Gallatin, Flathead Most Expensive Counties to Own a Home

By Beacon Staff

Flathead and Gallatin counties are the most expensive places to own a home in Montana, according to a recent report released by the University of Montana’s Bureau of Business and Economic Research.

The report, prepared for the Montana Association of Realtors and the Montana Building Industry Association, concludes that four counties qualify as “unaffordable,” using criteria from the U.S. Department of Housing and Urban Development. Those four are Flathead, Missoula, Gallatin and Ravalli. Flathead and Gallatin have the lowest affordability indexes. The study also states that a significant percentage of tenants statewide pay a disproportionate amount of their income on rent.

If a median-income household must dedicate more than 30 percent of its income to a median-priced home, then it falls into the unaffordable range. In other words, average families can’t afford mid-range houses in those four counties without putting substantial strain on their budgets. Yellowstone and Cascade counties, on the other hand, have good affordability indexes.

Home prices have soared in recent years, especially in high-growth areas like the Flathead and Gallatin. But income hasn’t kept pace. Now, as an economic downturn sheds sobering light on housing concerns, a wide range of groups are turning their attention to figuring out the affordability dilemma. These organizations include municipal governments, real estate groups and a variety of nonprofits.

In Flathead County, according to the report, the median price of homes in 2001 was $128,500. By 2007, the median price had jumped to $249,000. Meanwhile, the median household income was $45,021 in 2007.

“Since 1988 the median price for a Montana home grew by 96 percent,” the report states, “(but) the per capita income of Montanans only rose by about a quarter as much, or 26 percent.”

The report states that regulatory fees have exacerbated affordability concerns by adding high costs to new housing, particularly in Gallatin and Flathead counties. These development-related costs include impact fees, building permit fees and subdivision fees.

On March 19, Patrick Barkey and James Sylvester, the authors of the report from UM, were in Helena to present their findings to the Legislature. John Osweiler, president of the Northwest Montana Association of Realtors, was also there, as were representatives from building groups.

Osweiler said the Helena meeting was designed to discuss current housing trends and plant seeds for the 2011 Legislature. Considering this legislative session is nearing an end, he doesn’t expect lawmakers to be able do anything this year. Among the ideas broached, Osweiler said, was a new tax-benefit program for first-time homebuyers. He also said he likes the idea of community land trusts.

“We basically have open ears and open eyes right now to see what would be best for the community,” Osweiler said.

In a community land trust, a nonprofit buys land and holds it in perpetuity for the purposes of affordable housing. Low- and moderate-income homebuyers then can purchase existing houses on the land or stake claim to homes that will be built.

After the purchase, the buyers only own the house. The trust still owns the land, while the homeowners lease it at an inexpensive rate. They also enjoy the usual perks of home ownership, such as tax benefits. The idea is that the trust keeps the land off the market and holds it in common for the community.

Under the agreement, the resale price is limited. Therefore, homeowners get a modest paycheck for the appreciation in value if they decide to sell, but nowhere near market price. This way the house will still be affordable for the next purchaser or the owner can pass it along to an heir.

Missoula, Bozeman and Whitefish are currently the only Montana municipalities with community land trusts, though Kalispell and others are discussing them.

As the value of high-end houses continues to take a hit in Montana, local real estate professional Cal Scott said it’s clear that building habits of the past decade, which often focused on expensive homes, were overzealous. He said he hopes new residential construction from here on out focuses on houses in the range of $160,000 or less.

Scott, who holds frequent seminars on affordable housing, calls the lack of inexpensive homes “deplorable.”

“It’s not flash-in-the-pan economics – it’s very basic,” Scott said. “Where do we have the least supply and greatest demand? That’s affordable housing.”

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