The Belle Fourche Development Corporation recently won one of the state's fourteen workforce development grants with an affordable-housing plan that mirrors one proposed on the Madville Times seven years ago. The Belle Fourche housing plan also reveals a fundamental market failure in providing housing for workers.
The state is giving Belle Fourche $175,200 to help buy three lots, build three basements, plunk down three three-bed two-bath Governor's Houses, and hook them up to utilities. The total cost for each property will be $143,884. The city will also draft high school students taking vo-tech classes to build two more new houses during the next school year.
BFDC's application says that big new companies since 2013 have stimulated the Belle Fourche economy with $20 million in capital investment and 160 new jobs. However, those new workers can't find decent affordable housing in Belle Fourche and are having to commute from Rapid City and elsewhere. BFDC includes in its application a July 2014 letter from Permian Tank plant manager Robert Sieve saying that affordable local housing is "an important factor in our employee satisfaction and retention."
I agree with plant manager Sieve: a two-hour commute increases the chances that workers will keep their eyes open for work closer to home and stick the company with more frequent turnover costs. The Belle Fourche Development Corporation is serving the interests of labor, management, and the community as a whole in promoting affordable, quality housing.
But I see in Belle Fourche's plan the same market failure that I've seen in housing development in Madison. Back in 2008, the Madison City Commission granted developer Randy Schafer a tax increment financing district to subsidize construction of working-class housing that Schaefer told me would not get built without government help. In his last great economic development project, Richard Benda convinced the Lake County Commission that market demand wasn't enough to build workforce housing and secured tax increment financing for 28 townhouses in Madison. Tax increment financing will build another 14 housing units on the east side of town.
The assumption in Madison, Belle Fourche, and (as evidenced by the grant award) Pierre is apparently that the market is broken. Housing is a basic need; the market fails to build and maintain enough decent, affordable housing; therefore, government must act with tax subsidies and labor provided by prisoners and public school students.
I agree that government properly acts to redress market failures. But what part of the market is failing? Is supply failing to respond to obvious demand? I have a hard time believing that South Dakota contractors are willing to turn down an opportunity to make money building houses. It seems more likely the market failure lies on the demand side: workers would like houses, but their new employers in Belle Fourche, Madison, and elsewhere in South Dakota aren't paying the wages that will convince the bank to sign the mortgage.
Workers need houses. Belle Fourche is taking reasonable action to help workers get houses. But I worry that Belle Fourche's action and the state money supporting it, like other state programs, subsidizes employers who are shorting their employees the full paychecks they deserve.