Missoula's housing leaders are so far holding their ground against policies that would force developers to build or pay for affordable housing. Those policies have had mixed results in other communities. 

More than one year ago, Bozeman required developers to build affordable housing to positive reviews from a city leader — but patchwork results on the ground. In response to skyrocketing housing prices, Whitefish recently ditched voluntary incentives and also adopted mandatory regulations.

Decades ago, Aspen approved a similar measure that one housing expert says has made a huge difference. The community is vastly different from Missoula in terms of wealth and market forces, but Cindy Christensen, deputy director of the Aspen Pitkin County Housing Authority, said it's led to 3,000 additional affordable units.

"We had some very forward-thinking elected officials," she said.

On Monday night, the Missoula City Council is expected to discuss a broad range of policy recommendations aimed at addressing the extreme affordable housing shortage here. Between 1990 and 2015, housing prices in Missoula rose 114% — even adjusted for inflation. That means housing prices in Missoula have grown faster than places like San Francisco, Seattle, Miami and New York. And prices have set records every year since 2015.

The recommendations under consideration are the result of a two-year effort by the city’s newly created Office of Housing and Community Development, which produced a 95-page document suggesting everything from allowing higher density in single-family home neighborhoods to reducing regulations on Accessory Dwelling Units.

Eran Pehan, the director of the city's housing office that wrote the report, said after close evaluation and public input, she and housing planning consultants determined that mandatory requirements aren't a good fit for the Missoula market, but other ideas in the proposal will help create affordable housing.

"There are simply better, more effective tools at our disposal," she said.

But one local housing advocate, Hermina Jean Harold, says the recommendations are “skewed heavily” toward developer incentives, which she says have proven largely ineffective in Whitefish and Bozeman and take years to evaluate.

"I am hoping our city council will act courageously to enact policies that will stop the displacement of working people, and the worsening cost-of-living stresses that are making wage-earning Missoulians question whether they’re welcome here anymore," she said.

Harold is a member of the Missoula Housing Steering Committee and an employee of the housing nonprofit North Missoula Community Development Corporation. She believes that the recommendations lack two policies that would immediately help create more affordable housing here: Mandatory inclusionary zoning and a regulation that would require the Missoula Redevelopment Agency to set aside a certain percentage of funds in Urban Renewal Districts for workforce housing.

Mandatory inclusionary zoning is a term for a policy that requires developers of market-rate housing projects over a certain size to also build or set aside a certain percentage as deed-restricted affordable housing.

Unlike market-rate housing, deed-restricted housing is only available to those making incomes below a certain threshold, and the house can’t be sold for market-rate prices. The policy can also be used to develop permanently affordable rental units. Also, if developers choose not to develop affordable units, they pay a fee that goes into a housing trust fund that can be used on other sites in the city.

In a widely-shared blog post, Harold argued that Missoula’s housing affordability crisis is urgent, and mandatory inclusionary zoning should have been enacted here years ago.

“Imagine what our stock of attainable housing would look like right now if inclusionary zoning had been in place before the Sawmill District and Roam (Student Living) apartments started development: If we had just a 10% affordability requirement — the affordability levels of which could be decided upon by our City staff based on data we already have  —  about 120 affordable units could be added to the rental and homeownership stock,” Harold wrote.

Harold points to Whitefish and Bozeman, places where housing prices have also soared past where people making average wages can afford. She said the same types of voluntary incentives Missoula is considering weren’t effective there, so both cities recently adopted mandatory inclusionary zoning.

“Voluntary didn’t work, and they lost a lot of opportunity,” Harold said. “The (Missoula) city staff has talked about revising the policy to create an inclusionary policy later if the current proposals don’t work, but a lot of people feel there’s more urgency than that, that they need to talk about it now.”

According to Harold, if a developer had to make nine market rate houses cost $350,000 instead of $300,000 in order to build one affordable unit at $150,000, that’s still a win for the non-wealthy who wouldn’t have been able to afford the $300,000 unit anyway.

“A lot of us are unable to afford what’s there already, so we’re already pushed out of the market,” she said. “At least there would be some houses people earning a living wage could afford."

Harold also acknowledged that the Missoula Redevelopment Agency has used a lot of Tax Increment Financing to develop affordable housing in Missoula, such as the Sweetgrass Commons rental housing in the Old Sawmill District.

