On Monday, a much-debated Democratic bill received its first hearing. The bill intends to allocate $500 million from the state’s budget surplus towards a fund for constructing affordable housing. Supporters of the bill argued that it is crucial for the state to supplement market-oriented housing initiatives with public funding, which can help subsidize affordable housing.
House Bill 574, sponsored by House Minority Leader Kim Abbott, D-Helena, would make hundreds of millions of dollars available for grants and loans to support private-sector housing projects that produce homes and apartments at prices intended to be affordable for lower-income residents. Money put into low-interest loans would be repaid to the fund by borrowers, providing an ongoing stream of state money for subsidized housing.
On Monday, Abbott informed the House Business and Labor Committee that the proposal aimed to supplement other initiatives aimed at resolving the state’s severe housing shortage. These initiatives, particularly the bills seeking to relax current development regulations, aim to lower market prices by encouraging widespread home construction.
Abbott stated that the main focus of this bill is to invest in constructing. He emphasized that simply building alone will not solve the problem, as it is crucial to ensure affordability as well.
It’s unclear whether the bill will get enough Republican support to advance from the committee or, if it does, how it will fare amid vigorous competition from other large spending proposals under consideration by the Legislature. Other measures vying for their share of the surplus, estimated at $2.5 billion to $3 billion in one-time cash, include a $267 million local infrastructure program, efforts to shore up pension funds, and a proposal to exempt social security income from state income taxes. Gov. Greg Gianforte, a Republican, also signed an initial spending package into law Monday that puts about $1 billion of the surplus into income and property tax rebates.
On Monday, Abbott proposed the idea of potentially offering the housing trust at a reduced funding level, if needed.
She stated that she is unsure if it should be $500 million, but emphasized the importance of making a substantial investment in constructing affordable housing.
Many if not most Montana communities have seen rents and for-sale prices spike in recent years as an influx of pandemic-era migration has collided with the state’s finite supply of homes. Real estate website Zillow says the typical home value in the state was an estimated $420,000 in February, up from $265,000 at the beginning of 2020. A poll commissioned by University of Montana researchers last year reported three-quarters of Montana respondents considered lack of affordable housing an “extremely” or “very” serious issue.
Minority Democrats in the Legislature have advocated publicly for putting a large chunk of the surplus toward housing since last summer. Abbott, the elected head of the House Democratic caucus, introduced the bill Feb. 15. As a spending measure, it wasn’t subject to the Legislature’s transmittal deadline for non-budget bills on March 3.
Several organizations and groups showed support for the measure during Monday’s hearing, where no opposition was present. These included affordable housing developers, Shelter Whitefish, the city of Bozeman, the Montana Environmental Information Center, the Montana Budget & Policy Center, and private-sector labor unions.
Melissa Shannon, a lobbyist for the Montana Housing Coalition, explained that when constructing housing of this nature, there are restrictions on the rental or sale prices that can be set, which must be lower than the prevailing market rates. As a result, developers cannot make it financially viable without some form of investment.
Cheryl Cohen, the administrator of Montana Housing, responsible for managing the state’s affordable housing programs under the Department of Commerce, did not formally support HB 574 during her testimony on Monday. However, she did mention in response to inquiries from legislators that the bill would simplify the utilization of federal housing subsidies allocated to the state. Currently, these subsidies are challenging for developers to utilize without additional subsidies from other sources.
Cohen stated that states that have implemented a state housing trust fund or a state housing tax credit are more proficient in utilizing federal funding sources.
Additionally, she stated in her testimony that there is a shortage of approximately 31,000 homes and apartments in the state that can be rented at affordable prices for individuals with very low incomes, including families of four earning less than $40,000 annually.
According to Cohen, at present, the state board of housing receives federal funding to support the construction of approximately 500 homes annually for low-income renters. If the bill’s state funding is included, she believes the state would likely be able to increase that number twofold.
After the bill undergoes a committee vote, its next procedural move would be to advance for debate on the House floor if it successfully passes muster.
This story is published by Montana Free Press as part of the Long Streets Project, which explores Montana’s economy with in-depth reporting. This work is supported in part by a grant from the Greater Montana Foundation, which encourages communication on issues, trends, and values of importance to Montanans. Discuss MTFP’s Long Streets work with Lead Reporter Eric Dietrich at [email protected].
