House committee signs off on new loans for affordable rentals

A legislative panel voted Wednesday to double the amount of money that the state can loan to developers of rental homes for low and middle-income Montanans — a move that advocates say is a small step towards addressing the state’s growing affordable housing crisis. 

The House Appropriations Committee on Wednesday recommended passage of the bill, HB21, which reauthorizes and bolsters funding for a program that allows the Montana Board of Housing to loan out money from the state’s Coal Tax Trust Fund to multifamily property developers. 

While there’s still a long way to go before the bill becomes law, the committee’s bipartisan vote in support of the proposal today could signal the availability of $30 million in state money for affordable housing during the next biennium.

Lawmakers first authorized the multifamily coal trust home loan program in 2019, setting aside $15 million. Already, the Board has lent out almost that entire sum, helping fund seven projects — a combination of new builds and renovations to existing developments. 

“This is a fairly modest amount of resources being used, it’s very low risk, low impact on our general fund, but it does leverage a lot of money,” said Rep. Dave Fern, D-Whitefish, who worked on the bill with its sponsor, Rep. Geraldine Custer. “It’s a good starting point that helps keep some of the affordable housing in stock.” 

The new legislation would double the 2019 appropriation in a time when “affordable housing is at a crisis,” Kelly Lynch, the deputy director of the Montana League of Cities and Towns, told the Appropriations Committee this week. 

“This was already the case last session, and it’s only been exacerbated by the events of the past year,” she said. 

Rents statewide have increased precipitously over the last decade, far outpacing growth in income for the average Montanan.

Through the program, developers can apply for low-interest loans that they pay back over time, as with any mortgage, replenishing the coal trust fund. 

The fund, first created 50 years ago, is a minor example of the kind of state-run natural resource funds that exist in Alaska and oil-rich nations like Norway. Replenished primarily by revenues from coal severance taxes — money that mining companies pay to the state of Montana on the coal they extract and produce — the fund has swelled to nearly $1 billion. 

“I am from coal country, and I can assure you that I wouldn’t do something that would affect the coal tax trust,” said Custer, R-Forsyth, the bill’s sponsor.

Interest earned on money in the trust fund goes to a variety of projects, as well as to the general fund. The housing program is one such investment.  

And it’s an investment that went quickly when first approved two years ago, with projects applying for the loan money almost immediately, said Andrea Davis, the director of Homeword, an organization of affordable housing advocates in Missoula, in a hearing for the bill this week.

Four of the seven existing projects were renovations and improvements to existing developments, while the remaining loan monies went to new building. The developments aren’t only in the state’s population centers, either — two, for example, are in Havre. 

“For newer ones, in general, what we find is that the demand for this housing is spectacular,” testified Sheila Rice, an affordability advocate from Great Falls who serves on the state Housing Board. “There’s often a waiting list before construction even starts,” she said. 

In theory, the loan money also encourages developers to keep the money in-state, stimulating local economies and earning the program support even from right-leaning business groups like the Montana Chamber of Commerce. 

Perhaps more importantly, the coal trust financing also helps developers keep their projects affordable in a state that makes relatively few public investments in affordable housing . 

Rice recalled one owner in Great Falls who intended to sell two rental properties for seniors on the private market, which would have meant losing federal subsidies and driving up prices for dozens of elderly renters. Loans from the trust fund allowed improvements to the properties while retaining affordability, she said. 

“This project was dead in the water with conventional financing,” she told the committee. “It was only the availability of the coal trust funding that made these projects feasible. It allowed 42 senior citizens to be able to live out their lives in that project.”