Now on Monday that city government is continuing to “dig a hole” by continuing to dig literal holes to build homes partly funded in part by Tax Increment Financing (TIFs).

“We need to talk about the real causes of the housing issues in our city rather than trying to put a band-aid and build 65 houses, which is what this program will do.” Starr said.”

“It’s not the program I’m concerned as much about as as I am figuring out who we’re trying to help. And, it seems to me we have a wage issue more than we have a housing issue.”

We must be giving a helping hand to those who are at the bottom first to lift the other boats. The city has decades long programs in place including low interest Community Development loans and grants. We also need to upgrade the existing infrastructure in our core such as streets and lighting. We can do all this using existing money in our 2nd penny and Federal dollars.

The president of Sioux Metro Growth Alliance, which helps people with payment on houses in rural and suburban communities surrounding Sioux Falls, disagrees.

“If you look at wage growth around the country and in the Sioux Falls market in the last three years, it’s been astronomical,” Jesse Fonkert said.

While wages have increased in SF, inflation and housing costs have been beyond astronomical and have wiped away any wage increases.

But Fonkert does agree with Starr’s assessment that continuing these city-funded housing projects is not solving the affordable housing crisis.

“It’s a challenging situation, because if you spend too much money on government programming, you’ll have companies that will just hike their prices up,” Fonkert said.

Notice the Sioux Steel District and Cherapa II projects didn’t announce they were building hundreds of units of affordable housing after receiving a combined TIF payout of $50 million. Developers will always go where the money is, and that is how a FREE market system works. But tax rebates for parking ramps attached to condos isn’t fixing anything it’s just making that wealth gap larger.

12 Thoughts on “Top Down approach to affordable housing is a ruse

  1. D@ily Spin on September 13, 2022 at 12:30 pm said:

    If it makes no sense, throw public money at it. Small homes on small lots at a high price. Not even a good gamble.

  2. Mike Lee Zitterich on September 13, 2022 at 12:49 pm said:

    I do have to agree, while I like the fact that this TIF plan came forward, it allows the “city” to work with developers to build housing developments geared more to Affordable Housing, however, end of day, you still need people who can afford to pay cash for a $203,000 home, let alone get a loan for that $203,000 home.

    Not only that, will this development become just another “cookie cutter” development of homes that all are the same design, color, and concept? Which is quite boring, just look at the housing development off of Madison Street and between Benson Road on the west side… a drive through that development and you get the feeling you are driving amongst large “chocolate chip cookies”.

    While the “CITY” gets to put on hold $2,140,000 dollars worth of road improvements, utility work, water-sewer, etc for 20 years, the money becomes just another liability on our books; however, Pat Starr made an excellent point – ‘we’ could simply write the check today with the extra $4,400,000 in propert tax dollars we plan to take this year regardless…

    As for TRICKLE DOWN, please do not attack it, the entire concept was built around ALLOWING “Americans” to keep their Gross Income untaxable, meaning they have more money in their pockets to actually afford, and to buy a “Affordable Home”.

    South Dakota is a “trust heavy” state, that means ANYONE and every Citizen of the State can “invest” up to 100% of their Gross Income in a real property trust today, allow it to accrue over the next 10-15 years, while allowing the “tax free” income to go towards that New Home 15-20 years into the future. The American Dream is real, at least was real before this whole generation of “Tax Subsidies, Credits, and Allowances” manipulated by the Federal Govt came into existence.

    If you want to find ways to get people into New Homes, you do not do so by ‘taxing’ people to death!

  3. if 57th street and south is taupeville, what will the area east of vets pkwy and madison street be called?

  4. Very Stable Genius on September 13, 2022 at 7:02 pm said:

    Please, don’t get me started on supply-side/trickle-down economics and the Laffer Curve (Laughable Curve).

    But one of the things that I am beginning to notice, however, especially in the core of the city, is how people appear to be buying older homes and doing a great job fixing them up or restoring them. And my guess is that a lot of this has to do with people making the most of their recent house purchases in a market where prices are becoming prohibitive and supply is limited.

    It’s ironically one of the few pluses of an inflationary housing market, where willing and able purchasers are intentionally, or not, improving neighborhoods, and so I am not so sure they are now interested in moving up or beyond. Especially sense the only real short term financial winners of this current housing market are those who are down sizing, moving to a retirement center, or moving to say a smaller town with less expensive housing.


    ( and Woodstock adds: “I’m utterly amazed at what my nest is now worth”…. (… “Talk about a nest egg”… 😉 ))

  5. Mike, your posts are hard to read. Perhaps if you capitalized and put quotes on even more random words it would help.

  6. Fear & Loathing in Sioux Falls on September 13, 2022 at 8:52 pm said:

    Maybe a good name for that new area would be Gitchie Manitou Estates, or Gitchie You a Slab Home. Else, Tornado Alley.

  7. Further Fear & Loathing on September 13, 2022 at 9:01 pm said:

    Actually, TIFs are a developer’s Trix.

  8. D@ily Spin on September 14, 2022 at 8:18 am said:

    Saw the architects representation pic. This project reminds me of the Japanese internment camp during WW2. Will there be concertina wire and guard towers?

  9. The Guy From Guernsey on September 14, 2022 at 9:13 am said:

    ” ‘If you look at wage growth around the country and in the Sioux Falls market in the last three years, it’s been astronomical,’ Jesse Fonkert said.”

    I suppose the accuracy of this statement depends on what is the definition of “astronomical”.

    (IMO based from actual labor statistics) As a generalization, growth in wages, salary and compensation in the Sioux Falls area over the past 5 years has lagged the employment compensation performance for the entire US (reference Bureau of Labor statistics).

    Here is a little nugget I found while fact-checking this statement, a finding for which Mr. Fonkert and the rest of our economic development wizards should be absolutely embarassed:

    Bureau of Labor Statistics, June 2018 to June 2021 (most recent avail for specific occupations).

    Healthcare Practitioners and Technical.
    US. +11.1% in wages
    Sioux Falls area. -1.3% in wages.

    You want to know why nursing homes are closing in this state?
    With Sioux Falls as a regional bellwether for employment compensation, THIS is the reason why nursing homes are struggling to find employees and are closing.

  10. Fearing the Fuhrer & More on September 14, 2022 at 12:43 pm said:

    For the record, our internment camps were much nicer.

  11. Sick of Fearing on September 14, 2022 at 12:50 pm said:

    Say, didn’t we imprison Italian soldiers near Edgemont during WWII? No wonder Edgemont Pizza is so good. I especially enjoy the pizza they cook on uranium rock formations out there, which, by the way, puts the Chernobyl sauce from Hooters to shame.

  12. The only fair and unadulterated way to ensure the property owner is receiving the benefit is for the city to create a property tax free district. The district can have rules such as price per square foot at sale price.

    All other versions of this TIF shit is just welfare for the wealthy. End the TIFS and create property tax free areas!

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