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Pro-housing zoning bills advance, but big funding remains in limbo

Both the House and Senate have endorsed zoning bills intended to ease Montana’s housing crunch by simplifying construction. But spending bills have a less certain road.

A slate of zoning bills intended to spur home construction by limiting how local governments can regulate housing development appears headed toward passage following votes on the floor of the Montana House in recent weeks. However, bills that would put money from the state’s $2.5 billion budget surplus toward housing affordability remain in limbo as the Legislature enters the final weeks of its 2023 session.

Home prices and rents have soared across Montana in recent years, in part because rapid in-migration has crowded the state’s finite supply of homes and apartments. According to real estate website Zillow, Montana’s typical home value was nearly $428,000 as of March, up from $267,000 at the beginning of 2020. Rents have also risen enough in many communities that employers report having an increasingly hard time hiring employees to staff their businesses.

With the pressure those prices place on many constituents back home, housing affordability has been oft-cited as a priority for lawmakers across Montana’s political spectrum as the Legislature meets this year. Last year, Gov. Greg Gianforte, a Republican, convened a housing task force in an effort to tee up potential legislation, resulting in recommendations that focused largely on regulatory reforms intended to bring down housing costs by boosting supply.

Three-and-a-half-months into the session, several zoning measures focused on urban housing appear headed to the governor for his likely approval.

Two major zoning bills that had previously passed the Senate cleared the House earlier this month. Both are intended to rein in city planning regulations that allegedly drive up housing prices by stifling home construction. Senate Bill 323, sponsored by Sen. Jeremy Trebas, R-Great Falls, would make duplex housing allowable on any home lot in cities with 5,000 residents or more, preempting regulations that currently set aside some areas for only single-family homes. Senate Bill 245, sponsored by Sen. Daniel Zolnikov, R-Billings, forces cities of 7,000 residents or more to allow apartment-style housing in most areas set aside as a commercial zone.

Both bills faced opposition from local government leaders and have been amended to address some of those concerns. In its initial form, for example, SB 323 would have required cities of 50,000 people or more to allow triplex and fourplex construction on any home lot. That extra density, critics said, could have resulted in infill development that transforms neighborhoods and overloads existing sewer systems.

A third bill, a major overhaul of the state’s land use planning statute advanced by a coalition that included the Montana League of Cities and Towns, also passed the House April 13. That bill, Senate Bill 382, includes provisions intended to ensure cities in the state’s urban counties are encouraging the housing they need to accommodate population growth. Sponsored by Sen. Forrest Mandeville, R-Columbus, it also makes an explicit effort to shift public participation in land use planning earlier in the process, inviting more public input as growth plans are written and limiting public comment once specific projects are proposed.

Lawmakers and the governor have had a harder time garnering the votes necessary to shepherd many other housing affordability efforts toward law, however.

Democrats, who hold about a third of legislative seats, have complained that opposition from majority Republicans has scuttled many of their favored housing measures, including proposals that would have offered a tax credit to landlords who rent properties for below-market rates and assessed a fee on Airbnb-style short-term rentals to raise money for housing programs.

Many efforts advanced by Republican lawmakers have fallen short, as well. For example, a proposal to let local governments add a bed tax surcharge on short-term rentals to raise money for housing efforts failed to gather enough support to clear the House Appropriations Committee. Another bill that would have created a state tax credit to support more rent-restricted housing development also died in the budget committee.

With this year’s crop of bills thinned down in the session’s final stages, one big question on the housing front remains: whether lawmakers will allocate a significant amount of funding from the state’s historic, $2.5 billion surplus toward housing affordability efforts.

Legislative leaders from both parties have said they consider housing spending necessary, but the active spending proposals appear to have been entangled in the politics surrounding late-session budget negotiations.

“I do think we need to use some of the surplus for housing-related activities,” Senate Majority Leader Steve Fitzpatrick, R-Great Falls, said in an April 11 press briefing. “I guess the question is: What does that look like and where are the votes going to come from, because there seems to be a lot of dissension on what that final piece looks like.”

Senate Minority Leader Pat Flowers, R-Beglrade, said in an April 18 press briefing that he was worried the Legislature is headed toward adjourning without doing enough to address the housing crisis, particularly in terms of offering short-term relief to complement proposals aimed at making more homes available to lower prices on a long-term basis.

“This isn’t just a human welfare problem,” Flowers said. “There are businesses that can’t find workers — and we’re going to come out of here with nothing.”

Republicans passed a $1 billion package that included hundreds of millions for one-time property and income tax rebates earlier this session. While the income tax rebates will reach most Montana taxpayers, Democrats argued the property tax rebates should have been structured in a way that also provided short-term aid to renters.

The governor’s preferred housing investment proposal, his $200 million Housing Means Economic Security (HOMES) Act, faltered on the House floor April 3, failing an initial vote on a lopsided 30-68 margin. That measure would put the money into a trust fund, using interest to help pay for the construction of water lines, sewer lines and streets necessary to support new housing construction, particularly for higher-density developments. Gianforte has urged lawmakers to revive the proposal, suggesting it could be amended into another bill.

In the Legislature, Speaker of the House Matt Regier and House Minority Leader Kim Abbott are advancing their own $115 million housing proposal, House Bill 927. That bill would stash a chunk of the surplus in the state’s coal trust, where it would be used to offer low-interest loans for projects that build rent-restricted housing intended to provide affordable homes to low-income Montanans. That bill is pending in the Senate Local Government Committee.

Both Regier and Abbott have criticized the HOMES approach as a potential windfall for large developers who are building homes in Montana anyway. Abbott has also said she worries the HOMES proposal isn’t structured in a way that guarantees homes produced using subsidized infrastructure actually end up being affordable.

“Even in the Flathead, these projects are already going, so would this have been sucked up by developers that are already doing the developing?” Regier said in an April 4 press briefing. “Is that the best use of $200 million of taxpayer money? The vote said ‘No’ on that.”

“It felt like a giveaway to developers to me, and, I thought, to a lot of other people in the chamber,” Abbott told reporters April 18.

A third pending measure, Hardin Republican Rep. Paul Green’s House Bill 819, would put $50 million toward a housing effort that, working through regional organizations, would try to help middle-income workers purchase homes by providing mortgage assistance for deed-restricted properties. That bill, written in part by lobbyist Jessie Luther, has the backing of several industry groups calling themselves the Montana Attainable Housing Alliance. It is pending before the House Business and Labor Committee.

The governor, for his part, has expressed skepticism about the cost of direct housing subsidies and argued his “free enterprise” proposal is a superior policy.

“We want to encourage smart, denser housing development using incentives,” Gianforte said at a press conference April 6. ”We stand by this approach, and we think it’s much better than promoting subsidized housing or paying off other peoples mortgages, which will not increase the housing supply.”

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