Workforce housing served two ways: Proposals from parties differ on how to tackle the shortage

One of the biggest barriers to recruiting and retaining staff across industries in Montana is housing, proponents for a bill to infuse $500 million into affordable housing projects said.

The workforce housing shortage has been a topic of debate in the legislature this session, with both Republicans and Democrats proposing solutions to the problem.

Tirza Asbell of Montana Women Vote said that House Bill 574, which would establish a workforce housing trust fund, would “ensure that working Montanans are able to stay in the place they love.”

“This trust can help healthcare centers and school districts alike attract high quality applicants by ensuring that there are affordable homes available,” she said, adding it would help retain Montana’s workforce in low paying fields like hospitality and service work.

The bill, sponsored by House Minority Leader Kim Abbott, D-Helena, was one of at least two workforce housing proposal bills heard this week. There were 15 proponents and no opponents for HB 574 in House Business and Labor on Monday. Proponents included the Blackfeet Tribe, the Montana AFL-CIO, Shelter Whitefish and the Montana Housing Coalition.

The funds would subsidize affordable housing development for lower income people in the state.

Abbott said the rental rate would be no more than 25% of household income for families earning 80% of the area median income, figures she said they took straight from the U.S. Department of Housing and Urban Development.

A technical note on the bill’s fiscal note shows that HUD actually uses a definition for affordable housing as no more than 30% of family income. Cheryl Cohen, executive director and administrator with the Montana Housing Division, said the HUD definition has changed through the years, but said the standard now is 30%.

“If we set this bill and funds source at a lower threshold, that would mean the developers would need to have the rent set potentially even lower, which could affect the underwriting of the project,” she said.

Half of the money, $250 million would be reserved and invested to earn interest, with the goal of using revenue from the investments and interest payments to make additional grants down the line. The fiscal note outlines the initial investment along with three full-time employees.

Another bill would take a different approach to the workforce housing issue by providing incentives to businesses to provide housing for employees.

Sponsored by Rep. Marty Malone, R-Pray, House Bill 820 would create a 20% market value property tax exemption for properties owned by employers that are rented to employees or provided to employees as part of compensation, the fiscal note said.

Malone said in the House Taxation Committee on Tuesday this bill would encourage businesses to purchase or build housing for employees, and employer-owned housing provides benefits for businesses, giving the example of a friend of his with a car dealership in Livingston.

“Not only does he have a spot for his employees, the employee can keep an eye on the vehicle lots, the employees walk to work, and the employee will more likely be on time,” he said to chuckles in the room.

The fiscal note said local mills would have to offset the cost from the property tax discount here, a more than $600,000 loss in state revenue, something some legislators flagged as a concern. Overall taxable value in the state would decrease an estimated 0.11% if the bill were to pass, but the fiscal note said resort areas with more seasonal workers that might use this incentive may see a greater tax shift than the statewide average.

The bill had no proponents. One opponent, Bob Story with the Montana Taxpayers Association, said it was a good bill but needed to be tightened. Story expressed concern that business owners who also own their home could claim their private residence as a business asset for a 20% property tax reduction. Malone said he’d be interested in amending the bill to make sure that loophole isn’t in the final bill.

Bureau Chief with the Property Assessment Division Bryce Kaatz, who would be administering this bill if it were to become law, told lawmakers the way he read the bill, if the property was in the business’ name, then it would qualify. But if it was owned individually under the business owner’s name, then it would not qualify for the discount.

Story also expressed concern about the tax offset to other businesses and community members.

Rep. Marilyn Marler, D-Missoula, asked if employer provided housing already serves to benefit businesses, why give them an extra incentive and put the local tax burden on other community members?

Malone said there needs to be more of an incentive.

“Because there’s a lot of businesses in my part of the world that are not providing employee housing … They can’t find employee housing. They obviously need a little more incentive,” he said.

Rep. George Nikolakakos, R-Great Falls, asked Malone if he would be willing to put sideboards around what rent employers could charge, like rent that corresponds with area median income. Malone said he considered it but wasn’t sure how to add that language into the bill.

When asked about whether employees could potentially feel trapped in a job if they can’t secure housing outside of what their employers provide, Malone said he understood the issue, but still saw there being a bigger benefit.

“It’s more of an incentive to stay in the job,” Malone said.

Competitive wages to match the cost of living in an area were less of a concern for Malone, because the problem, he said, was housing supply.

He gave the example of a dentist who was struggling to find housing, someone who wasn’t making minimum wage by a long shot. He said in small communities, like Park County where he’s from, short term rentals like VRBOs have eaten up local housing supply.

Malone said he was against two other housing initiatives that came before the Taxation Committee, which he also serves on- a bill from Rep. Dave Fern, D-Whitefish, for optional local abatements for affordable housing that Malone characterized as “rent control” and the bill from Rep. Jane Gillette, R-Bozeman, to tax short-term rentals.

Fern’s bill died on a tied 49-49 vote on the floor after much debate Monday, but was revived on the floor Tuesday after a motion to reconsider the bill passed 51-49. Gillette’s bill hasn’t been voted on after being heard in committee in February, according to the legislative tracking website.

The committee did not immediately take action on HB 820.

In closing on her bill Monday, Abbott said that a major priority for both caucuses is the affordable housing crisis.

“This idea of a public private partnership that is helping with investment of capital to build housing that we know Montana families nurses, hospitality industry, workers, teachers can actually afford their communities is incredibly important,” she said.

Editor’s Note: Minority Leader Abbott said HB 574 would apply to families at 80% of the area median income. This story has been updated to correct the percent AMI.