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Rehab Housing in Miner County, SD
November 5th, 2008 by Mike Knutson
Does your community have a house like the one to the right in need of rehab? Before answering, you’re probably going to ask “what do you mean by rehab?”
That was the question posed to Joe Bartmann last week when he spoke to the Independent Community Bankers of South Dakota.
Rehab housing typically refers to the renovation of older houses that are in need of significant repair (i.e. — new windows, furnace, foundation, roof, etc…). In other words, it’s about the non-cosmetic improvements necessary to make a house livable.
Early in our work in Miner County, SD, we recognized that way too often older homes languished on the market far longer than they should have. Some buyers didn’t want the trouble of renovating a house. Some couldn’t see the post-construction potential of an old dilapidated house. Others needed to move into a house right away, and couldn’t wait for construction. And all too often, we found that buyers could not afford to renovate a new house while still living in (and paying for) their old house.
In short, a multitude of barriers prevented older homes from being purchased, further depressing an already fragile housing market.
The Solution
We turned to a “purchase, rehab, resell” concept, which we discovered from Linda Kastening of Northeast Housing Initiative of Allen, NE. In this concept, the not-for-profit purchases a house in need of repair. They complete the rehab work and then sell it to a qualified buyer.
When we first started to investigate this concept back in 2003, I hadn’t discovered HGTV and had never heard of “flipping houses”; but that’s sort of what the concept is about. In our case, however, there was an important difference: our primary motivation was to develop affordable housing and revitalize our community — not make a quick buck.
To help offset the risk associated with the project, we turned to the Department of Housing and Urban Development’s (HUD) Rural Housing and Economic Development program. The grant helped reduce some of the risk associated buying homes on speculation.
Questions
The program has had some fits and starts, and I think we’ve learned a lot. It’s safe to say that it’s more difficult than your favorite “do it yourself” show makes it look. Since I’m no longer directly involved in the housing work in Miner County, I hope to interview Tami Severson who currently manages the program.
But before signing off today, let me answer a couple questions Joe was asked last week.
- Do you make money? I think everyone engaging this activity should set that as a goal or else they won’t be sustainable. But I need to admit that it’s been a struggle just to break even.
- Do you help with financing? We haven’t engaged in financing housing, which I think is a missing link. Down in Nebraska, Linda credits gap financing as a key to their program’s success.
- Can any rural community do this? That’s a tough question to answer without knowing specifics about the local economy and the community’s goals. If you look at it like an investment, just like investing in a marketing campaign or a business incentive, then you’ll be much more likely to succeed. And, I do think that the size of your community makes a difference in a program’s sustainability.
In sum, I think the concept is a viable option to most rural communities hoping to address their housing needs. Just keep in mind that like most things in life, it’s a lot harder than it looks at first glance.
Tags: miner county sd, Purchase Rehab Resell, Rehab Housing, rural housing, Rural Housing and Economic Development Grant
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