Missoula County’s new workforce housing policy eyes attainability

Martin Kidston

(Missoula Current) A new workforce housing police adopted by Missoula County could increase the number of affordable and attainable homes in certain districts where tax increment financing is available.

Commissioners last week adopted the new policy, which allows the county to direct tax increment toward housing in Targeted Economic Development Districts including the Wye, Grant Creek Crossing and the Bonner West Log Yard.

“We have three developers in three TEDDs proposing housing as part of their projects,” said John Wilke, the county's housing specialist. “This policy is really defining what workforce housing means for Missoula County and creating a transparent framework for how tax increment can be used in those projects. We recognize that no two projects are going to be the same.”

Missoula County remains in what Wilke described as a housing crisis that was fully exposed during the pandemic. At that time, the county had a housing shortage estimated at 2,400 housing units.

The most recent housing report published by the Missoula Organization of Realtors found that the local market remains under-supplied, especially for housing priced under $600,000. The median cost of a home has increased by more than 180% since 2010.

“These trends aren't unique to Missoula or Montana, or even the Mountain West,” Wilke said. “We're seeing this all over, especially areas of growth all over the country.”

Local and state governments have scrambled in recent years to address the issue. In Montana, the Legislature recently changed the definition of uses where tax increment can be applied. In doing so, it identified workforce housing as a form of public infrastructure.

The county's new policy helps define what workforce housing means.

“I'm really proud of this because we worked closely with the development community – the folks who are going to build the houses,” said Commissioner Josh Slotnick. “It needs to be workable for them and it also needed to yield houses that will be attainable. I think it will work over time, even as our economy changes.”

When the draft version of the policy was created, it included restrictions on rent and sales prices, limits on income requirements and how long a home must remain affordable – all when receiving tax increment support.

But when testing the requirements, they were found to pose an “undue administrative and financial burden” on builders when compared to the limited amount of tax increment that's available.

“It would discourage housing development within the TEDDs rather than incentivizing it,” Wilke said. “Housing projects within our TEDDs face higher costs from the beginning, just due to a lack of infrastructure. They're starting several steps behind a housing developer that would be building within city limits where that basic infrastructure is already in place.”

To address the disparity, the final policy sets two tracks for different housing types, including attainable housing built by a for-profit developer and affordable housing built by a nonprofit. Both would be eligible for tax increment support but in different amounts and with different guidelines.

“This allows us to offer different levels of tax increment support,” said Wilke. “For attainable housing, TIFF would primarily be used to support public infrastructure. The goal there is help offset the higher costs of building in a TEDD.”

Wilke said a deeper level of tax increment would be offered for affordable housing, including the cost of vertical construction. However, that form of housing would be guided by income restrictions and other regulations to ensure the final result met affordability standards.