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Housing Missoula: City, county, industry leaders seek solutions to constrained market

Missoula Housing
Missoula Housing Development Mullan
Posted at 8:38 AM, May 31, 2021
and last updated 2021-05-31 10:39:08-04

MISSOULA — While the City of Missoula sharpens its housing policy, Missoula County will explore a “suite of options” presented in its own forthcoming study as local governments look to mitigate the region’s rapidly rising housing prices and bolster its lagging supply.

In the wake of the 2021 housing report released this week by the Missoula Organization of Realtors, city and county officials described the findings as a difficult reality and said maintaining the status quo may no longer be acceptable.

“We have to think of new ways to handle housing,” Commissioner Josh Slotnick told the Missoula Current. “Attempting to get people into traditional housing with traditional methods isn’t working.”

This year’s housing report included some striking figures. Among them, it found that the median price of a home in Missoula jumped 20% in the First Quarter of 2021 to $420,000. That’s on top of last year’s 11% increase and nearly double costs in 2016 when an average Missoula home could be had for just $254,000.

The rental market has faced similar increases. In 2016, the median monthly rent for all housing types in Missoula County stood at $778. By 2019 – the last year figures are available – it had climbed to $863.

More challenging, however, is the rental vacancy rate. In the first quarter of 2021, it stood at just 1.2%. At the same time last year, it was 2.2%.

“We need to come up with new methods of assisting and getting involved, so a working person with good credit can buy a house and a working person with good credit can rent a house, and everyone can afford housing,” Slotnick said. “Continuing on the same path and expecting something different won’t yield anything different. We’re challenged with coming up with some new ways of doing things.”

The year-over-year increases may be good for homeowners, though it has caused troubling ripples across various sectors of Missoula. Those looking to buy or rent a home have taken their frustrations to the Missoula City Council.

A week before the housing report was released, nearly a dozen people urged the city to take urgent action to address escalating prices and low vacancies. The City Council in turn cast a critical eye to the 2021 Legislature, saying it did little to address the statewide housing crisis.

Instead, they said, the Legislature handcuffed local municipalities and their efforts to resolve the problem.

Business leaders also have expressed concern, saying that local housing costs and the tight rental market has made it difficult for them to recruit and retain workers. Even those businesses that pay well above the local median income have voiced concern.

“One thing we’re definitely hearing from business leaders in Missoula and across the state really has been the effect of housing costs on their workforce,” said Christina Henderson, executive director of the Montana High Tech Business Alliance. “They’ve really ramped up hiring again, but the skyrocketing cost of housing is really concerning.”

The rising costs revealed in the 2021 report didn’t catch city and county officials by surprise, and efforts actually began years ago to address the challenge.

The city adopted a housing policy in June 2019 in hopes of removing barriers that contribute to rising costs. It also created a trust fund to help bolster the city’s stock of affordable housing.

In a controversial move, the city also has begun buying up underdeveloped properties and vacant land, where it hopes to partner with private developers to increase the housing stock, both affordable and market rate.

One such project on Scott Street will result in 70 permanently affordable homes and several hundred market-rate homes. The city paid $6.3 million to acquire the property to make the project possible.

“There were no grand surprises to us in the release of the report,” said Eran Pehan, director of Community Planning, Development and Innovation at the city. “It cemented our need to move rapidly to solutions and reminded us of the urgency of the moment.”

The granular level of data provided by the report may prove helpful, Pehan said. While increases in the cost of a rental year-over-year are “stark and concerning,” broken down, it lends insight to the current situation.

What was reportedly a 16% increase across the board in rental prices is actually closer to 6% in multi-family apartments and 25% in single-family homes.

“That’s a little different of a picture. It changes our solutions and changes the way we address that,” Pehan said. “The granular level data are only going to make our solutions more successful because they’re going to be more targeted.”

Missoula Housing Development Mullan
Construction in the Mullan area will take years to complete, though it’s expected to bring as many as 6,000 homes to the market.

Missoula County Commissioner Dave Strohmaier offered a similar take. The housing report had few surprises in way of facts and figures, though the details could prove useful in the months ahead as the city and county seek solutions to the problems it has some control over.

The report, once issued annually, will now be issued quarterly.

“Ramming every harder a round peg into a square hole isn’t going to accomplish the task,” said Strohmaier. “We need to be as creative as possible and maybe break free from the array of options in the past we thought were the way out of the housing crisis.”

The county has already hired a new housing coordinator and in February, it contracted ECONorthwest out of Portland for $30,000 to develop an affordable housing strategy.

The county has a list of goals it expects to find in the final product, which will be developed over the summer by community input and a needs analysis.

“There will be a suite of options,” said Strohmaier. “We’re looking for how we can best use our limited resources in the most impactful, transformation way as possible. Simply trying the same thing and expecting different results isn’t going to get the job done.”

The Missoula Organization of Realtors warned in 2018 that housing wasn’t keeping pace with demand. To get a fact-based handle on the challenge, MOR and the Missoula Building Industry Association commissioned WGM Group to study the challenges.

In all, the report found that 93% of Missoula County had constraints that limited development. The latest housing report also found that it takes on average 50 months to move a project through city approval and 87 months when seeking county approval.

The timeline, which covers the process from the filing of a preliminary plat to final government approval, involves more than government red tape, the organization noted on Friday.

“Sometimes there’s conditions that need to be met by developers. Sometimes there might be a wheel that clogs the process with DEQ,” said Jim Bachand, CEO of the Missoula Organization of Realtors. “There are tons of people involved in the process. The more we understand the process, the more we can do to speed it up.”

While the city and county look to streamline the process and explore any regulatory hurdles that can drive up prices or slow development, the real estate and development communities also are working to make improvements.

They’ve placed their support behind a new county tool known as iSam – a repository that captures subdivision work and process. In that, it will also capture lot activity and lend deeper insight into timing.

“It helps give the community the ability to forecast to a certain degree some predictability of what supply might look like,” Bachand said. “There’s no guarantees that gets built tomorrow. There’s always variables that go into a production schedule.”

Bachand said the city is partnering with the county to add its own data to the tool, and the building industry is lending its support.

“It would be the single source for public record of where subdivision and development efforts are and what associated lots are tied to those,” he said. “It does a lot for economic development as well. If builders or developers outside our community are looking for opportunities, they can look at that tool and see what’s out there.”