(Fourth story in a series)
The City of Boulder has long grappled with a lack of affordable housing, a situation exacerbated by its geography and economics. Bounded by public lands, a river, an interstate and private ranches, the city offers little opportunity for new housing developments that could serve both commuters to Helena and Butte, but also employees of new businesses — the latter of which Boulder is eager to attract given the closure of the Montana Development Center and the loss of its 250 jobs.
The city has responded by offering a suite of new tools to spur economic development — subdivision regulations, an annexation policy, among others — designed to smooth the way for those wanting to bring new housing to Boulder. Others, such as the nonprofit National Affordable Housing Network, have worked for years to provide affordable homes to qualified buyers.
Yet some residents still struggle to find a house to buy or a place to rent, such as Ron Kennedy, who dutifully searched for nine months before finding a rental he could afford in Boulder, or Brian Nathan, who was on the verge of quitting his job because it was taking too long to find a place to live. Jay Brown, who owns a few rentals in town, is often hesitant to put an ad in the paper because he’ll be overwhelmed by calls.
Boulder has its challenges, but its situation is not unique among Montana cities, towns and counties when it comes to a lack of affordable housing.
Gene Leuew, who is now developing a housing project in Laurel using federal housing tax credits, and years ago, helped with building the Big Boulder Residences, said the need for affordable housing in Montana far outstrips the money available to do it.
However, Leuew and others in Montana are dedicated to easing the housing squeeze with a variety of approaches.
In the final story of its affordable housing series, The Boulder Monitor looks at those efforts by focusing on five types of solutions — land trusts, rehabilitating or reusing existing structures, housing trust funds, inclusionary zoning and federal housing tax credits, which are being spearheaded by entities ranging from local governments to nonprofits to for-profit developers and investors.
The land trust option
Under the land trust model, housing consists of two separate components — the house itself and the land. By separating the two, the Missoula-based nonprofit, Trust Montana, keeps housing affordable in perpetuity by establishing a cost saving community land trust.
A land trust allows a nonprofit or another entity to own the land and either sell or rent the house to a qualified individual or family. In the event of an eventual sale, the purchasers agree that when they sell the house, it will be priced in a way that the affordability is retained. Meanwhile, the homeowner earns equity on the structure while the land continues to be owned by the nonprofit or other entity. Separating the land from the structure keeps the property affordable.
Trust Montana is part of a team working to build a 12-home subdivision in Red Lodge, along with the Helena Area Habitat for Humanity. Currently, four houses are being constructed, with move-in dates scheduled for next summer, according to Executive Director Hermina Harold.
The project got its start because a private individual, who understood that the lack of affording housing was causing a worker shortage in the city, donated the land, said Jacob Kuntz, executive director for the Helena Area Habitat for Humanity.
To build the houses, Habitat was able to obtain a $600,000 construction loan from Altana Federal Credit Union. Once the project is completed, the land will be transferred to Trust Montana to be held as a community land trust. The pre-qualified buyers will have individual mortgages on the homes through the USDA Rural Development program and the construction loan will be paid off, said Kuntz.
Part of the deal includes the buyers adding “sweat equity,” where they participate in the construction of the house, said Kuntz.
The houses will cost between $150,000 to $180,000 and that is due to the land being held separately in the trust, said Kuntz. The new owners will then pay a ground lease fee to Trust Montana for the land.
Harold said the ground lease fee is $40 per month.
“This fee supports Trust Montana’s operations, ensuring our ability to support home owners across the state. Instead of paying about $40,000 for the land, they just pay a fee to lease the land under their home. The leases are 75 years, renewable and inheritable. Many other states have CLTs (community land trusts) that have 99-year ground leases but Montana statute only allows leases up to 75 years (unless the home is on state-owned land, then the leases can be longer),” she said, adding that the $40,000 is an estimate and it is that difference that makes the house affordable.
Kuntz said the people who are buying these houses include a hospital worker, another at the grocery store and a third at a nonprofit that serves people with developmental disabilities.
“These are the folks you want to keep in your community,” said Kuntz.
Another avenue for creating affordable housing is through rehabilitating existing properties.
Land trust plus rehabilitation
In Kalispell, the Washington-based Northwest Community Land Trust Coalition partnered with the city in 2009 to obtain federal neighborhood stabilization funds that were made available as a result of the recession.
The HUD Neighborhood Stabilization Program offered emergency assistance to state and local governments as part of the Housing and Economic Recovery Act of 2008. It was focused on acquiring and redeveloping foreclosed properties that might have otherwise become abandoned and blighted areas in their communities.
NWCLTC President Maren McCleary said her organization was approached by the city and a group of concerned residents who knew they had a housing problem. The two groups began exploring the community land trust model and as “one thing led to another,” the federal housing stabilization funds became available, said McCleary.
