Legislation Targets Whitefish Affordable Housing Program

Billings lawmaker says mandatory “inclusionary zoning” requirements have chilling effect on builders

By Tristan Scott
A development in southern Whitefish on June 17, 2020. Hunter D’Antuono | Flathead Beacon

As the city of Whitefish continues to refine its nascent program requiring affordable workforce housing in the majority of new multifamily developments, a new legislative proposal would prohibit “inclusionary zoning” rules intended to assist working residents with moderate incomes.

Under the Whitefish Legacy Homes Program adopted by city council in July 2019, new residential developments that need a discretionary permit — such as a conditional-use permit or a planned-unit development — must include 20% of new housing units as permanently affordable through the Whitefish Housing Authority.

Called “inclusionary zoning,” the requirements are intended to assist working residents with moderate incomes. In Whitefish, a voluntary inclusionary zoning program has been on the books for years, but has produced very little housing.

Under draft legislation introduced by Rep. Sue Vinton, R-Billings, that program and others like it would be prohibited, with the bill’s sponsor saying that developers are chafing under the constraints of the mandate.

“In visiting with builders across the state, anytime there are these types of mandates or provisions it’s going to drive up the costs of building,” said Vinton, who worked with the Montana Building Industry Association to draft the legislation. “I haven’t conducted the research, but inclusionary zoning hasn’t been particularly successful in our state. They have implemented programs in Whitefish and in Bozeman, but it hasn’t really done what the proponents intended.”

In Whitefish, the 18-month-old program is the latest in a series of regulatory steps the city has taken to build out the local inventory of affordable housing, a scarcity of which has priced out many middle-income, working-class residents, leaving them with few options for finding cost-effective living arrangements.

Whitefish City Manager Dana Smith said the local program differs from Bozeman’s as it relates to income levels, the percentage of affordable housing units required, the types of developments to which the zoning requirements applies, as well as incentives.

“Inclusionary zoning isn’t a one-size-fits-all solution and should be tailored to the needs of each community, especially ones like Bozeman and Whitefish that are seeing rapidly increasing housing prices and the wage gap is so significant,” Smith said. “The city opposes any legislation that would eliminate inclusionary zoning since it is one of our only tools to address affordable housing as a community.”

“Before adopting our Legacy Homes Program, the city went through an extensive public process that included input from builders, workers and business owners,” Smith added, noting that Whitefish’s program is for affordable workforce housing, not low-income housing.

According to a workforce housing needs assessment released in December 2016, middle-income residents have limited options when it comes to finding housing, a problem that is displacing locals and forcing them to live outside their chosen community — 56% of Whitefish’s workforce lives in neighboring communities, 34% of whom would prefer to live in Whitefish.

The assessment identified a need for 980 total housing units to accommodate employee households through 2020, or 580 rentals and 400 ownership units. The assessment noted that only 70% of Whitefish homes were occupied by locals, which marked a 10% decline from 2000.

According to Whitefish’s Annual Affordable Workforce Housing Update released last summer, not enough time has passed for the community to realize the benefits in new housing stock built. However, more units and cash-in-lieu amounts have been approved since the annual report’s release, while the city council has revised the zoning requirements to lower the threshold that triggers affordability requirements.

In that move, the Whitefish City Council lowered the number of units a developer must build before triggering the deed restrictions and the need for a conditional-use permit, from eight units to five.

The hope, Smith said, is that lowering the unit threshold will capture more projects in the Legacy Homes Program.

Vinton said her bill prohibiting inclusionary zoning requirements may go up for a committee hearing as soon as next week, at which point it could be tweaked and amended. She said the bill’s co-sponsor, Sen. Carl Glimm, R-Kila, is a builder by profession, and his input has helped inform the draft legislation.

Smith said it’s the city’s hope that, at the very least, the measure makes exceptions for programs like Whitefish’s, perhaps by capping the percentage of affordable housing required at 10% instead of the current 20% threshold, or by exempting communities in which the wage gaps are so wide.

Meanwhile, Rep. Dave Fern, D-Whitefish, is working with Rep. Geraldine Custer, R-Forsyth on an expansion bill that would double the funding available to a program that allows developers use the state’s coal trust fund to furnish affordable housing projects with low-interest loans. The Multifamily Coal Trust Homes Program, first authorized through legislation Fern sponsored in 2019, lets the Montana Board of Housing use up to $15 million of the fund to offer affordable-housing developers loans at a below-market rate.

The expansion bill, which the House passed last week, would double the amount that the Board of Housing can use to administer the lending program. Fern said he and Custer would present the expansion bill to the Senate Finance Committee on Jan. 27 before it goes to the Senate floor for a final vote.

“We’ll make a strong pitch to the committee and there is a small fiscal note attached to the bill that shows a few dollars coming into the general fund,” Fern said.

The Whitefish Democrat said the bill has garnered support from a coalition of moderate Republican lawmakers, and serves as “a good test case” to show how bipartisan legislation can gain traction despite conservative majorities in both chambers.

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