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Inclusionary Zoning Ban Complicates State's Affordable Housing Crisis

'For Rent' sign in front of a house.
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A new law in Montana prohibits local governments from requiring builders to include housing units for low- and moderate-income families in new projects. The restriction comes as some communities were getting programs off the ground.

Michelle Nequette is a horseshoer in the Flathead Valley. She and her partner moved in with his parents on their farm in Whitefish in January of 2020, only planning to stay as long as it took to buy their first home together. They brought along their dogs, cats and even a few horses. But they weren’t planning on staying this long, with no clear end in sight.

“It's been a blessing to be able to come here,” Nequette says. “And at the same time, you know, we're adults: We would really love our own living space.”

Employment has never been a concern for the couple, even through the pandemic. Horses still need to be shoed, and her partner works at FedEx, whose services have been in high demand as people chose to shop from home.

Nequette says housing options are limited and expensive. When they see something they like, it goes quickly.

She says they have considered renting but have found very few rentals available. Plus, open rentals rarely take pets — or charge high fees for them.

“I love it here because my work is absolutely taking off,” Nequette says. “I love my clients. I have great horses to work on. It's gorgeous here. But gosh darn it, it would be really nice to find a place to live.”

Housing scarcity has been an issue in Whitefish for years. In 2017, a task force of local leaders and consultants drew up a report that recommended inclusionary zoning as one of several steps the city could take to manage the problem.

Inclusionary zoning is a policy that requires developers to set aside for low- to moderate-income residents a certain percentage of the housing units they build inside certain zoned areas. Those units are usually priced below market rate.

State Rep. Dave Fern, D-Whitefish, took part in the task force. He says the goal was to fold the program in as part of a larger city effort to get more people into homes.

“It's really interfering with our ability to grow jobs in our state successfully because housing is limited and the affordability issue is quite profound,” Fern says.

But with Gov. Greg Gianforte’s signature on HB 259, Whitefish must now roll back it’s inclusionary zoning policy before people like Nequette can even use it. The law prohibits inclusionary zoning across Montana.

Whitefish and Bozeman were the only Montana towns running inclusionary zoning programs, but other cities facing affordable housing trouble had considered it before the policy was banned statewide.

Opponents of the inclusionary zoning programs say they drive up costs for builders.

Rep. Sue Vinton, a Republican from Yellowstone County and a member of the Home Builders Association of Billings, sponsored the bill to ban the programs.

“Everyone in Montana is dealing with issues of how to make housing more affordable, but I don't believe that inclusionary zoning effectively deals with that issue,” Vinton says.

She says inclusionary zoning puts a hefty burden on developers at a time when building costs are up and skilled workers are hard to come by. She says the costs lifted from low- and moderate-income buyers through inclusionary zoning are unfairly put onto other homebuyers in the process.

“We have wide open spaces, right?” Vinton explains. “But that land comes at a cost and there are many people across the state that are in favor of inclusionary zoning but they don't necessarily want it in their backyard, either.”

Vinton says she supports finding other means of promoting affordable housing in the state.

Before the end of Montana’s 2021 legislative session, lawmakers passed a bill that would increase opportunities for mobile home owners to buy mobile home parks. Another bill allocated COVID-19 relief funds that would help some residents make rent and mortgage payments.

Lawmakers rejected a bill that would have allocated $15 million from the state’s Coal Tax Trust Fund to a program providing housing loans to low- and moderate-income families, as well as a bill restricting single-family zoning.

Bryce Ward is the founder of ABMJ Consulting and an economist at the University of Montana, he says the state faces an issue with affordable housing. But as policy makers search for solutions, he says inclusionary zoning policies rarely lead to much new housing.

Ward says there’s another option that would work better.

“The unpopular one, which is you’ve got to give people money to pay their rent,” he says.

Ward says raising the minimum wage and the earned income tax credit — or giving out housing vouchers — would probably go further in helping people into homes. He says Montana communities also need to build more housing by removing single-family zoning. But that’s hard to do because people who already have homes don’t want to see the rules change. 

“It's not explicit, but this is what lies underneath it: I already own my house. Expensive housing to me, that's great. It means I'm richer,” he explains.

For those who already own a home, affordable housing crises mean the value of their homes will continue to climb. For those still looking, it puts buying a home or even finding a rental further out of reach.

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