Deadwood Lead Eco. Development Corp. delves into housing demand dilemma

Deadwood Lead Economic Development Corporation Director Kevin Wagner shared successes for 2019, as well as exciting news about additional housing projects in the two towns at Tuesday’s DLEDC annual meeting. Pioneer photo by Jaci Conrad Pearson

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DEADWOOD — Followed by a report from Deadwood Lead Economic Development Corp. (DLEDC) Director Kevin Wagner, guest speaker Dr. Jared McEntaffer dove into data driving the housing demand dilemma in the Lead-Deadwood area, providing interesting national and local insights and offering opinions at the DLEDC annual meeting Tuesday at the Lodge in Deadwood.

McEntaffer, project director and regional economist with the Black Hills Knowledge Network/South Dakota Dashboard, has focused on research fields such as program evaluation, economic forecasting, human capital formation, assessing housing affordability, and regional labor force development.

In a presentation titled, “Housing Demand in Lead and Deadwood Trends and Insights,” McEntaffer started out with a broad overview of national economics that trickle down locally and said a dichotomy currently exists nationally.

With consumer confidence at a two-year low and manufacturers’ confidence on a nine-month side, the median sale price for a home, currently around $213,500 in the Midwest, is beginning to slip, while the labor market continues to grow exponentially.

“We’ve got this strange situation where businesses seem to not be very confident, consumers don’t seem to be very confident, yet, everybody’s hiring,” McEntaffer said. “Everyone wants workers and everyone’s getting jobs. We’re at about a 50-year low for unemployment, nationally. And if you look around the region, we’re at 0%. You can’t find workers anywhere ... so the labor market is very strong.”

In South Dakota, with eight years of steady growth, employment has grown 1-2% annually, with 4,500 jobs per year.

“Healthcare is driving that growth, with 23% of all new jobs, or 8,000 new jobs in the last eight years in this field,” McEntaffer said.

“Farm incomes. This is what scares me about South Dakota for next year,” McEntaffer said, referring to data that showed South Dakota farm incomes plummeting from a $4 billion high in 2011 to around $952 million in 2018. “So we’re on a multi-year slide. Hopefully, toward the bottom of it. This is caused by a number of issues, mainly low commodity prices.”

McEntaffer then turned to the local economy, examining sales tax trends, the labor market, and housing market trends.

One-year sales tax growth for the state was 3%; Lead 8%; and in Deadwood 1%. Five-year growth for the state was 15%; Lead 11%; and in Deadwood 16%. The growth leader was healthcare.

“This is good. This is really positive. This is higher than a lot of areas in the region,” McEntaffer said.

“We’re seeing some non-retail, non-gaming-related industries that are growing that tend to be higher value-added, tend to be higher-paying and also you’ve got the ability to attract businesses that can service the entire country.”

In examining the labor market, McEntaffer asked what is unique to the Lead-Deadwood area.

“For me, the thing is, how many jobs you have that are filled by people that don’t live here,” he said. “That’s a big one. You’ve got a lot of people cycling through this area every day.”

Estimates from 2016 show around 3,114 jobs in Lead-Deadwood. 

“Of those, 2,300 are people who don’t live here, but work here. They’re commuting in from Rapid City, Spearfish, (and) surrounding areas,” McEntaffer said. “Only 800 jobs in Lead-Deadwood are filled by people that live here.”

McEntaffer said it is an interesting situation when it comes to housing.

“What can you do to develop housing stock here where you can maybe get some of these people to just live here?” he asked.

Historically, Lead has had no new multifamily units added in the last five years, while Deadwood has had 24 multi-family units added in the last five years.

“That’s not enough,” McEntaffer said.

In regard to single-family housing, data provided by McEntaffer indicated that in 2014 in the Lead-Deadwood School District, 16 single-family homes were built with the least inexpensive valued at $310,000. Sales of existing homes over the were down almost 20%, with an average 2019 price of $227,000. A salary of $70,000 would be required to affordable the homes, but locally, the median household income is $50,000.

