MISSOULA - Two words added to a section of state law during the last Legislature could enable cities in Montana to direct tax increment toward workforce housing, though exactly how hasn't been determined.
But a working group that includes members of the Missoula Redevelopment Agency and local housing experts have met several times in an attempt to translate the new law and craft a policy that works for the city.
“There's no definition of workforce housing in the statute,” said Annie Gorski with MRA. “The advice we've been given is to define what this means for Missoula, and define what workforce housing is for Missoula.”
Gorski said issues like area median income, price caps, length of affordability, and other issues must be defined as part of any future policy. The working group should be ready to bring its recommendations to MRA this spring, and possibly the City Council if needed.
“We've reached consensus on what the area median income range may be in terms of workforce housing,” she said. “We've reached some consensus regarding the length of affordability that might be tied to any new investment in workforce housing using tax increment financing.”
Montana Code Annotated lists the types of infrastructure a city can direct tax increment toward as part of a project. That includes water, utilities, telecommunication lines, sidewalks, bridges and other transportation needs.
But in 2021, the Legislature added workforce housing to the definition of infrastructure. It could be a powerful tool once the details are ironed out, Gorski said.
“We didn't realize that addition had happened until we were talking to our bond counsel last year,” she said. “Like many cities around the state, we've been trying to figure out what this means and how we can use this new provision now that they're defining workforce housing as infrastructure.”
The Missoula Organization of Realtors this month released its annual housing report. In doing so, it detailed the growing gap between the area median income in Missoula and the rising cost of housing.
With inventory tight and demand high, the city is working to revamp its codes and regulations in an effort to streamline the permitting process and get more homes to the market. But that will take time and other tools may be handy, including the use of tax increment to increase the city's supply of workforce housing.
“We know from talking with several projects right now that there's a significant gap between the workforce housing income range and the amount those units can be sold or rented for, versus the market rent,” Gorski said. “On top of that, we have high interested rates and high construction costs. Making these projects pencil right now is challenging.”
Historically, MRA has invested in housing in a number of ways, primarily in projects that involve public housing. In 2020, it directed $1.3 million in tax increment to help finance the $54 million Villagio project, which is set to open this year.
This year, MRA also agreed to direct tax increment towardthe infrastructure needed to develop around 70 units of income-qualified homes off Scott Street. Other MRA investments have gone toward the acquisition of land, such as the Sleepy Inn, to help lower the cost of bringing housing to the market.
Adding workforce housing as a use for tax increment could provide the city another tool, Gorski said.
“We have so few resources in Montana to fund workforce and attainable housing, so we hope this will be another tool,” she said. “We just want to think carefully about any unintended consequences. We don't want to bring something forward that doesn't meet the need, or discourages housing in our urban core near services and pushes it out further away from services. We're trying to be thoughtful about what we recommend.”
