Lack of affordable housing an issue for many Montana cities

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Whitefish appears to not be alone when it comes to Montana cities that are facing a lack of affordable housing.

A recent article in the Montana Business Quarterly outlines the issue, noting that many Montana housing market prices are high and are also high relative to the incomes typically earned by Montanans.

In looking at median home values, six major Montana cities were considered — Billings, Bozeman, Great Falls, Helena, Kalispell and Missoula. Five of the cities in 2016 all had median home values above the United States median home value of $205,000. Only Great Falls fell below the U.S. value. The median home values in Montana, however, did appear to be less than those in the West. Only Bozeman had a slightly higher median home value than the West home value of $337,200.

Bryce Ward, associate director of the University of Montana’s Bureau of Business and Economic Research, examined the factors contributing to rising home prices in the state, which he notes is creating affordable housing supply issues, in the article titled “Poverty with a View.”

Ward said he began looking at the issue when he realized that many Montana college students don’t remain in the state following graduation. He also noted that this issue is of importance because a lack of affordable housing can have a broader impact on the regional economy.

“I wanted to try understand what the problem might be about,” he said.

Though the report looked at Kalispell specifically, Ward noted that the numbers associated with the county’s largest city are reflexive of the trends happening throughout Flathead County.

For comparison, Whitefish’s median home value for a newer single family house was about $450,000 in the housing assessment completed in 2016 through the city of Whitefish and the Whitefish Chamber of Commerce. The assessment and subsequent Whitefish Strategic Housing Plan adopted by the city have kicked off work to create affordable housing for the city’s workforce.

Of the research presented in the Business Quarterly, one of the most striking items came with regard to the connection between home construction and price. Ward noted that the results didn’t follow the classic supply and demand model — that building more houses would lower the price — at least in the case of Kalispell and Bozeman it didn’t.

While all of the communities studied experienced housing price growth in excess of 50 percent, the supply response was varied. The percentage change in the number of housing units in some of the cities was below average and in others it was more than average. Kalispell and Bozeman, however, built “substantially more than average given price appreciation” between 2010 and 2015.

“What comes out of this for me is that it’s not simple,” Ward said. “We can work to build more, but that may not bring it to the magic level that we need [for affordable housing.]”

Ward suggests that there are outside factors at play when it comes to folks choosing to purchase houses in the Treasure State. He likens it to a popular restaurant that has a line of customers waiting to get in.

“There is a social effect,” Ward explained. “Montana is cool in some sense.”

Ward noted that it’s important for cities to look for ways to mitigate the issue — though building affordable housing or looking at rent control. Mainly, he said, cities can “no longer say you should build more and that might help.”

Following that concept, Whitefish may already be on the right track to mitigating what has been called a “crisis” in terms of a lack of affordable housing here.

The Whitefish Strategic Housing Plan sets goals to work toward filling a housing gap of about 600 residential units. The city’s Strategic Housing Plan Steering Committee began meeting earlier this year and is already beginning work on strategies outlined in the housing plan intent on creating affordable workforce housing rather than expecting it to be created solely from the free market.

The Business Quarterly article points out that Montana owners and renters spend a higher percentage of their income on housing than they did 25 years ago. The widely accepted benchmark for affordable housing is a housing cost at or below 30 percent of household income. In terms of housing demand, it also notes that places with strong demand experience either population growth or housing price growth or both.

“Over the past 25 years, Montana has enjoyed both faster-than-average population growth and faster-than-average housing price growth,” the article says.

Though Montana wages are low, they have grown faster than across the country, however, some portion of those that seek to enjoy the state’s quality of life have incomes that don’t rely on jobs in the state — such as retirees and telecommuters. Thirty-three percent of Montana’s personal income comes from dividends, interest and rent, the article notes.

“The people that are moving here and buying are not tied to the local economy,” Ward said. “We offer a nice quality of life for those that are not depending on finding a job here and they consume some of the housing stock.”

In addition, Montana has seen a relatively fast rate of growth in the number second homes. In 2010, the share of second homes in the state grew to 8 percent, while the U.S. share grew to only 3.5 percent.

Whitefish’s housing assessment found similar results in examining the housing market here pointing to a trend that seems to be at the center of why about 56 percent of workers commute in to Whitefish — houses are being purchased as second homes and being used as vacation homes, rather than being occupied by locals. In Whitefish the percentage of homes occupied by local residents is 70 percent, according to the city’s housing assessment. Suggesting that 30 percent are second homes/vacant.

Ward issues a caution to all communities noting that the loss of affordable housing can push business out of the community because owners can’t afford to pay a wage that allows workers to live there.

The Bureau of Business and Economic Research is the main research unit of UM’s College of Business. BBER researchers engage in a wide range of applied research projects that address different aspects of the state economy.

The full report on affordable housing across the state, is available at http://www.montanabusinessquarterly.com/poverty-with-a-view/

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