POVERTY WITH A VIEW: Can We Make Housing Affordable in Montana?

• Author: Ward, Bryce
• Position: TRENDING - Statistical data

Buying a house in Montana can be hard. A recent Gallup study found 45 percent of Montanans were dissatisfied with the availability of good affordable housing. This tied Montana with Maryland and Oregon for eighth worst in the country.

In many Montana markets prices are high. As shown in Table 1, prices are high relative to other parts of the country. Home prices are also high relative to the incomes typically earned by Montanans, relative to the cost of building a house, and they are also much higher than they used to be.

Montana renters fare better. Rent in Montana markets tends to be lower than in other parts of the county. Montanans are less likely than the average American renter to be rent burdened (spending more than 30 percent of their income on rent). However, Montana's median gross rents have been rising faster than across the country.

Combined, Montana's owners and renters spend a higher percentage of their income on housing than they did 25 years ago. In 1990, Montana was one of the most affordable states, but its affordability advantages have eroded. Given these challenges some have wondered what, if anything, can be done to ensure housing in Montana is affordable?

Standard economic logic suggests increasing affordability requires slowing housing price growth, while also boosting income growth--this is difficult. Slowing housing price growth entails limiting demand (making Montana less desirable) or increasing the supply response (making it easier to build).

Thus, those seeking to improve affordability must ask two questions: l) Can we reduce demand--can Montana become less desirable and do we want it to be less desirable? 2) Can we increase supply--can Montanans make it easier to build more housing?

Housing Demand

Places with strong demand experience either population growth or housing price growth or both. Based on these metrics demand for Montana is strong. Over the past 25 years, Montana has enjoyed both faster-than-average population growth and faster-than-average housing price growth.

Productivity and quality of life drive demand for place. Places that are very productive (i.e., places that produce lots of value per worker) tend to offer high wages and good job opportunities. As such, they tend to attract people. Similarly, places that offer an appealing quality of life also tend to attract people.

Demand growth in Montana reflects some productivity improvements, but mostly it reflects demand for Montana's quality of life...