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2000 Best Practice Awards

Best of the Best Winner: South Dakota

Best Practice: Green Hills I Development

Partnership Provides Affordable Housing to South Dakota Residents

Sioux Falls, South Dakota. The South Dakota Housing Development Authority (SDHDA), Sioux Empire Housing Partnership, Costello Companies, Stencil Construction, Security Mortgage Corporation and Citibank partnered to obtain low-interest financing to acquire and develop land for the construction and sale of affordable single-family homes and lots in Sioux Falls.

Security Mortgage Corporation provides ongoing mortgage loan servicing and guaranty. The mortgage loans do not carry mortgage insurance; instead, they are backed by a five-year letter of credit from an AA-rated bank. The applicable mortgage

Tom Costello/Dave Munson/Brent Atne/Valerie Kahl receiving Best of the Best award from Secretary Cuomo (l) and Deputy Secretary Ramirez (r)

loans are serviced by a single servicer, who also provides a take-out guaranty beginning in year five for the remaining term of the loans. With cooperation from the city of Sioux Falls, the development authority was able to sell tax-exempt bonds to finance the project, instead of relying on direct government subsidies. By December 1999, 48 affordable homes had been built and sold for $81,500 each, and 40 lots were sold at $14,500 as affordable home sites.

To make the homes available to low-income families, down payments were set as low as $500, and 100 percent low-interest financing was available to homebuyers meeting the income limits of first-time homebuyer program. Financing for the entire project was provided through SDHDA’s issuance of $4.45 million in tax-exempt bonds. Citibank provided a letter of credit to enhance the sale of the bonds.

Costello Companies provided construction management and marketing, and served as the listing agent. Through the company’s website, potential homebuyers could view the lot locations and the six floor plans available, and they also could access a purchase agreement. Because of bulk sales and common construction and closing dates, the appraiser and title company provided reduced costs to homebuyers. The homes were built by Stencil Construction.

Phase II of the program began in spring 2000. Because of this program, lower-income homebuyers are able to obtain affordable housing with built-in equity, minimal closing costs and small down payments. Furthermore, monthly payments are greatly reduced because mortgage loans are uninsured, low-interest, first-time homebuyer loans.

To replicate this project, the following steps need to be taken:

  • Determine need for the project.
  • Identify potential partners.
  • Establish a partnership with a general contractor to complete construction and a realty company to provide marketing and coordinate closings.
  • Obtain low interest construction financing. State and federal statutes allow SDHDA to be a developer of affordable housing and to use tax-exempt bonds for that purpose.

Contact: Darlys Baum, Thomas Costellow, and Jim Schmidt, Phone: (605) 773-5157
Tracking Number: 608
Winning Category: Program (Housing - Single Family)

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Content Archived: April 20, 2011

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