Martin Kidston

(Missoula Current) With recommendations from the Montana Housing Task Force fresh off the press, members of Missoula's legislative delegation have turned their focus toward a number of issues that could help address the city's housing crunch, so long as the recommendations in the report find their way into law.

Gov. Greg Gianforte convened the task force earlier this year and Missoula had a number of representatives at the table, including Democrats Sen. Ellie Boldman and Rep. Danny Tenenbaum, and former Rep. Adam Hertz, a Republican.

The latter two brought their views to the Missoula City Council this week and said many recommendations in the report had bipartisan support among legislators. If adopted, they could help cities across the state reduce barriers to grow their housing stock.

“The ultimate goal they're fighting for is to make sure people can live where they work,” Tenenbaum said of the task force. “I think that's a goal we all share at all levels of government. I'm hoping this is a problem we can attack collaboratively to ensure people can live where they work.”

Inclusionary zoning isn't seen by all as a silver bullet, and rent stabilization is unlikely to win bipartisan support, they said. But other recommendations within the report are more likely to be considered when the Legislature convenes in January.

Among them, the report recommended a prohibition on minimum lot sizes larger 2,500 square feet, and to allow accessory dwelling units on all single-family residential lots. It also considered infrastructure grants and a statewide affordable housing tax credit that's tied to local zoning.

Hertz said the work also recommended a rewrite of the state's Subdivision and Platting Act.

“There have been many stakeholders, both from the private and public sector, involved in that,” Hertz said. “The idea is really a full rewrite of an act that was written in the 1970s, is outdated and really doesn't work well in Montana anymore.”

Zoning for more housing opportunities

Tenenbaum said the local delegation also looked at a number of housing reports generated by the City of Missoula and other partners over the years.

One report from 2010 referenced “fair housing,” and while the terms changed in future reports, one theme has remained constant: Land-use designations and building codes currently limit the availability of affordable housing choices.

The task force concluded that affluent neighborhoods were more prone to speak out against multi-family dwelling units, leading to a “covert segregation of protected classes.” It also has led to an “over-concentration of lower-income housing in selected areas.”

“This problem that was identified about affluent areas opposing zoning for multi-family housing and leading to segregation in zoning maps, and increased housing costs and higher rents – those problems exist in cities across the state,” Tenenbaum said. “It's something we really picked up on in the Housing Task Force. This is a statewide problem.”

A housing project in Missoula.
A housing project in Missoula.

The task force also recommended a change to general land-use codes, and to find ways to reduce regulations that limit the construction of new housing. Tenenbaum said he was struck by one report from the Pew Research Center on who benefits from restrictive zoning.

He said it turned out to be real estate investors.

“They search out jurisdictions that have constrained levels of new home construction and avoid areas and lobby against policies that create an excess supply of homes with reduced occupancy rates,” he said. “What hurts their bottom line is when there's an increased supply of housing and they have to compete for tenants.”

Hertz agreed and said spreading more housing across less land can effectively lower the price consumers pay for the end product.

“We looked at this through the lens of how to bring more supply to the market to create a more competitive market to either hold prices where they are or reduce prices,” Hertz said. “We looked at bringing new inventory to the market at lower price points – inventory that in many cases is illegal in many cities across Montana right now.”

Housing at all prices needed

In Missoula at least, some have decried several recent housing projects and proposals simply because the end product doesn't meet their definition of affordable. That resistance has included several members of City Council, who have been vocal in criticizing some recent projects due to their intended clientel.

But Hertz and other members of the Housing Task Force found that higher-priced projects can effectively reduce the cost of housing by opening less expensive units for others to occupy. One report from the Upjohn Institute described it as filtering.

“That migration chain goes all the way from the top down,” Hertz said. “It underscores the idea that new units being built don't necessarily need to be affordable to create more affordable housing opportunities in the market. That migration chain can help do that.”

Filtering occurs when someone builds a $1 million home and sells their $600,000 home. Someone else sells their $250,000 home to buy that $600,000 home, and so on. In the end, an affordable home goes on the market, providing housing to one more family looking to get started.

While such filtering is effective, according to the Upjohn Institute, it can be broken if someone buys a second home, converts one of those homes to a vacation rental, or if someone from out of state secures one of the houses along the chain.

“Rarely is that chain broken,” said Hertz. “That migration chain is very real and very tangible.”

A large affordable housing project under construction off Scott Street. (William Munoz/Missoula Current)
A large affordable housing project under construction off Scott Street. (William Munoz/Missoula Current)

Missoula's newest housing report also called for more housing across the entire income spectrum. But when discussing housing, the City Council spends the bulk of its time debating affordable or subsidized housing. It also directs funding toward them, and a number of such projects are currently under construction.

The council doesn't however dedicate as much time on other housing opportunities and, when it does, it generally brings out a small but vocal group of individuals looking to block such projects.

In some cases, the City Council has even required developers to subsidize a portion of affordable housing in their private projects. Some contend that such subsidization drives up the cost of the other units, which must cover the revenue lost due to the inclusion of lower-end units.

“We hear a lot of push-back from certain sectors that luxury housing isn't what we need,” said council member Gwen Jones. “But it's key to having that spectrum of housing. We need all of it.”

Jones said other issues also handicap the city's efforts to boost its housing stock, including the capacity of its planning department. Hertz said the issue came up within the Housing Task Force, and it could result in changes that allow fees from building permits to be used to pay for planners.

Other factors, however, remain outside the control of the Housing Task Force and city councils across the state.

“There are a lot of economic factors to housing affordability that are outside the purview of local or state government,” Hertz said. “We can't change the fact that interest rates went from 2.5% to 7.2%. Some of those things are outside our control.”

The state's elected officials will consider the recommendations when the Legislature convenes in January. And while the end goal looks to reduce barriers to construction, boost supply and address affordability, concerns of too much supply still linger.

Hertz said that was an issue as recently as eight years ago, when housing in Missoula was too abundant. That had consequences of its own.

“No one wants to reduce the value of the investment that people have made. I'd also say that I don't think anyone wants to reduce demand,” Hertz said. “The challenge is how to create that supply without eroding what exists, and the best way is simply to build more housing. We have way more demand than supply right now, but I still remember when it was the exact opposite.”

While some members of the City Council would like to see other housing and infrastructure issues addressed, most were pleased to see the state place its focus on housing as an issue.

“I'm happy to see housing prioritized by the governor,” said council member Mirtha Becerra, a former planner. “Rewriting the Subdivisions and Platting Act is paramount to making any of this happen. But I also think Montana's tax policies need to line up with the recommendations in order for it to have meaningful change for the state.”