Citing risk, Missoula gives final approval to $479K loan for affordable housing project

A soft-cost loan to a private developer to aid in the construction of a community land trust off Scott Street received final approval from the Missoula City Council on Monday, but not without a final debate on the value of the project and the city's financial risk.

The $479,000 loan to Ravara LLC will help subsidize 78 units of permanently affordable housing reserved for those earning 120% of the area median income or less. While the loan does not guarantee the project will still pencil as proposed, most council members described it as a risk worth taking.

“It's incredibly challenging to develop community land trust properties. This is money well spent to figure out exactly what's going to be happening here,” said Council member Heidi West regarding the project's intended affordability. “I'm in favor of issuing this loan so we can figure out how to reach those goals.”

The median cost of a home in Missoula now stands at around $500,000 – a figure housing advocates contend is beyond the reach of most working families. Given such costs, a family of four would need to earn around $123,000 to afford a median-priced home in Missoula with 5% down.

In comparison, the median family income in Missoula is around $70,900.

But with 78 units within the land-trust reserved for those earning up to $120% of the area median income, a two-person household would qualify with earnings of just $72,000. For a family of three it would be $81,000 and for a family of four, around $90,000.

“The only way we're going to know if the city can be a partner in public-private projects is to take a little risk to figure out if we can build a model and replicate it,” said council member Mike Nugent. “If this does work, then we've created something hopefully we can repeat to help solve some of our problems. If it doesn't work, yes it was a risk, but trying to help solve our housing problem is a risk worth taking.”

Council member Sandra Vasecka said she favored the concept of a community land trust, which lowers the cost of a home by removing the cost of land as a factor. The buyer owns the home but the land beneath it is held in a trust.

But Vasecka also maintained her opposition to the 1.5% soft-cost loan the city will give Ravara, citing currently inflationary rates of around 8%.

“It's a high-risk loan and a lot of banks wouldn't be in favor. We are going to be losing money on this, and I don't think the city should be in the loaning business,” she said. “These are our taxpayer's dollars. I'm uncomfortable using our taxpayer dollars to be in the loaning business.”