Housing and development are hot topics. A rising population without an adequate increase in housing to serve the existing community have brought significant challenges to the Flathead Valley. The result of this lack of development is a severe strain on existing housing – and higher prices for prospective homeowners.
In contemplating how to be a part of the solution to this problem, my firm, Location Ventures, wanted to fully understand the state of the Flathead’s housing market in greater detail. We commissioned a study from the Bureau of Business and Economic Research, or BBER, at the University of Montana, and its director, Dr. Patrick Barkey, delivered an insightful report. Below, I summarize some of the key points from the paper.
We know that the area’s population has grown in recent years, and the BBER study helps quantify this. In the 2010s, the Flathead’s population grew by 14.8%, before another 3,700 people moved into the county in the year 2021 alone. This growth has produced pressure on the local housing markets that is unprecedented.
For the first time in 40 years, significantly, the rate of housing growth failed to keep up with population growth in the county. Indeed, despite that large population growth between 2010 and 2020, housing growth was a meager 6.2% over the same time. While we hear about new housing development proposals regularly, they either aren’t being approved or aren’t coming online fast enough to winnow this gap. In Dr. Barkey’s words, “actual building has fallen well short of what was needed to accommodate population and household growth.”
Based on information on population growth, household formation, and residential construction, BBER estimates that what began as a surplus of housing in the immediate wake of the financial meltdown in the Great Recession was quickly erased and became a deficit that grew to a shortage of more than 3,100 units across the county by 2022. The result is not only higher prices; it means that current residents of the Flathead are living with parents or other extended family members, or dealing with impermanent arrangements such as long distance commutes, staying in motels, or sleeping in vehicles.
To fix this, BBER’s projection is that under very conservative assumptions Flathead County will need 1,500 net new housing units of all kinds each year in the coming 10 years, for a cumulative total of 15,000 units out to 2033. The units are needed to serve new demand, and to restore the market balance that has led to very low inventories and high price growth.
It is important to point out that while we are talking about housing, what is really at stake is the welfare of people; housing provides shelter, security, and basic needs. The low rates of homebuilding of the last 10 years, coupled with the strong attraction of Flathead County to new companies, workers and residents has produced an unfortunate and painful increase in the cost of housing that has placed increased pressure on many who are least able to bear it.
Additions to supply at all price points are needed if new demand in the coming years is not to continue to push up prices beyond the reach of many Flathead residents. Fortunately, there is ample evidence to demonstrate that housing markets across price tiers are interdependent, with newly constructed housing priced at or above market rates producing supply and price impacts across other price tiers. Any housing, from single family townhomes to duplexes to apartments, will benefit the market and work to reduce prices at other levels.
At the end of the day, in the words of last year’s Housing Task Force report to Governor Greg Gianforte, “Montana needs to increase its housing supply. Period.” This statement could not be truer in Flathead County.
Rishi Kapoor is the founder and CEO of real estate development firm Location Ventures.