Montana is in an affordable housing crisis. For a household to afford a fair market rent two-bedroom apartment without spending more than 30 percent of their income on housing, they must earn $3,342 monthly, which equates to $19.28 per hour. The average renter wage in Montana is $16.91. Fair market rent is representative of the cost to rent a moderately-priced dwelling unit in a local housing market. If an individual earned the 2023 minimum wage, $9.95 per hour, they would have to work 1.9 full-time jobs to afford a two-bedroom rental at fair market rent. Nearly a quarter (23 percent) of renters, or 29,589 households, in Montana are severely cost-burdened, meaning they spend more than half of their income on housing. Montana representatives and lawmakers must urgently make policy changes to help residents in Montana afford the cost of living. The Montana Legislature can help improve housing affordability in Montana with three policy solutions:
1. Pass a state-based low-income housing tax credit that provides tax incentives to encourage the construction and rehabilitation of affordable housing.
2. Invest $50 million in the Housing Montana Fund and allow the Housing Montana Fund to make grants in addition to loans.
3. Further support the existing Multifamily Coal Trust Homes Program with an additional $50 million of funding, for a total of $115 million.
State-Based Low-Income Housing Tax Credits Improve Housing Affordability
Today, many factors, like the market environment, construction, and development, increase the costs of building homes for families living on lower incomes. Each year, the federal government allocates a specific number of credits to Montana through the federal Low-Income Housing Tax Credit (LIHTC) program, which is dispersed by the Montana Board of Housing.
Thirty-two states have chosen to piggyback on the federal LIHTC with a state-based credit. For example, in Arkansas, developments that receive Federal LIHTC funds are eligible to receive state-based housing tax credits equal to 20 percent of the federal award. Oklahoma offers a dollar-for-dollar match up to 100 percent of the federal LIHTC. As drafted, Montana’s LIHTC proposal would be a dedicated $1.5 million per year tax credit that expires after six years, totaling $54 million. A state-based housing tax credit would increase the pool of funds available in Montana, leading to more organizations receiving funding and ultimately allowing for more affordable units in the state.
Low-Income Housing Tax Credits provide lower debt costs for developers, allowing for less revenue needed to break even on the costs of developments. Developers compete for tax credits, which are scored based on application criteria. The developers then convert those credits into cash by selling them to private entities that use them to offset tax liability. If a development uses a LIHTC, they are held to income eligibility and affordability requirements. Tenants in LIHTC units must demonstrate an income level at or below 60 percent of the area's median income (AMI). Area median income is the median of all wage-earner incomes in a specific geographic area. For example, a family of four in Missoula living on an income of $54,120 or less could live in one of these homes. In exchange for tax credits, properties must remain affordable for at least 30 years for existing homes and 50 years for new developments.
Housing Montana Fund: An Underutilized and Underfunded Program
The Housing Montana Fund was created during the 1999 session to help provide affordable housing for citizens and to utilize available federal funds fully. The last investment for this fund was $700,000 in 2002. Since 2023, Housing Montana Funds have been committed to two projects to maintain and create affordable housing to be finished between 2025 and 2026. After these commitments, there is only $103,149 left in the fund.
Additional funding for the Housing Montana Fund would benefit Montana by allowing the state to capitalize on matching federal funds for housing that would otherwise be lost. The fund can also serve as bridge financing necessary to finish low-to-moderate-income housing projects. The program states that 20 percent of funds must be disbursed to rural areas, noting that these communities, like urban communities, are also affected by the cost of housing.
Multifamily Coal Trust Homes Program: An Example of Existing Program Successfully Creating and Preserving Affordable Housing
In 2019, the Montana Legislature created the Coal Trust Multifamily Homes Program and provided $15 million of Coal Trust funds to be invested in loans for projects that develop or preserve multifamily rental homes in Montana. In 2023, the program was reauthorized with an additional $50 million in funding. As of May 2024, the Montana Board of Housing approved loans totaling $49 million to finance 18 developments in 13 Montana communities, creating 592 apartment homes. Since 2020, 244 affordable apartment homes have been developed or preserved, with 348 in development. Funding for this program will be exhausted before the 2025 session, which is why additional funding is so important. This program has proven its efficacy and success through how many units it has created and preserved. At least 75 percent of units created through this program must be rented to households at or below 95 percent of the area median income.
Not only is this program providing homes for Montanans, but it is also stimulating the economy. From the initial $15 million allocated in 2019, $17.7 million has been given to private investments, 421 jobs were created, and $19 million in wages were expelled. Workforce housing also helps support local businesses that may be struggling to attract and retain employees due to the rising cost of living in Montana. The financing of the Multifamily Coal Trust Homes Program also allows the fund to grow as all loans are paid directly back to the trust.
Why Support These Initiatives and How?
In Montana, there is a deficit of 14,487 homes for individuals at or below 50 percent of the area median income. Policymakers must allocate funds to create a Montana Low-Income Housing Tax Credit and further fund the Housing Montana Fund and Multifamily Coal Trust Homes Program. These legislative priorities are long-term solutions to help create stronger Montana communities through the development and preservation of safe and affordable homes.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.