MISSOULA — While Missoula's for-sale housing market remains challenged by supply and rising costs, the city's rental market also faces challenges, including a low vacancy rate and rising rent.
The median cost of a one-bedroom apartment in Missoula climbed to $1,190 by the end of 2024, while a two-bedroom unit cost $1,490. At the end of 2022, the average cost of a one-bedroom unit was $806 while a two-bedroom unit cost little more than $1,000.
Missoula's rental market remains challenged by a number of factors, including new construction, a lack of affordability and rising operational costs faced by landlords, which includes year-over-year tax increases.
Speaking at the Missoula Organization of Realtor's annual market report, Josh Plum of Plum Property Management said a healthy vacancy rate in the rental market lies between 5% and 8%. That ensures tenant choice and prevents excessive turnover.
“By the end of 2024, multi-family vacancy had fallen well below this range, reinforcing the shortage of rental housing in Missoula,” said Plum. “The city has a high proportion of renters compared to homeowners, underscoring the need for sustainable rental solutions.”
With the perceived construction boom, vacancy rates in the rental market stood above 8% at the close of 2023. The steady addition of inventory sustained that rate into 2024, but with strong demand, the vacancy rate soon fell to 2.8%.
“The sharp drop indicates that new multi-family units are being absorbed quickly,” said Plum. “It means we still have a continued market demand across multi-family housing.”
While land and construction costs continue to climb, attributing to rising rental costs, operational expenses also play a role, Plum said. The costs include maintenance, debt service and utility costs, which are also rising.
But insurance premiums and property taxes may be the largest factor, Plum said. The latter has increased in Missoula year after year.
“There's also been a big increase in insurance premiums across all multi-family sectors, especially older properties, with some being almost not insurable for 100-year-old-plus buildings,” Plum said. “It impacts a property owner's ability to cash-flow those assets, which in turn affects vacancy rates through demand and costs.”
Subsidized housing also challenged
The challenges of affordability and choice are amplified for those who have secured a housing voucher. The Missoula Housing Authority has seen an increase in those seeking a voucher but a decrease in the number of people able to put the voucher to work.
By the end of 2024, the housing authority had more than 2,100 people waiting for a voucher, marking a sharp increase over past years. At the same time, the housing authority's success rate has fallen to a new low.
For families earning roughly 50% of the area median income, the voucher ensures they pay no more than 30% of their income toward housing. The voucher covers any rental costs above that figure.
“Once a person comes up next on the voucher list, they have a limited amount of time to find a rental that will accept the voucher,” said Julie Pavlish with Homeword. “We had about a 75% success rate in 2020, but we saw those success rates starting to drop, pretty dramatically, even when the housing authority was able to extend that search time.”
The housing authority's success rate now sits at around 50%, she said.
“There's a mismatch in the maximum amount a voucher will pay, and those are standards set by US Housing and Urban Development,” she said. “There's only so much a voucher can pay. There's also mismatch between that and the current pricing for available rentals.”
The lack of supply in Missoula doesn't help, she added.
“It demonstrates the challenges and growing need on the supported side of our housing continuum,” she said.
