Both state lawmakers and Missoula city officials are taking shots at the affordable housing crisis this winter.
While the Missoula City Council is taking public comment on a proposal to increase registration fees for new tourist homes, a raft of bills aimed at creating or preserving affordable housing are plodding their way through the Montana Legislature, some faster than others.
Senate Bill 194, sponsored by Sen. Mary Ann Dunwell, D-Helena, is one example of a bill that’s officially supported by Missoula’s local government.
“SB 194 would provide an income tax credit to landlords who rent their properties at below-market rate,” explained Jessica Miller, a digital engagement administrator with the Missoula mayor’s office, in a presentation to the city council on Monday. “We’re supporting that one. We’re seeing a lot of creative approaches to the housing problem this year statewide, from both sides of the aisle. We don’t know where these are going to go but we’re seeing a lot of approaches and we’ve been supportive of those.”
People are also reading…
Dunwell introduced her bill in the Montana Senate on Jan. 31. She said Montana ranks No. 4 in the country for its increase in rental rates this past year.
“It’s a bill for affordable rental housing,” she said. “SB 194 provides a financial incentive for landlords to keep rents at or below fair market rents. When I was out knocking doors during the campaign, talking to constituents and stopping by rental units, I just heard, ‘Oh my gosh, I don’t know how long I’m going to be able to stay here because my landlord keeps raising rent.’”
For every $100 that a landlord sets rent below 110% of the Fair Market Rate set by the federal government, a property owner would be eligible for $200 in state income or corporate income tax credits if the bill was signed into law. The rental units would need to meet quality standards and there would have to be a rental agreement for one year to exclude short-term rentals.
“This is not going to solve our housing problem in Montana,” Dunwell said. “This is one little teeny piece of a multi-pronged approach that it’s going to take. But we have the money now with a revenue balance of $2.5 billion.”
The bill is supported by the Montana Environmental Information Center, the Montana Landlords Association and the Associated Students at the University of Montana.
“A lot of students are feeling the crunch,” said Ethan Hanley of ASUM. “I can’t tell you how many stories I’ve heard of renters in Missoula moving to Frenchtown, Lolo and Florence just to find affordable housing.”
The Montana Society of Certified Public Accountants opposes the bill because they believe most of Montana’s income tax credits should be removed to simplify the tax code. They also believe that the burden of paying for the tax credit will fall on everyone who isn’t a landlord.
“Each credit that is added requires the rest of us to shoulder the cost,” explained Allen Lloyd, the executive director of the society.
Sen. Becky Beard, R-Elliston, noted that the state’s revenue surplus is “one-time only” money and that Dunwell’s bill would require an ongoing funding commitment.
“This is sugar-high money,” Beard said. "How do you propose to pay for this going forward?"
Dunwell replied by saying that tax credits are reviewed every 10 years and she would be amenable to adding a sunset clause to her bill.
“We need to tackle this housing crisis head-on right now,” Dunwell said.
Short-term rentals
Meanwhile, on Monday night, the Missoula City Council opened a public hearing on a proposal to update registration and renewal rates for tourist homes in city limits.
“The first-time registration would be increased to $555 to more adequately cover the costs that the city incurs in processing, inspecting and registering tourist home registrations,” explained Montana James, the deputy director for the city’s community planning office.
City officials in mid-2022 said they know of 445 registered short-term rental units in the city, which is less than 2% of Missoula’s housing stock.
Ward 3 Councilor Gwen Jones asked if the city is going to differentiate between full-time tourist homes and owner-occupied homes that are periodically rented out for extra income. James said that the city doesn’t consider someone’s primary residence to be a full-time tourist home.
The council has opened a public hearing on the proposal and will make a final decision next Monday night.
Miller, with the mayor’s office, followed up that discussion by pointing out that the city is closely following the many housing bills in the Legislature.
“Of course we’re looking for overall reform of the property tax system,” Miller said, pointing out that residential property taxes made up about 43% of the city’s revenue in 1999 compared with 60% today.
That’s because revenue from commercial property taxes, business equipment taxes and industrial taxes has fallen fairly drastically in that same time, largely due to laws passed at the state level.
Miller also said that the Legislature’s interim study committee studied Montana’s property tax system and found that Montana’s local governments get 96% of their funding from property taxes compared with about 72%, on average, for local governments in the other 49 states.
“So that’s a pretty dramatic number,” Miller said. “Missoula supports efforts to allow local governments the ability to ask their voters for alternative revenue solutions such as a local option tourist tax.”
She said a recent study found that Missoula County could get up to $3.8 million in revenue per year from out-of-state visitors with a 3% local-option sales tax.
