Take a Montana college town. Good beer, a decent economy, beautiful scenery. A quality of life that attracts new residents in droves. A housing crunch as the influx pushes up home prices, trapping even middle-income wage earners in rentals. A mounting sense of public frustration — enough that a Santa Fe-based consultant is brought in to assess the community’s options.
The year? 2015. The city? Bozeman.
Not that things look so different in Missoula, circa 2018. That same Santa Fe housing consultant, Daniel Werwath, filled a Holiday Inn ballroom here Jan. 30 as he presented a study commissioned by the Missoula Organization of Realtors. With median home prices at $268,000 and climbing, Werwath told attendees, Missoula is at a turning point. “You’re on the cusp of a bad situation,” he said, “but it hasn’t totally gone over the waterfall yet.”
He might as well have been standing in Bozeman three years ago, when he walked through a similar document before a sparser crowd in that college town’s city hall. There, the median home price was $287,000 in 2014, up $80,000 since 2011. “You have a lot of folks who are renting right now who should be able to buy a house,” he said then.
Left unmentioned in the Missoula ballroom this year? How little progress Bozeman has made in addressing its gentrification woes. Bozeman’s main housing push, the effort that came out of its Werwath report, has produced a grand total of nine below-market-price houses in three years. That could provide a look into Missoula’s future.
Over the divide, housing politics curdled even before Werwath finished his 2015 presentation. Southwest Montana Building Industry Association representatives stepped up to the city commission podium to rail against one of Werwath’s key recommendations: an inclusionary zoning policy that would have mandated accessible prices for some homes and condos in new housing projects.
A stick-it-to-the-developers mandate might sound good to Bozeman’s growth-weary public, builders said, but it would actually crimp the city’s home supply by making it harder to profitably build new housing. A better approach, the industry reps said, would be to offer regulatory incentives, like permitting home construction on smaller lots. They could build plenty of modestly priced homes and condos, builders testified, if the city would just make construction cheaper by easing red tape.
Werwath disagreed. “I don’t think that [even] if you completely deregulated Bozeman, that you would be getting affordable home prices,” he told the city commission. “I don’t think there’s enough juice there.”
But Bozeman’s leaders offered a compromise anyway, telling the industry they’d hold off on the affordability mandate if builders could take select incentives and produce enough low-priced homes. The initial goal, which then-planning director Wendy Thomas described as modest: 14 homes in 10 months, with at least four sold for $219,000 or less.
It didn’t happen. By mid-2017 the incentives program had produced only nine homes, all built by a single company and none hitting the city’s more aggressive price targets. Thomas, the affordability project’s key in-house proponent, quit in mid-2016 and moved to Florida, where she now runs a “Department of Doing” in Gainesville intended to make that city more responsive to its citizens. With the Bozeman project shuffled among staffers after Thomas’ departure, city government didn’t keep the paperwork that was supposed to verify sale prices. Because Montana law keeps real estate sale prices private, that meant the city didn’t actually have any guarantee that the “affordable” houses met the city’s targets.
Then-Mayor Carson Taylor blamed the effort’s failure on the building industry, complaining that it “only gets excited about this when there’s a deadline about to come.” Builders blamed city government, saying the incentives hadn’t been plump enough to make modestly priced construction worth their while. In the meantime, median home prices were up to $398,000, out of reach for most families making less than $68,000 a year.
“It just bought the builders time,” says Werwath, who now says Bozeman’s compromise program was “just so clearly a situation where it wasn’t going to work.”
Bozeman pivoted back to the affordability mandate last summer, but the would-be silver bullet appears to have jammed in the barrel. For starters, when city staff went to dust off the legal language that would implement the mandate, written as part of the compromise package in 2015, they realized it would inadvertently place an effective ban on new condo developments. So, as a stop-gap measure, the city has exempted condominiums — currently the de facto starter home supply for many Bozeman buyers — from the mandate.
Additionally, most of the other housing developments proposed in Bozeman in the last six months have been small enough to duck the mandate’s 10-unit threshold, says current planning director Marty Matsen, though one major subdivision developer has four homes on the way priced below $200,000, and a nonprofit housing developer is working on a few more. A new city housing director tasked with overhauling the effort started work Feb. 20.
Werwath thinks Bozeman’s housing market may have passed the point of no return. “It was running away two, three years ago, and then they didn’t do anything for a couple years,” he says. “It was already sort of too late when they started looking at this.”
In Missoula, meanwhile, Werwath’s new study — commissioned by Realtors, rather than city government, at a cost of $25,000 — touts collaboration as the city’s best hope for keeping its housing stock accessible.
The study details a lengthy list of ways the city and county could promote affordability by relaxing regulations and suggests using tax dollars to create a housing trust fund. Werwath doesn’t recommend an inclusionary zoning mandate because, he says, Missoula’s housing sector is “sophisticated” enough that it makes more sense to look at other options first.
“There are just better methods to put energy into,” he says.
The Garden City does have its advantages. While staff turnover has dogged the administration of Bozeman’s affordability program, the city of Missoula has had a dedicated housing director, former Poverello Center director Eran Pehan, since 2016. And Missoula does have active “production builders” putting $230,000 homes on the market, according to Werwath, thus hitting price points that Bozeman struggled to accomplish with its incentives program.
Missoula’s political dynamics may be more amenable to effective action on housing, as well. While a number of Werwath’s recommendations for Missoula involve better coordination between city and county governments — for instance, developing a joint annexation policy to help determine where new housing will be built — that sort of collaboration has been a challenge for the Bozeman area, where a conservative county commission routinely butts heads with more progressive city leaders. At the Realtor-organized event last month, Missoula County Commissioner Jean Curtiss, a Democrat, was onstage.
Additionally, a single nonprofit in Bozeman, HRDC of District IX, handles everything from low-income housing development to a seasonal homeless shelter and a homebuyer education program. Missoula, in contrast, has several major agencies in the housing space, including the Missoula Housing Authority and Homeword.
The number of stakeholders certainly gives Missoula more capacity to tackle its problem. But add Realtors, bankers and builders to the mix, and it also means an awful lot of cooks in the kitchen.
While Bozeman’s housing push ended up adversarial, Werwath says he’s optimistic about Missoula’s prospects for getting government, private industry and housing nonprofits working in sync well enough to make substantial progress.
“It’s really a hard thing to do,” he says, “and it takes everyone from every sector pulling in the same direction.”