“But what I’m asking for is formalizing that amount so there’s a set-aside,” she said.

Developers and builders are often the loudest voice in opposition to mandatory inclusionary policies. The Flathead Building Association Board opposed the measure recently enacted in Whitefish, saying that it would make new developments “cost prohibitive” and actually stifle building, thereby leading to more market pressure on existing housing. They also said that the costs of adding affordable housing would be passed on to consumers in the form of making the market rate housing more expensive.

Pehan said her research shows forcing developers to build affordable housing only works in communities with a high level of subdivision development and where housing prices compared to wages are far higher than they are in Missoula.

"This risk is, in our market, we still have many homebuyers earning 100% and 120% of the average area income," she said. "If as a result of enacting (mandatory) inclusionary zoning, we are adding $30,000 to $50,000 to market-rate housing, we are pushing people in Missoula out of the market in exchange for a small number of income-restricted units, so that's a very real risk to the market."

She's also concerned that if the city adopts the policy, it would push more development outside the urban core where it's more expensive for taxpayers to pay for new roads and other infrastructure.

"That would be in direct conflict with our stated goals of growing inward and being responsible with infrastructure development and maintenance," she said.

Pehan said she realizes the policy works in places like Aspen and Jackson, Wyoming, where extreme wealth has warped the market, but she and the consultants the city hired and members of the public who spoke at stakeholder meetings determined the risks outweigh the benefits in Missoula.

"Good policy is thoughtful, and it can't always be enacted in an urgent way," Pehan said.

Additionally, she said the city's recommendations leave the door open to enact the policy down the road if it's warranted. 

"We've determined that (mandatory) inclusionary zoning is largely untested in Montana," she said.

Andrea Davis, the executive director of the nonprofit housing and community development organization Homeword, said she’s “optimistic” about the city’s policy recommendations. And she said mandatory inclusionary zoning might be "heavy-handed for where Missoula's market is."

“There’s a really interesting conversation about how much you incentivize the market and get out of the way of the market versus how much do you regulate the market and mandate these things," Davis said. "You need carrots and sticks both.”

The Bozeman Daily Chronicle reported recently that 19 months after that city enacted mandatory inclusionary zoning, partly because voluntary incentives weren’t working, only eight affordable homes were built under the new policy. Whitefish’s policy was only enacted very recently.

Davis said Missoula is better prepared to make the voluntary incentives work and invite the private market to participate rather than require inclusionary zoning.

“Bozeman didn’t have some of the administrative muscle that we have,” she said. “(Missoula’s housing policy recommendations) are meant to be a holistic document where all these things work together and we come at (the problem) from a number of different directions,” she said.

Chris Mehl, Bozeman’s deputy mayor, said the results of the policy have been “mixed,” but he’s glad it’s in place.

“There hasn’t been a night-and-day improvement,” he said. “In Bozeman, we have a lot of individual builders, meaning they are building a home at a time, and we apply it to any construction of 10 units or more for ownership and it doesn’t apply to rentals, so we’re not seeing the policy triggered.”

Mehl said that Missoula is farther along in its housing policy efforts, and Bozeman will be doing similar work in six months.

“It’s pretty clear from our success, or lack of success, that a comprehensive approach is what’s necessary,” Mehl said. “Builders are going to pass that cost (of mandatory affordable housing) along. If they build 10 and build one affordable unit, you may help a targeted family with a truly lower income. It may be beneficial to them, but at the same time you’ve jacked up the price to nine other families. It’s a huge trade-off.”

Back in the 1970s, Pitkin County in Colorado, along with the town of Aspen inside its borders, enacted a policy that required developers to build affordable workforce housing that’s available to people who work full-time there.

Christensen, the deputy director of the Aspen Pitkin County Housing Authority, said it’s led to the creation of 3,000 affordable units, both rentals and for-ownership.

“Any developer has to provide a certain amount of mitigation, whether it’s a unit or we have an affordable housing credit program,” she said. “We pride ourselves in being one of the earliest developers of workforce housing, especially in a tourist town."

The dynamics of wealth and poverty in Aspen are very different from Missoula, however, as even someone with $2.2 million in net assets can qualify for affordable housing in Aspen, she said. But she also said voluntary incentives probably wouldn’t have led to the creation of as many affordable units.

“Without (mandatory requirements), I don’t think we would have anything like we have,” she said.

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