Saying the market alone won't solve Missoula's housing problem, Missoula County has signaled its intent to adopt a housing strategy that could place greater focus on affordability and lean on array of tools to achieve that goal.

With a shortage of nearly 2,500 housing units, the local market remains tight and prices are responding as a result. While action today could take years to show results, commissioners said it's time for local government to act.

“Leaving this to the market alone is not going to solve it,” said Commissioner Josh Slotnick. “Left alone, the market would push to where the returns are the highest. If we want to maintain our character as well as make sure people have places to live, we're going to have to intervene in some way.”

Contracted by the county to explore solutions, ECONorthwest has presented the outline of what could become the county's first housing strategy. Dubbed “Breaking Ground,” it explores the issues that have contributed to rapidly rising prices and the tools that could help address them.

Oscar Saucedo-Andrade, one of the consultants, said Missoula's shortage of housing remains the main contributor for rising costs. And as costs rise, local wages aren't keeping pace. Median incomes in Missoula County have risen 15% over the past decade while housing costs have risen 109%, according to the plan.

“This creates increasing affordability challenges,” he said. “We've seen that renters are the most impacted here. They're paying more out-of-pocket for housing compared to owners. About 50% of renters are cost burdened compared to 20% of owners in 2019.”

In general, cost burden occurs when an occupant or owner spends more than 30% of their income on housing. The median price of a home in the Missoula urban area in November stood at $520,000, according to the Missoula Organization of Realtors. In 2017 it was $254,000.

But Missoula isn't alone in the challenge. Consultants cited the “four B's” in Bozeman, Boulder, Boise and Bend, among other cities in the West experiencing new housing pressures. While state law limits some solutions in Montana, other tools have been implemented elsewhere, from an excise tax to a housing bond to fund affordable construction.

“I think you're all experiencing similar housing pressures right now,” said consultant Lorelei Juntunen. “Boise's housing market is completely through the roof right now and has a similar trajectory to what you're experiencing.”

Most of those communities are in the process of grappling with the problem, and some are ahead by several years in implementing new tactics. But none are far enough along to draw any conclusions, Juntunen said.

“The places that are best poised to make the most progress are the ones being the most aggressive on funding,” she said. “Without public money to support the production of affordable housing, it's very difficult to significantly move the needle.”

(Missoula Organization of Realtors)
(Missoula Organization of Realtors)

Estimates suggest Missoula needs around 2,400 units today to address the current shortage. While a number of subdivisions are moving forward, along with several projects geared toward affordability and funded in part by public subsidies, more work is needed, the consultants said.

For a housing market to function well, it needs an abundance of housing at all price points.

“When you're experiencing a shortage, as Missoula County is, the goal should be to build as many units as you can in the market area, as well as the supported environment that requires public investment,” she said.

Actions recommended in the plan range from removing regulatory barriers to disposing public land. The county is currently taking an inventory of its public holdings and will likely present its findings this year.

The city has for the past few years used its property holdings to help direct the outcome of projects unfolding in a public-private partnership. The county could explore something similar, though Juntunen said coordination will be key.

“It's going to be very hard, in the near term, to build your way out of this problem, especially with market-rate production only,” she said. “Because so much of the demand is coming in at the top end of the income spectrum, it puts a lot of onus on the county and the city and the other partners to be focusing on the affordable end of the spectrum.”