“So what we’ve got is the median income does not touch really what could be considered affordable for that average home price in 2019,” McEntaffer said.

But he is encouraged by the direction housing is headed in the area. 

“Bringing this new supply online to help end this cost curve a little bit. Focusing, especially, on some town homes, multi-family, those are things that tend to be a little bit more affordable, especially for your workforce development and long-term housing needs.”

In examining future housing needs, McEntaffer focused on demographics of the area and the Sanford Underground Research Facility. 

Demographic estimates show statewide populations to grow from 735,381 to around 777,832 in the birth to 64 age group, and from 146,854 to approximately 212,856 in the 65-plus age group by 2030.

“We’ve got an aging cohort that tends to be in housing that they have paid the mortgage off. So it’s much more affordable to live in that housing stock … what happens is that aging cohort is effectively removed from the market,” he said.

But in the Lead and Deadwood area, this is not the case.

McEntaffer said it begs the question whether the housing stock in Lead-Deadwood is suited for the aging demographic. 

“The housing stock now, is it going to be working and attracting this, because when you see, essentially, a zero growth to negative forecasted growth in your birth to 64 cohort through 2027, that’s not good. That’s not a stable population trajectory.”

McEntaffer said the question is how to attract the younger workforce.

“This is huge, huge implications for housing development,” he added.

The population of people locally from birth to 29 is projected to decrease by 10% through 2035 and an 86% increase in population 65 or older is projected to occur. 

“This is what you need to be planning for. This is what’s coming down the road for this community, based on the projections at this point in time,” he said.

In summarizing future housing needs, McEntaffer said that population is aging rapidly and likely to stay in homes for as long as possible, which contributes to higher home prices and makes attracting workers more difficult.

New experiments gearing up at the Sanford Lab will cause large but temporary increase in demand for housing. Development to meet this need must recognize its temporary nature and plan accordingly.

“You’ve got a bubble coming, but how do you build smartly in accommodating that bubble for the long term,” McEntaffer said. “How can we build some of this new stock, make it work for that bubble, also maybe develop it so it can help this aging issue that’s coming along, so that you can maybe free up existing stock for younger workers, building for the bubble.”

Economic success

In his report, Wagner communicated 2019 successes for the economic development corporation, including $2.01 million in assistance loaned out from the DLEDC revolving loan fund for Lead, Deadwood, and Central City.

“In 2019, we loaned out $642,081 in assistance for retention, expansion, and start-up efforts,” Wagner said. “That financial investment led to the direct creation of five full-time jobs and seven part-time jobs this year, alone. Wages of these positions, ranging from $15 an hour for some part-time positions, all the way up to $150,000 salary positions.”

Wagner also pointed to the lead generation efforts of DLEDC which led to the sale of Golden Hills Resort; $73,000 in back taxes paid, and a $2 million renovation to bring the property into a Hampton Inn & Suites flagship.

Another success was the partnership with Deadwood Stage Run principals to bring 38 new apartment units on the market.

“More market-rate workforce multi-family housing,” Wagner said. “By this time next year, the first portion of the overall 38 units will be filled with working families that are in the Lead and Deadwood communities.”

Also counted as successes were the opening of Outlaw Square, as well as the continuation of the Long Baseline Neutrino project.

Wagner named other housing strides made in 2019.

“One new construction home took place in city limits in 2019 and four more planned spec homes are on the docket for the 2020 season,” he said. “A large-scale single family housing project is in the making that could be up to 25 single-family home build-out in the first phase of the project. A townhome project that could be upward of a dozen townhomes ranging in single-level and multi-level build is currently in the making and a large-scale multi-family project is passing through the soil engineering phase as we speak. This project will be the largest multi-family project ever for Deadwood and Lead. An upscale yet affordable 85- to 100-unit build-out with common areas, workout facility, and outdoor recreation space for its tenants. The future of housing in Deadwood and Lead is bright and desperately needed. We are excited to share these official announcements with you as the projects progress.”

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