With rapid population growth developers, designers, contractors, and finance are at work to provide adequate housing supply. Housing is required to facilitate the recruitment and retention of the influx of the workforce. Yes, housing is in high demand. Yes, we need to accommodate the influx. But – are we planning for the long-term impact on Sioux Falls and other cities going through mass growth? I’m starting to notice a few trends.

• Land opportunities are getting further and further away leading to concerns of suburban sprawl, and associated results of long commute time, costly infrastructure costs that raise the cost of living, and loss of community environments.
• There is a disproportionate number of leased units being built in contrast to ownership opportunities held in condos, townhomes, and single-family dwellings.
• The influx of multifamily dwellings may not provide stable housing to those who seek the financial and social benefits of homeownership.

The affordability of buying homes is far fetched for many and it poses the question – Why are the primary housing options a $400,000+ home or putting your financials to a lease where the opportunity of equity is not an option? There are a few companies focusing on the in between with townhomes, but the quantity and options are limited. The following graphs from the city of Sioux falls compare the large quantity of Apartments, single-family dwellings, and townhomes permitted this year, a large imbalance is present.

SOURCE: City of Sioux Falls – Permit States

https://www.siouxfalls.org/permit-stats

QUESTIONS

• How do we find the opportunity to provide long term solutions to mix affordability with ownership opportunity?
• How do we mix the financial and social benefits of long-term stable housing to those who need it most?
• How do we remove the viscous rent cycle for tenants seeking stability

INITIAL CONCEPT – RENT-TO-OWN

This one might throw some of you for a loop, but stay open minded for a sec. I used to own a trailer park outside of Brookings and what an experience that was! There was good, bad, excitement in cleaning it up, and so much opportunity to do good for people.

Trailer parks often use the rent-to-own approach to sell trailer homes. This is for multiple reasons.

• Trailers are licensed like a vehicle title, meaning they do not have a typical mortgage or low downpayment option for ownership.
• Trailers are one of the most affordable options for ownership – yet often require lot rent.
• Trailers degrade in quality quickly! This has encouraged owners to sell them as their value rapidly depreciates (often leaving the new owner with a low quality product ☹)

But, I think there’s something to it. Trailer housing are designed for efficiency in layout with tight parameters. They are designed to be mobile. They are designed to hit a price point and offer options to obtain ownership. They serve a purpose. Can that purpose be tweaked or facilitated on a larger scale?

If this concept were taken to a larger development and tested as an opportunity to provide affordable housing – without additional funding, still providing financing benefit to a partner bank/developer, and designed as a quality community/environment, would we be able to provide stable housing at the demanded price point? Now I’m not talking about trailers anymore. Rent-to-own for small homes, for condos, for townhomes.

There are many benefits that could occur with this approach such as quality housing, tenants being invested in caring for the property with a sense of ownership, contract agreements that treats the property as a lease as ownership is built up, and ownership protection of tenants losing equity if not caring for the property. Yes, there of course would be concerns raised as a new concept and contract writing would be vital to ensure the product is mutually beneficial and neither party is taken advantage of, but the opportunity of ownership, equity, and 0% down could be a lifechanging opportunity for stable housing.

CONCLUSION

Building Equity is important to increase the amount of money residents have now and in the future. People need the opportunity to borrow equity as a loan, invest in their community’s long term, and leave with capital upon selling their home. I believe affordable housing opportunities must be present for stable housing for those who need it (or just want it) the most. Apartments don’t provide stable housing.

Leasing properties are beneficial for those who are not interested in ownership or need housing as they make decisions for long term commitments, and in no way do I think they should go away – but it is our responsibility to ensure that those interested in stable housing have opportunity to engrain in our community, devote and invest in stable housing, and be a contributing resident of their city. To do this, we need to provide creative and flexible equity opportunities for low-income households.

How do we balance our product cost to income? Is there something between single family housing and apartment leasing that can create social and economic benefits? This type of approach would require a group of open-minded and creative individuals to evaluate financing, sustainability of the projects, design considerations and expectations to keep quality, and multiple partnerships. As a long-term approach, what do you think? There are hundreds of holes that can be poked in the concept, but the conversation is important!