Economist says innovation needed to address affordable housing issue

With a focus on the challenges of affordable housing, Montana’s Economic Outlook Summit statewide tour stopped at the Hilton Inn in Kalispell recently.

The Bureau of Business and Economic Research at the University of Montana presented five hours of local, state and national economic data and forecasts, with in-depth data and analysis of the state’s biggest industries – health care, energy, the forest industry, real estate, agriculture, and tourism and recreation.

Bureau Director Patrick Barkey opened the day with a presentation of affordable housing dilemmas and philosophies for solving the problem. Local panelists with expertise in affordable housing issues wrapped up the day.

“Anytime you have a strong economy, it ultimately impacts housing,” said Mike Smith, senior vice president of Glacier Bank. “It really is supply and demand. In 2010, we had 5,500 homes on the market and in 2018, there was 40 percent of that. It’s much more competitive, and that drives prices up.”

Whitefish Planning Director David Taylor agreed with that premise, pointing out a recent study showing a lack of housing in his jurisdiction.

“We did a housing needs assessment in 2017 and we were close to 1,000 units short of what we should have in Whitefish,” Taylor said. “Sixty percent of our workforce was commuting to Whitefish from Kalispell or Columbia Falls.”

Building an adequate stock of housing is made even more difficult, he said, by high land prices and lack of building sites. An emphasis on developing within the city, which was part of the 2007 growth policy, caused a rush on vacant lots in Whitefish, he said.

Mark Panissidi, developer of the Alta View townhomes in Whitefish, said land prices are one of a few factors that have made it difficult to keep prices as low as he originally intended.

“A few years ago when we started Alta Views, they were supposed to be priced from $239,000 to $289,000, but in three years we’ve seen an increase in land costs, labor costs and tariffs on materials,” he said. “Now to be at where we feel comfortable, they have to be $289,000 to $339,000.”

Myrna Terry, vice president of Terry Homes, said her company’s mission is to build homes for people who live and work in the Flathead.

“We’ve been struggling with keeping homes affordable the last few years,” she said. “After the recession we built fewer homes, and now there aren’t enough for everyone. Prices have really gone up in labor and construction materials. We’re trying to come up with innovative solutions, but affordability is an issue that is not corrected easily.”

Barkey addressed the need for more innovation in the construction sector during his opening remarks.

“We build homes not that differently than we’ve been doing for decades,” he said. “The rest of the economy has seen revolution in things like IT and supply-chain management. Construction is ripe for a productivity revolution of some kind.”

Smith pointed out that what defines affordability, which he priced at $330,000 maximum, is pressed downward by the financial situations, especially with younger people who may have student debt compounded by sizable auto payments.

Joe Unterreiner, president of the Kalispell Chamber of Commerce, spoke to the affordable housing issue during his report. He said many multifamily housing projects throughout the city are in various stages of approval.

The Kalispell downtown core, which will eventually have a trail system when current rail tracks are pulled, will be a prime area for affordable housing, he said.

“We’re making a strong move toward greater densities,” he said. “Multifamily is a permitted use in the railroad track area, which allows 60-foot height limits. It’s an ideal location for density, close to services and downtown.”

The forecasts for the general economies in the United States and Montana are optimistic, but reserved, Barkey said.

“What’s going well? Consumer spending, business spending, a lot of hiring,” he said. “What’s not doing well are international trade, tariffs and interest rates are up.”

Commodity prices are also on the low side, he said, impacting the wood-products and agricultural industries.

Tourism has been a vital part of the Flathead Valley’s healthy economy, Norma Nickerson, head of the Institute for Tourism & Economic Research, said. Nonresident spending in Flathead County was second only to Gallatin county, with more than $530 million in 2017.

Though fewer visitors came to the state in 2018 than the year before, they spent more per person. Outfitters and guides have been some of the biggest beneficiaries of travel dollars, she said, while retailers are seeing a smaller slice of the spending pie.

“People are not buying things, they’re buying experiences,” Nickerson said. “You go on a trip, you don’t want trinkets any more.”