There were two rounds of Neighborhood Stabilization Funds that were awarded to Kalispell in 2009 and 2011, and the NWCLTC spent about $6 million in NSP funding, said McCleary.
Initially, those funds could not be used for a community land trust project, but a national group of community land trust partners went to Washington, D.C. and convinced HUD otherwise, said McCleary, who admitted that trying to find funds for a community land trust is not easy.
The nonprofit and Kalispell were able to use those NSP funds to buy and rehabilitate 54 houses — with the requirement that those structures be either in foreclosure or abandoned, said McCleary.
McCleary said that in the past, her organization could spend about $200,000 on a property to rehabilitate, and then subsidize the $50,000 or so to make it affordable to the buyer by using NSP funds.
That approach worked until recently, when housing prices around Kalispell have gone “out of control,” according to McCleary, a situation recently spurred on in part by the migration of remote workers from the West Coast seeking a haven away from the pandemic and civil unrest.
As a result, she said, the coalition’s typical clients have been priced out, even with its subsidies. The Coalition had planned to expand its program with the City of Columbia Falls, which also has federal funds available, but the price inflation has forced the city to reevaluate, said McCleary.
Last year, said McCleary, the City of Whitefish passed new zoning regulations requiring developers of certain types of developments to make 20% of their units permanently affordable.
The housing is made affordable through deed restrictions, which act as liens on the property making it difficult to sell or refinance without disclosing the requirements put in place to retain the long-term affordability.
In a deed-restricted housing program, resale restrictions are recorded with the property’s deed and generally remain valid for more than 30 years, according to the federal Department of Housing and Urban Development.
The maximum resale prices for housing in this model are established using formulas based on the appraised value of a home at the time of resale, changes to the consumer price index, or increases in the area median income, according to HUD.
In the case of Whitefish, those affordable units are targeted to a specific average median income (AMI), said McCleary.
In 2019, that income range was from $32,000 to $64,000 a year, or between 60 - 120% of the AMI, according to the Whitefish Housing Authority.
An earlier, voluntary version of the program had produced few results, according to a June 30, 2019 story in the Flathead Beacon on the new zoning rule. Realizing that its housing situation had reached the crisis level, Whitefish made the zoning feature mandatory, according to the Beacon.
Housing trust fund
The City of Helena this month approved an affordable housing trust fund, and that move was based on information obtained from the 2018 Tri-County Housing Needs Assessment that also included Jefferson County, said Sharon Haugen, director of the Helena Community Development Department.
Housing trust funds are distinct funds that collect public revenues to provide a source of funding reserved for affordable housing. Housing trust funds help guarantee that revenues are available each year to support housing needs. Because these trust funds are designed at the state, county, and local level, policymakers have control over securing a dedicated revenue source that is tailored to local conditions. They also have flexibility in determining how to use these funds and in establishing eligibility requirements and program activities based on particular local needs and priorities, according to the nonprofit Montana Budget and Policy Center.
To get it started, the City of Helena is poised to use $100,000 from its general fund as well as $300,000 from the sale of city property, said Haugen.
The city plans to put together a policy manual to guide how the funds are used and work with local housing providers to help put it together, said Haugen.
The plan is to make the program as flexible as possible to address a range of affordable housing issues in Helena, as well as use the money effectively and responsibly, said Haugen.
Helena is also working with Our Redeemer’s Lutheran Church, the Rocky Mountain Development Council, the Helena Area Habitat for Humanity and the YMCA to submit a planning grant to develop 12 acres west of the church, said Haugen in an email update to area housing advocates.
The plan is to create a community land trust on this parcel and make it available to some Habitat homes, an affordable rental project to be completed by RMDC and a transitional shelter for homeless women and children, said Haugen.
Federal housing tax credits
Recently, Gov. Steve Bullock’s office announced five affordable housing projects in the state, to include Laurel Depot in Yellowstone County. The projects, which were submitted by developers or nonprofits, were selected by the Montana Board of Housing, which receives an annual allocation of housing tax credits each year from the federal government.
The Laurel Depot project received $3.5 million in federal tax credits.
Leuew, who is with North Fork Development, is heading up the project in Laurel, which when completed will include about 19 units serving residents in the 40-60% income range for that area, as tabulated by HUD. For the Billings area, the median family income is $71,200, placing a household at the 40% threshold with an annual income around $28,400.
Leuew said rents will likely range from $400 to $800 a month, depending upon income, and the project will accept Section 8 vouchers. Section 8 vouchers are issued to individuals and can be accepted by a variety of housing offerings, differing from a complex hat is considered Section 8, such as Big Boulder Residences, said Leuew.
