Flathead Population Growth Continues to Outpace Housing Supply

As Flathead County continues to grapple with unaffordable housing prices, Pat Barkey, the executive director of the University of Montana’s Bureau of Business and Economic Research (BBER), told the audience at the July Kalispell of Chamber of Commerce luncheon that the valley’s population far exceeds the available housing inventory.

Barkey compared housing and population growth dating back 40 years, which revealed there was nearly twice as much housing as people in 1980, and that trend has since reversed.

According to data from the U.S. Decennial Census, Flathead County’s housing supply grew by 6.2% from 2010 to 2020 while the population grew by 14.8%. By comparison, the housing growth from 1970 to 1980 was 59.5% while the population grew by 31.7%.

“Montana has had a lot of growth spurts in this area, but you can see that housing growth over that decade was almost 60% – almost double of what the population growth was,” Barkey said.

Barkey said there was a housing surplus following the Great Recession in the 2010s, but by 2015, that trend shifted, and the population growth began to exceed housing growth. In 2011, there was a surplus of 3,000 housing units in Flathead County and by 2022, there was a shortage of 3,161 units.

“You can see clearly the rollercoaster ride of housing prices during the great boom and bust after the Great Recession, but this is where it starts to happen – right around the 2010s,” Barkey said. “This period when we weren’t building as much – you can see the consequences of that.”

During the 2010s when building dropped off, the population continued growing at a steady pace. According to U.S. Census data, the net migration steadily grew by 1,000 to 2,000 people each year between 2013 and 2019, but that change doubled in 2021 when the net migration grew by 4,000.

The spike in population growth coupled with the lag in housing growth contributed to the rise in housing prices, which grew by 49.9% in Kalispell and 62.3% in Whitefish, according to Federal Home Finance Agency data.

Additionally, high home prices in Flathead County have priced out many high-income earners from home ownership, keeping them in the rental market.

“Rent is pretty ugly,” Barkey said. “It’s the same situation. Once you have so many people getting pushed out of the home ownership market, you’re getting people with higher incomes renting. They’re displacing other renters – it’s a tough situation.”

According to the Zillow Observed Rent Index, the Flathead County has hovered around $2,500 in the last year compared to Missoula County at $1,500.

The housing deficit, Barkey said, causes residents to get creative with housing solutions to help offset those costs.

“In a housing deficit situation, households don’t form, people have long commutes, people have alternative housing arrangements – some of us call that roommates.” Barkey said.

The lack of housing also prevents many potential residents from relocating to the Flathead Valley, which impacts the job market, according to James Williams of Sage Appraisal & Strategy.

“The problem is not that we don’t have job opportunities,” Williams said at the luncheon. “There are underlying issues, which Pat Barkey just talked about, which is housing and childcare.”

Williams says that while the demand for business is strong in the Flathead Valley, the workforce shortage impacts the supply of services offered.

Montana’s current low unemployment rate of 2.4% has left business owners with a limited labor pool to choose from.

“We’re seeing higher business expenses,” Williams said. “We have less employees to hire.”

Gov. Greg Gianforte also spoke at the event and praised the state for its 23rd consecutive month of low unemployment along with the creation of 40,000 new jobs at the luncheon.

“Our economy is growing,” Gianforte said. “We’ve also set records for new businesses created in the last two years.

Gianforte said that close to 150 businesses were recruited to Montana in recent years, which he attributed to the state’s “work ethic, quality of life and pro-business policies.”

Additionally, the governor called the recent legislative session a success, where he signed 172 “red tape relief” bills and facilitated tax reforms and relief, including the tax rebate that he said provided $470 million in relief.