Black Hills Knowledge Netowork

June 26, 2018

High Demand for Affordable Housing Found for Rapid City in Newly Released Study by the Black Hills Knowledge Network

In response to both local and national affordable housing concerns, the John T. Vucurevich Foundation commissioned the Black Hills Knowledge Network to conduct a Rapid City Housing Affordability Study to help the Rapid City community understand the local need for affordable housing. Authored by Dr. Jared McEntaffer, Callie Tysdal, and Rochelle Zens, the Rapid City Housing Affordability Study was released to the public on June 25, 2018.

According to a report released today by the Black Hills Knowledge Network, affordable housing is in short supply for low-income households in the Rapid City Market area.

The study found that there is an estimated market shortage of up to 3,490 owner-occupied housing units costing $899 or less per month. The report also found a need for up to 1,459 more rental units with gross rents of $500 or less per month.

Between 2010 and 2016 real median household incomes (i.e. inflation adjusted incomes) in the study area fell by 3.2%, while real median home prices, in contrast, rose by 11.5%. The simultaneous divergence of incomes and housing costs led to increased housing burden families with lower incomes.  As evidence of this, the study found that an estimated 4,417 households, or 12% of area households, were forced to pay more than 50% of their incomes towards housing in 2016.

For more information, scroll to the bottom of this page and download a copy of the entire report. You may also contact Dr. Jared McEntaffer with any further questions or for an interview by email or at 605-716-0045.


This study adopted a broad definition for affordable housing based on the 30-percent rule, which advises that a family or household should not pay more than 30% of its annual income for housing. The demand for housing was estimated by creating an income profile for the Rapid City market area by stratifying households across several distinct income brackets. The study then applied the 30-percent rule to determine the maximum monthly housing costs that could be considered affordable to households and families in each income bracket. The supply of affordable housing at each income level was estimated using data obtained from local tax records and the US Census Bureau.

Market gaps in affordable housing were estimated by subtracting housing demand estimates from housing supply estimates at each price point. This method identified market gaps, or mismatch, between household incomes and housing costs.

Market Area Income and Demographic Pressures

The most noteworthy trends in the market area were those related to household incomes. Real median household incomes (i.e. inflation-adjusted) in the Rapid City market area declined by 3.2% in recent years, falling from $50,380 in 2010 to $48,784 in 2016. In contrast, real median household incomes across South Dakota grew by 7.8% over the same period — rising from a comparable $50,513 in 2010 to $54,467 in 2016. Real median incomes at the national level similarly rose by 4.6% from $55,071 in 2010 to $57,617 in 2016.

A thorough analysis of local demographic patterns highlighted three trends that have depressed real household incomes in the market area: (1) the local population is aging out of the workforce, (2) the composition of households is changing with 1-person and 1-earner households becoming more prevalent, and (3) the local labor market is dominated by low-wage tourism related occupations (e.g. food service, retail sales, and accommodation) that have experienced slower than average wage growth since the 2007-2009 recession.

Owner-Occupied Market Gaps

The mismatch between area incomes and housing costs in the owner-occupied market was clear and is demonstrated by an estimated market gap of 3,490 housing units costing $899 or less per month.

The results of mismatched incomes and housing costs in 2016 were large disparities in housing burden across the income distribution. An estimated 52% of households earning less than $20,000 per year paid more than half of their annual incomes towards housing in 2016. The report also found 75% of households making less than $20,000 annually paid more than 30% of their incomes toward housing, and an estimated 56.5% of households with annual incomes below $35,000 were similarly cost burdened. In contrast, 85% of these households earning more than $100,000 paid less than 20% of their incomes towards housing.

Rental Market Gaps

The rental market exhibited a similar pattern of shortages and surpluses as the owner-occupied market, and displayed a pronounced shortage of an estimated 1,459 units with gross rents of $500 or less per month. The true shortage of units with gross rents under $500 per month is likely larger than reported, however, because households receiving Section 8 vouchers tend to under-report their total rental costs due to the rent subsidy. By implication, the supply of lower-cost rental units may be overestimated, causing the real-world shortage of lower-cost units to be larger than estimated.

As in the owner-occupied market, the pattern of shortages and surpluses in the rental market indicated that low-income households experienced higher rates of housing burden than high-income households. Approximately 57% of renting households earning less than $20,000 per year paid 50% or more of their incomes towards housing. In contrast, an estimated 87% of households earning $75,000 or more per year paid less than 20% of their incomes to housing.

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