As more data comes in, it’s becoming clearer that high-earning college-educated remote workers are pouring into Missoula County from abroad, driving up house prices while displacing the people who live here. And though Missoula has experienced an unprecedented housing boom in recent years, state legislatures are introducing legislation aimed at removing barriers to construction.
However, many of these measures are opposed by Missoula officials.
Last week, the Bureau of Business and Economic Research stopped in Missoula for its nationwide tour of the Economic Outlook Series. Bureau Director Patrick Barkey provided an update on the local housing market.
Using migration data from the Internal Revenue Service, he showed that Missoula County’s population has increased due to migrants from abroad, although many county residents are moving to other counties in Montana.
“Missoula County is similar to Bozeman in that real estate prices have continued to get higher and we’re seeing people potentially moving to neighboring counties or other counties to escape our high prices,” Barkey told the audience.
The data shows that wages in Montana as a whole are not keeping pace with the rise in home prices, he said, but average wages in Missoula are slightly higher here than other counties because of the growing tech industry.
Missoula has seen two housing booms this century. One was in the years leading up to the Great Recession of 2008 and the other started about the last five years but has peaked during the pandemic. Barkey noted that the recent surge is a lot more robust than the last construction boom.
“We’re seeing more buildings now than at the peak before the housing crisis of the last decade,” he said. “Does that mean we’re headed for bankruptcy? I don’t believe.”
Single-family home construction made up a majority of new construction in the early 2000s, he noted. But the construction of apartment buildings is the trend of recent years.
Bryce Ward, an economist who studies the US Census Bureau’s American Community Survey and housing data, showed that people who move to Missoula today are wealthier, more educated, and less likely to be employed than in decades past.
Looking at census data, people who moved to Montana between 2020 and 2021 were more likely to have at least a bachelor’s degree, a remote job, and an inflation-adjusted income of over $200,000 than people who moved in previous years Montana were drawn.
“More people are moving here, different people and especially wealthier people,” Ward said. “13.2% of all households that moved to Montana in 2020 and 2021 reported an inflation-adjusted income of over $200,000. That is much higher than historical.”
From the last quarter of 2019 to the third quarter of 2022, the median home selling price in Montana increased 54%. But in Missoula County it was 63%. More people moved here in the western half of Montana during the pandemic than anywhere else in the nation except Idaho, Ward said.
“The average (number of people who moved here) over the last two years is 3.3 times higher than the 20-year average that we’ve seen this century,” Ward said. “Now there are 28,000 more people living here than you would expect if we were growing at historical rates.”
Montana’s population will now double in 40 years if current rates stay the same, he said, compared to the 70 years it would have taken to add just over 1 million people at pre-pandemic migration rates.
All the pressure on house prices has left state legislatures trying to take action to quell the storm.
On Tuesday, Rep. Katie Zolnikov, a Billings Republican, made a presentation on a bill she sponsored, HB 337, that would replace local government powers to set minimum lot sizes for new housing developments. Instead, local governments may not require minimum lot sizes larger than 2,500 square feet in areas served by municipal water and sewerage. In Missoula, the minimum lot size is currently 3,000 square feet in eight of the 16 neighborhoods, and the rest range from 5,400 to 215,000. The bill is opposed by the City of Missoula.
“This gives landowners more freedom to develop their property to meet the demands of their community,” Zolnikov said. “If a lot is going to be big, the developer’s incentive to build a small house is incredibly small.”
She said the bill gives people the freedom to subdivide smaller lots and will not result in the creation of “high-rise buildings” in backyards of single-family neighborhoods.
“Although the Montana housing crisis is not a new problem, I have heard that there is a great need for affordable housing,” she said. “Helena has abolished minimum batch sizes, Billings has opted for a batch width requirement. In both cities, the world moved on. No skyscrapers were built in the middle of residential areas. And home prices in those two cities have remained lower than Missoula, Bozeman or Whitefish.”
But Eran Pehan, the director of Missoula’s Office of Community Planning, Development and Innovation, said the bill was wrong for Missoula.
“In short, this is one of several piecemeal, one-off bills that will not solve our state’s or local community’s housing problems,” Pehan said. “What works for one community won’t work for another. One-size-fits-all mandates are not real housing solutions. But comprehensive land-use law reform is, and we are already doing that as a community.”
The city initiated a code reform process for development regulations late last year.
“We work hand-in-hand with those most affected,” Pehan said. “Aspects of (HB 337) are worrying. The bill does not include exceptions for sensitive areas such as flood plains. In a floodplain there are financial and ecological reasons for larger batch sizes. Having more people in a flooded area increases the risk and cost to our community.”
In general, Pehan said, Missoula needs a more comprehensive approach to solving the housing crisis.
“House Bill 337 isn’t,” she said.
She noted that in the Missoula residential areas where lot sizes are much larger than 3,000 square feet, the reason is that they are near areas such as flood plains or near the urban-rural divide where larger Land makes more sense for the community.
Ginny Merriam, the city’s communications manager, said the city’s list of where it stands on each proposed bill was created by gathering the opinions of all managers whose input is relevant.