SD housing authority grant and loan program on track to be approved by July after delays

The interim executive director of the South Dakota Housing Development Authority was back in front of lawmakers Wednesday to speak about the delay in a $200 million grant and loan program meant to develop housing infrastructure across the state.

The meeting came a day after draft rules for the housing and loan program were approved by the Housing Development Board. It's the second time the draft rules were reviewed by the governing board after the Governor's Office of Economic Development took issue with the first draft.

The rules will now have a public hearing, tentatively set for May 31, before moving on to the Legislative Interim Rules Review.

Chas Olson told lawmakers sitting on the appropriations committee Wednesday he hoped the draft rules would be in front of the rules committee for approval in time for their June meeting and that SDHDA could start accepting grant and loan applications by July.

That's about a month ahead of schedule compared to what Olson had told lawmakers on the executive board in April, when he said he'd hoped applications would be reviewed by August with money beginning to be distributed by September.

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This is the most recent development in what's been described as a frustrating process to get the grant and loan program out the door. The Legislature had originally approved the program in 2022 with SDHDA overseeing it, but the funds sat dormant because of vague wording in the original bill.

During the Legislative session in January, the program was rewritten in SB 41, with SDHDA still in charge but with the condition that it had to write administrative rules, something the semi-independent agency has never done because of an exemption in state law.

Olson was appointed interim executive director at the end of March, weeks after former director Lorraine Polak resigned abruptly.

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What were some of the rule changes?

In a memo to the board ahead of the meeting Tuesday, Olson outlined nine rule changes and three rule requirements taken out of the newest draft.

The requirements omitted included not stating the maximum funding amount, the limit on developer profit or consultant fees, and environmental review.

The nine rule changes included removing for-profit entities as eligible grant/loan applicants, creating an open application cycle, eligible projects based on when they started construction, grant-funding criteria, flexibility for financing, maturity and interest rate changes, flexibility for letters of credit, grant/loan disbursements and waiver requests.

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Olson explained removing for-profit entities from eligibility, the grants and loans could be used by cities, counties, tribes or economic development groups for new development projects, "that may have not happened without the funds."

However, that doesn't stop nonprofits from partnering with for-profits on projects, Olson said, explaining for-profits could be included as guarantors on the new development projects.

As part of the project eligibility, construction projects that started before Feb. 1 are not eligible for the funding, since that was when SB 41 was signed into law, according to the memo. But, projects applying for ARPA funding that incurred costs after March 3, 2021, are eligible for the grants and loans.

Projects that applied for the 2022 program will have to reapply for the funding approved in 2023, Olson added.

Originally, the first draft of rules included a separate administrative plan, which was where GOED's concern came in.

"The guts of the program were in this plan, which wasn't an administrative rule," said Tim Engle, an attorney who represents GOED.

'It's fair to say we're probably all disappointed'

During the appropriations meeting, Rep. Mike Derby, R-Rapid City, was careful not to point fingers at who to blame for the delay in the project.

"I think it's fair to say we're probably all disappointed that this $200 million has not been out on the street," he said.

Gov. Kristi Noem had criticized the Legislature's role in the program on April 25, saying if the Legislature had allowed GOED in 2022 to review the grant and loan applications and award the funding like she'd originally wanted, the money would've already been out.

"Those houses would be built and families would be living in them, because it would have been out a year-and-a-half ago," the second term Republican governor said at the time.

Sen. Jack Kolbeck, R-Sioux Falls, who had sponsored SB 41, voiced his frustration the Legislature had not been made aware about the rules making process.

"We could have had this done and that $200 million could have been on the street," he said. "That's what frustrates me to this day and frustrates people back in my home area."

This article originally appeared on Sioux Falls Argus Leader: Housing authority grant and loan program on track to be approved by July