Both programs provide a rent subsidy.
Leuew, who headed the Rocky Mountain Development Council for more than 30 years, said these sorts of projects, such as Laurel Depot, are a “niche business,” and putting together the financing is often difficult and complicated as there is always more demand for this type of housing than there is money. The projects generally rely on an investor, such as a bank, which stays with the project for 15 years, said Leuew, adding that there is some risk on the part of the investor and for that reason, there needs to be some assurance that it will be successful.
To get started, developers, or perhaps a city housing authority, can do a market study, for which the state does provide parameters, said Leuew. Other times, a community will do an informal assessment, but often it lacks the staff, he said.
Low-income housing tax credits make it financially feasible to complete the construction of an affordable housing project and to offer rent priced below the area’s fair market rent for qualified residents, according to the nonprofit Montana Budget and Policy Center.
From one use to another
Sometimes a seemingly unlikely building can be transformed into residential housing.
Homeword is a nonprofit based in Missoula that is often sought after by localities or local organizations to develop properties into affordable housing by using a variety of methods, such as federal grant programs to build and preserve homes that are affordable, said Executive Director Andrea Davis.
“Sometimes we find the land first and then build new. Sometimes we acquire an existing multi-family property and rehab it and preserve it as affordable. We’ve also been approached by communities with a site already in mind from them and have figured out a way to get a project built,” said Davis.
One of those projects is the former Livingston Memorial Hospital in Livingston that Homeworks is in the process of turning into 37 rental units for singles, families and seniors who earn between 40-60% of the Area Median Income, said Davis. Bluebunch Flats and will offer studio units, as well as one and two-bedroom apartments.
In Livingston, a three-person household at 60% AMI earns $38,580 or less — or $18.34 for a single earner with two children, or two full-time workers earning $9 an hour, said Davis.
Someone at 40% AMI in Livingston earns about $20,000 a year or $9.60 an hour, she said.
That is someone working in retail or a service industry, or on a fixed income like Social Security income, such as seniors, said Davis.
Because Homeworks was able to get the mid-century building on the National Historic Register, it was able to utilize historic tax credit funding, said Davis. The project is also funded by federal low-income housing tax credits, private grants and mortgage debt. The cost to construct the project is $5.87 million.
To combat any objections from neighbors who might have been concerned about the project, Homeword hosted an on-site open house where the nonprofit answered questions about who would live there.
Neighbors are also typically interested in screening processes,” said Davis.
“Once you break down the myths of people who earn low and moderate incomes, neighbors often realize they themselves or people they know earn those income levels,” she said.
In the end, there are recurring challenges that must be overcome.
“Finding available land and/or a good project site is a challenge in our world — it’s expensive, or zoning isn’t right, or neighbors are concerned and protest, or there’s simply nothing on the market to support the project scale needed to make a deal feasible,” she said.
“In short, land banking for the future use of homes people can afford is a good policy,” said Davis.
Good for families, communities
Davis provided a worksheet that outlines the various costs associated with daily living, and how challenging it can be for someone to afford housing along with other expenses.
For example, the average renter in Missoula earns $26,000 a year, or $12.50 an hour, which means they can afford about $650 in rent and utilities at the standard 30% threshold used by HUD to determine affordability. However, the average rent in Missoula for a two-bedroom unit is $918 a month without utilities. That means, someone would need to earn $17.65 to afford that rent, according to the worksheet.
The worksheet shows a list of other possible expenses an individual or family earning $26,000 a year may incur over a month-long period. The non-negotiable expenses — rent ($918), utilities ($100), groceries and household supplies ($300) — totaled $1,318 out of a monthly income of $1,734. That left $416 for everything else — cell phone and internet, transportation, childcare, clothing and other items.
The situation is not unlike one possibly facing a teacher at Boulder Elementary School, where the starting salary is $29,837 a year, but the fair market rent is $915 a month for two bedrooms in Jefferson County, as calculated by the federal Department of Housing and Urban Development.
“When people can afford their home, they can afford other life necessities and ultimately kids are able to achieve their potential because they have home stability,” said Davis.
Kuntz said the crisis in affordable housing impacts more than individuals and families — it is also a detriment to communities, particularly those that are rural — with regards to economic development.
Many rural communities struggle to attract workers, often because they can’t offer the wages that more urban areas can provide, but also because the housing stock is lacking, and what is available often suffers from blight, said Kuntz.
As a result, communities become destabilized, because those workers are often teachers, hospital employees and other workers essential to running a town or county, said Kuntz.
Kuntz said of all the growth policies adopted by localities, the top priority is usually economic development and the second is housing.
“Those two things are tied together,” he said.