Skyrocketing housing costs adding to financial burdens of renters in SD | Local News

SOUTH DAKOTA — Steadily rising rents across South Dakota are adding further financial hardship to renters who are already facing record gas prices, rising costs for food and utilities and inflationary increases in the overall cost of living.

The rising rents are forcing some potential renters to make tough choices, such as taking on roommates, living longer with relatives or accepting housing with worse conditions or less space than hoped for.

Urban areas of South Dakota are seeing the biggest spikes in rents. The average rent for a 2-bedroom apartment in Pennington County is up 15% from 2020 to 2022, and the monthly cost is up 10% for renters in Meade, Minnehaha and Union counties during that two-year period. Several South Dakota counties are near or above $1,000 a month in average rent for a 2-bedroom apartment.

Rural areas of South Dakota have seen lower increases in average rents, but availability of rental housing is low in many small cities and towns.

The increased costs of housing comes at a time more people are seeking to move, including people making life changes after the pandemic, recent high school or college graduates, or those who seek new housing in the summer months.

Meanwhile, as has long been the case in South Dakota, there is a growing disconnect between average wages and the increase in rent and the overall cost of living. The spiking rents also come as availability of rental housing is low across the state, further challenging those who need housing.

Across the Midwest, monthly housing rates have gone up about 4.8% since April 2021. In April 2022, the average rent for a two-bedroom unit in South Dakota was about $750 a month, according to World Population Review. Meanwhile, the minimum wage has only increased $1.30 per hour in the last four years, though a workforce shortage has prompted many employers to pay well above minimum wage so far in 2022.

The housing market in the US has become extremely competitive and costly, turning away many first-time homebuyers and adding pressure to the rental market.

According to Zillow.com, mortgage and interest rates have made homes 53% more expensive that a year ago. The National Association of Realtors saw the average home price rise 17 percent in 2021.

The median list price for new homes in the Sioux Falls metro area was $295,000 in April, according to Realtor.com, an increase of 16 percent from 2021, while the Rapid City median home list price tops Sioux Falls at $329,000, an increase of 20 percent for 2021.

The spike in home purchase prices has pushed an estimated one million prospective buyers into the competitive rental market.

The burst of potential new renters is also reducing availability of quality, affordable housing in both urban and rural areas of South Dakota.

Tillie Morrin, 19, spent most of a recent day driving around Rapid City with her fiancée and a friend trying to find a 2- or 3-bedroom apartment that was available and that they could afford.

Morrin and her roommates were trying to land an apartment for $1,000 or less per month.

“The hardest part is availability,” said Morrin, who works as a stocker at Walmart.

The group found one 2-bedroom apartment available for $1,200 a month but kept on looking

In some areas of South Dakota, more tenants than ever are taking advantage of government assistance programs.

Grow South Dakota, an agency that helps low-income residents in a 17-county region in northeastern South Dakota, has seen an “astronomical” increase in financial assistance provided to needy renters, said Maureen Nelson, senior program director at Grow.

In the seven-month period from Oct. 1, 2021, through April 30, 2022, Grow provided about $975,000 in assistance to 930 people in about 350 households, Nelson said. Most of that funding was for rental and utility assistance, she said.

Prior to the pandemic in 2020, the Sisseton-based agency was providing only about $30,000 a year in total assistance, Nelson said.

The huge increase is due to higher need for help, greater availability of federal assistance and stronger “word of mouth” communication among those who potentially qualify, Nelson said. However, anyone receiving assistance must still meet federal low-income guidelines before receiving any money.

One recent challenge facing renters is that many other costs of living have gone up, including gasoline, groceries and utility costs, Nelson said.

“They’re needing more assistance with rent because everything else is going up across the board,” she said.

Furthermore, many rural areas in South Dakota have an overall shortage of housing, especially for families, Nelson said.

“There might be job opening for people to come to a town, but they’re having a hard time finding rentals that accommodate their family size,” she said.

Nelson said landlords have also struggled financially during the pandemic, including those who were unable to evict non-paying tenants due to a federal eviction moratorium, which has now expired. Landlords are also enduring much higher costs for goods, services and mortgage payments, Nelson said.

“I think it’s been tough for landlords,” Nelson said. “If you didn’t have income coming in for six months, that makes a huge difference in their cash flow.”

Nelson said some landlords are responding by being more rigorous in screening potential tenants, placing additional challenges on people seeking rental housing.

Dustin Hoffman owns a construction company in Sioux Falls but also manages 17 rental properties in the city, mostly for low-income tenants. His 2-bedroom apartments are running about $900 a month, an increase of nearly 40 percent from two years ago.

“When you consider taxes, insurance, gas bills – everything is going up,” Hoffman said. “We were forced to raise our rates to get back to where we were before the pandemic.”

Still, even with higher rents, demand for housing remains high, he said.

“The problem a lot of [tenants] have is that they’re paying high dollar for gas and groceries and everything else,” Hoffman said. “So the question becomes whether they’re making more money in their paycheck to accommodate that. A lot of the time they aren’t.”

Meanwhile, wages in South Dakota are falling even further behind increasing rents and a higher cost of living.

In 2021, the National Low Income Housing Coalition reported that the average renter’s wage in South Dakota was $13.15 per hour, or about $27,400 annually. At that wage, monthly rent must be at or below $684 to be considered affordable, or under 30% of a renter’s monthly income.

— South Dakota News Watch reporters Bart Pfankuch and Stu Whitney contributed to this report. News Watch is a non-profit news organization online at sdnewswatch.org.

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