Missoula’s workforce housing program seeks clarity, support

Martin Kidston

(Missoula Current) A pilot program established by the Missoula Redevelopment Agency last year to help spark workforce housing saw two projects approved in 2024, suggesting the program is on the right track.

But while the agency this week agreed to continue its Workforce Housing Pilot Program, it suggested that stronger guidelines should be set regarding the scale of a project and its targeted income levels when seeking public subsidies.

“We need to continue to find ways to make housing construction viable in this environment to keep up with population growth,” said Annie Gorski, deputy director of MRA. “We're recommending we continue this program in a pilot phase and make this program as effective as we can moving forward.”

The Montana Legislature last year added workforce housing to the state's definition of infrastructure. The change qualifies the construction of workforce housing for tax increment financing – a subsidy that can help fill gaps in construction costs.

MRA also adopted its own workforce housing program to ensure that any project that seeks $100,000 or more in tax increment financing (TIF), and that doesn't include income restricted housing, must contribute 10% of its TIF award to the city's Affordable Housing Trust Fund.

“So far, we haven't had any projects that meet that threshold,” said Gorski. “But we expect there to be some in 2025.”

A challenging market

With the programs in place, MRA and city officials hope to see a number of workforce housing projects begin to move forward in the coming year. But the current market makes that challenging.

Construction costs and interest rates remain high while available labor remains low. Housing officials also say that property owners in Missoula collect less rent when compared to the likes of Boise, Spokane and Eugene.

That makes any investment into a project less enticing given the smaller returns. In other words, officials said, a developer will spend more to build in Missoula but will receive less in return.

So far, that upside-down formula has challenged efforts to redevelop the old library block in the downtown district. The lack of Low-Income Housing Tax Credits in Montana only adds to the problem.

“That's the environment we're in,” said Gorski. “There's a gap in that middle-income range in terms of other programs that support workforce housing. We hope the Montana Legislature will provide more funding to support housing construction in the coming year.”

While a number of housing projects are poised to move forward in 2025, the scale of those projects may be greatly reduced due to the market's current challenges. But size matters, and if the city is going to subsidize workforce housing, then the scale of the project and its income restrictions must provide a larger community benefit.

As the Workforce Housing Pilot Program moves forward, MRA may look to the city to answer those questions and clarify the program's guidelines. As it currently stands, the city's income restrictions for workforce housing range from 60% to 140% of the area median income.

“I think you're going to see that our expectations have to change,” said MRA Director Ellen Buchanan. “We've had some projects that are pretty large projects that aren't going to pencil at that scale. So how do you build your way out of a housing shortage, which creates healthy vacancy rates, when the bigger projects don't pencil and we're running out of land?