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MT Legislature tackles affordable housing – or not

Most bills focus on easing builder regs
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Posted at 4:07 PM, Apr 06, 2021
and last updated 2021-04-06 18:22:03-04

BOZEMAN — Editor’s note: This is the first of a two-part series on the 2021 Legislature’s actions to address the affordable-housing crisis in Montana

Kayla Tengdin says without a special zoning program requiring Bozeman builders to include more affordable houses in their developments, she and her husband Rolf likely could not have bought a home – or even been able to remain in Bozeman.

“Getting this house was life-changing for us,” she told MTN News last week. “We were both able to really feel like we had stable ground to stand on, in order to pursue our careers, lead into developing our lives here and becoming part of the community.”

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Kayla Tengdin, Bozeman homeowner.

But Republicans at the 2021 Montana Legislature have voted to end the program, in Bozeman and anywhere in the state.

On party-line votes, GOP lawmakers passed a bill to ban “inclusionary zoning,” which Bozeman and Whitefish put into place two years ago, after other efforts to create affordable housing fell short.

The home-building industry opposes inclusionary zoning, saying it puts the onus on them to solve Montana’s burgeoning housing crisis, which has many causes.

“Inclusionary zoning, in Bozeman, as it’s written, forces me to raise prices on other homes to subsidize the house that is being classified as affordable,” says Eugen Graf, a Bozeman housing developer and owner of EG Construction. “If we have an affordability issue, we need a community solution.”

Graf and others – including many Republican lawmakers – say other options exist to address the problem, which is a severe shortage of homes and other dwelling units in many parts of the state.

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Eugen Graf, Bozeman housing developer and builder.

The approach preferred by conservatives is to ease restrictions on zoning and subdivisions, that they say are slowing or blocking the approval of building projects or building modifications that can reduce the shortage.

“What we’ve seen going on here lately is (local) control is getting more onerous,” says state Sen. Greg Hertz, R-Polson. “We’ve been drawing back some of that local control, just because it’s not only delaying the process, it’s adding costs to new construction.”

Whatever the response of state policymakers, few disagree that the lack of affordable housing has become one of Montana’s most pressing problems.

In fast-growing Bozeman, the price of an average home is topping $600,000 – double the cost of just 10 years ago. Missoula and the Flathead Valley aren’t far behind, and even Helena and Billings are around the $300,000 mark for a median home price.

“We are very quickly become a place that is simply unaffordable for many people to live,” says Bozeman City Manager Jeff Mihelich. “We don’t want to be a community that is solely for very wealthy people and for people that are in service industries serving wealthy people.”

According to housing website Zillow, the statewide median home price in Montana has climbed to $329,000, up 11 percent in the past year.

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Bozeman City Manager Jeff Mihelich.

The Legislature has considered at least a dozen bills related to affordable housing, primarily in two categories: Ones that directly incentivize lower-cost housing or, more often, ones that seek to rewrite regulations on building and development.

Two of the former are House Bill 21, which would expand a program of coal trust-funded loans to finance low-cost housing developments, and HB379, which creates a state tax credit for builders of housing projects for lower-income renters.

Both measures have passed the House, but remain parked in Senate committees, while lawmakers decide whether state money should be spent on the efforts.

Hertz also sponsored a bill to prevent some city restrictions on “accessory dwelling units,” which are things like basement or second-floor apartments in existing homes, or smaller units on urban lots that already have a larger home.

He argued that the restrictions are preventing property owners from creating affordable options for many renters.

But that measure died in committee last week, opposed strongly by cities.

The one measure that has passed, however, is the GOP-backed repeal of inclusionary zoning. Nearly all Republicans, who control sizable majorities in the House and Senate, voted for the bill; all Democrats opposed it.

HB259 now heads to Republican Gov. Greg Gianforte for his signature.

Kevin Gartland, executive director of the Whitefish Chamber of Commerce, said he and other local officials are asking Gianforte to veto the bill.

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Kevin Gartland, executive director of the Whitefish Chamber of Commerce.

“I think we need to give (inclusionary zoning) a chance, before we declare it a failure,” he told MTN News. “We shouldn’t take away the ability of our local folks, who are … in the best position to put together a cohesive plan that can work for the community.”

Gianforte’s office said only that he will examine HB259 when it reaches his desk – although sources told MTN News that they suspect the governor supports it.

The main supporters of HB529 are the homebuilding industry and realtors. In testimony before a Senate committee last month, they said requiring developers to set aside part of a project as “affordable” or for lower-cost homes is costing them money.

They said many factors contribute to the rising cost of homes, such as increased demand, skyrocketing lumber prices, labor shortages and more regulation, and that builders shouldn’t be the only ones shouldering the burden of a solution.

Yet Bozeman and Whitefish officials said they tried to work with builders voluntarily, to prompt them to build lower-cost homes, to no avail.

Bozeman’s program, begun in 2018, has led to the construction of 27 lower-cost homes and generated cash that’s led to building another 30 homes, Mihelich says.

“The most frustrating part, considering the legislation, is that we have 70 more units in the pipeline,” he says. “If the legislation is signed by the governor, then those 70 units could go away.”

Under the Bozeman zoning program, any development in the city with at least 10 units must provide at least 10 percent of them as “affordable.” If the developer doesn’t want to build the homes, he or she can donate equivalent land or make a cash payment.

In Whitefish, the business community was the impetus for its inclusionary-zoning program, as high housing prices were making it more and more difficult for local companies to recruit workers.

“What we tried to do here is find a way for those folks who work here feel like they’re part of the community, and actually be part of the community, from all levels of economic strata,” Garland says.

Tengdin, whose husband is a public-school teacher in Livingston, said they had been paying $1,400 a month in rent in Bozeman before they eventually were able to buy a home built through the inclusionary-zoning program.

Their home in northwest Bozeman cost $217,000. After using some no-interest loans and help from family for the down payment, the Tengdins now have a house and a monthly mortgage payment of just under $1,200.

Tengdin acknowledges that the program has helped only a few people at this point, at a cost for developers, but says it should remain as one of many approaches to tackle the huge problem of affordable housing.

“If this is removed, then a lot of people like my husband and me are not going to be able to have a safe and stable place to live in this city that we love so much,” she said. “I do think that we all have a responsibility to take care of our neighbors and to foster the kind of city that we want to live in.”

Tomorrow: Will removing restrictions on zoning and subdivisions lead to lower-cost housing?