Once the COVID-19 pandemic gets under control – and it will – an old challenge holding back economic growth in South Dakota will resurface.
Housing shortages have been slowing growth in cities across South Dakota, especially in small towns that have been fortunate enough to experience an expanding base of businesses that provide jobs. Businesses in communities without decent housing options face especially difficult challenges in recruiting and retaining workers.
SDN Communications and its 17 member companies across the state, which have been concerned about the issue for several years, have joined with three other regional business organizations to help address the housing crunch.
SDN announced Wednesday it has pledged to invest $1 million in a housing-development initiative that is part of a revolving loan fund administered through the East River Electric Power Cooperative of Madison. Loans from the Rural Electric Economic Development (REED) Fund will support private and nonprofit developers who create homes such as multi-family apartment complexes and single-family houses.
REED Fund housing loans are not made to individual homebuyers; the low-interest loans will go to non-profit or private developers to construct homes. As a nonprofit operation, the REED Fund can offer loans with attractive rates with the objective of spurring economic development, not profit from making loans.
SDN will invest $250,000 per year for four years in the project. The company recently made its initial payment.
The availability of housing is a huge economic issue in many South Dakota communities, said Vernon Brown, vice president of marketing and community relations at SDN. He pointed out that SDN and its member companies, and East River Electric and its member cooperatives have largely similar business footprints in the region, so they make great partners.
“Instead of SDN and its member companies starting its own housing development fund, the REED Fund already has the staff and years of practice. It would take us so long to get anything going,” Brown said. “We thought it would be better for us to invest in what they already have and work with the REED Fund and its electric cooperative members on financing housing development rather than create more administration for building houses.”
The investment will help promote growth and create new customers in communities that SDN member companies serve, Brown said.
“We’re excited about the partnership,” he said.
Avera Health, which has affiliated healthcare facilities throughout the region, has also joined the housing initiative. It, too, is a good fit for the project. The Sioux Falls-based regional healthcare system has more than 300 facilities in 100 communities in South Dakota and neighboring states.
Avera has committed $2 million to the partnership.
BRINGING ORGANIZATIONS TOGETHER
East River Electric, is a cooperative that delivers wholesale power to 24 rural electric distribution co-ops and one municipally-owned system in eastern South Dakota and western Minnesota. East River facilitates the REED Fund and the housing initiative in partnership with its member cooperatives. They established the REED Fund as a nonprofit corporation in 1996. Since then, the loan fund has been involved in hundreds of projects, with total lending of more than $100 million, that promote business and job growth as well as improve infrastructure and community facilities.
About a year ago, the REED Fund launched a special initiative to specifically promote housing development. The organization set a multiyear goal of raising $10 million in outside investments to supplement the program.
SDN and Avera are the first two outside investors in the initiative and First Bank and Trust was a third partner added in June. All three organizations are a great fit, said Mike Jaspers, business development director for East River Electric and the administrator of the REED Fund. The nonprofit is seeking additional investors.
Assisting housing development is not an entirely new effort for any of the participating organizations, but it’s a common challenge in the region that they can more efficiently address jointly, Jaspers said.
“In every community, largest to smallest, the issue that keeps coming back is that we’re so short of affordable, workforce housing,” he said. “It’s the most common theme that every community has, and it’s a big challenge.”
Past and current loan projects have assisted housing projects in several communities in South Dakota, and more projects are in the works. The REED Fund initiative is bringing together organizations that will provide additional expertise from communities across the state, Jaspers said.
“We’re all in this together. We have the same footprints, roughly, and we all have the same common goal of trying to work on this problem.”
SDN is a leader in providing business internet, private networking and cloud connectivity to businesses and organizations in communities such as Sioux Falls, Rapid City, Worthington, and the surrounding areas.