Is density the solution to Montana’s affordability problem?

Proposed bill would make larger cities and towns allow for duplexes in lots zoned for single-family homes

New construction in the Ironwood subdivision on Dec. 23, 2020 in Billings, Montana. (Photo by Darrell Ehrlick of the Daily Montanan)

A Montana lawmaker is pushing a solution called “upzoning” to the state’s housing affordability crisis. This movement, popular in a number of areas with urbanists, housing advocates and the Twitterati, would apply to many of the state’s fast-growing municipalities, whether or not they’re on board.

Upzoning is the process of tinkering with zoning codes in certain neighborhoods to allow for greater building density. The concept is often applied in areas that are exclusively zoned for single-family homes, the type of development that advocates see as an impediment to adding new housingin constrained markets.

This is the perspective of freshman Rep. Danny Tenenbaum, D-Missoula, where housing prices have surged — in part, he says, due to restrictive zoning ordinances that don’t allow for development of so-called “missing middle” residences like duplexes and courtyard complexes. 

His bill, House Bill 134, would disallow municipal zoning ordinances in cities above a certain size that prevent single-family lots from being used for duplexes, triplexes and fourplexes. 

Towns with more than 5,000 people would have to allow landowners and developers to build duplexes on lots currently zoned for single-family homes. Cities above 50,000 people — in this case, Billings, Missoula, Great Falls and Bozeman — would have to allow for triplexes and fourplexes in those lots too.

In all cases, the bill would also prevent cities from requiring off-street parking to accompany these developments, something which Tenenbaum and other proponents say is an inefficient use of a limited amount of land.

“It’s easy to just point to the rising price of houses and throw your hands up and say, ‘Oh, it’s all these out-of-staters’,” Tenenbaum told the Daily Montanan. “But we should ask: Why isn’t the housing supply meeting housing demands? I think there’s increasing realization that cities have been artificially limiting supply.” 

He said he’s heard from constituents who have found themselves priced out of the places where they work and grew up, or people who want to sell their homes to move into something more manageable but have found even substantially smaller units out of reach. 

Often, he said, these aren’t the people who are able to show up to planning commission meetings, so even policymakers in cities that are sensitive to the affordability crisis have been slow to respond. 

“We cannot ignore basic, regulatory changes that would allow for an increase in supply,” Tenenbaum said. 

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The proposal has earned support from an odd assortment of proponents across the political spectrum, from the libertarian-minded Americans for Prosperity to the Montana Building Industry Association, which see it as a deregulatory effort that could increase affordability without new taxes, appropriations or slow-moving federal grants. 

Not on board are many of the places the bill would affect — cities and towns that would normally be the ones making decisions on zoning. 

“It’s not an affordable housing bill,” said Jeff Mihelich, Bozeman’s city manager. “What it is, is a constraint on local authorities for land use decisions.”

The type of zoning the bill addresses is called “R-1,” and it’s relatively common in big cities nationwide. But Mihelich said it’s actually rare in Bozeman, and more flexible than one might expect. He also pointed to the city’s inclusionary zoning ordinance, which requires a share of new housing to be affordable for those with low and moderate incomes. 

Tenenbaum’s bill, points out lobbyist SK Rossi, who is representing Bozeman, doesn’t do anything to ensure that the new dwellings that could pop up in these R-1 zones actually remain affordable. 

“While it would create ‘more housing’,” Rossi said, with scare quotes, “it will not create more affordable housing.” 

What could happen, Rossi warned, is that developers buy up older homes in desirable neighborhoods, convert or tear them down, and put them back on the market — not as two smaller units at half the price, but two smaller units that are just as expensive, if not more so, as the value of the underlying land would increase.

Kelly Lynch, the deputy director of the Montana League of Cities and Towns, is similarly opposed, foretelling a strain on sewage and other infrastructure in neighborhoods that weren’t built to accommodate multifamily housing. 

“Every single one of those lots (in cities above 50,000 people) could be redeveloped with a fourplex,” she testified in the House Local Government Committee on Tuesday. “Is that what these folks were expecting when they bought their homes?”

Tenenbaum said he doesn’t expect to see such drastic changes. Bryce Ward, an economist at the University of Montana who has studied the impact of zoning on affordability, agrees. 

“There’s really only the capacity to build so many homes at a time,” he said. “And there’s only so many homes that are sitting there that are priced to tear down and rebuild.”

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Zoning laws became prevalent in American cities in the 1920s, ostensibly with the intent of keeping factories and other industrial operations out of neighborhoods for a growing middle class — but often with the implicit goal of separating that largely white middle class from immigrants, Black people and low-wage workers.

Over time, some planners and activists began to see the practice as an impediment to a healthy mix of affordable housing. 

“One of the reasons why housing is expensive is land is expensive,” said Ward. “When you restrict putting more units of housing on the same amount of land, you make land more scarce.”

This is especially the case in the many Montana cities that are hemmed in by mountains and can’t indefinitely turn to sprawl as a way of adding new homes to the market. Even if they could, sprawl leads to longer commutes, greater carbon emissions, and often pushes lower-income residents farther and farther away from economic and amenity centers.

But upzoning to allow for denser development in neighborhoods of single-family homes comes with a variety of necessary tradeoffs. For one, Ward said, these decisions often alienate residents who already own homes and bought those homes with a certain expectation — articulated in zoning —about the neighborhood. Plus, they’re seeing the values of their homes skyrocket. 

There’s also a possibility of a spillover, he added. Since this bill only addresses individual cities and towns, not a whole county, outlying suburbs or even undeveloped areas that aren’t subject to the zoning restrictions could even more so become havens for sprawling, single-family lots. 

“By trying to create density, we could create sprawl,” Ward said. 

Part of the issue is there aren’t many demonstrations of upzoning’s long-term effects. Only recently have cities and states begun to take a look at the issue, with Minneapolis and Oregon as the most prominent examples of places that have adopted an official upzoning policy. 

Last year, the city of Helena signed off on a plan to remove square footage minimums for multiple units in certain zoning designations, but did not go after R-1 zoning in the comprehensive fashion that Tenenbaum would like.

While Ward said those places haven’t demonstrated the kind of encompassing boom of multi-family developments that some opponents of the proposal fear, they also have yet to really demonstrate substantial gains in affordable housing. 

In fact, a 2019 study of upzoned neighborhoods in Chicago that ditched parking requirements sent waves through the planning community when it found the opposite: Over five years, housing stock remained about the same, but property prices increased. How much of this is due to a policy failure as opposed to the particular political dynamics in Chicago is hard to say

Critics have also pointed to the practice as largely benefitting middle-income earners, but not those in the depths of poverty for whom housing of any kind can be out of reach, at least if there are no additional subsidies or incentives.

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Tenenbaum said he knows that his bill isn’t a panacea for the state’s affordability woes. He said he supports all efforts to increase affordability, including Bozeman’s inclusionary zoning policy, which has resulted in 17 new homes in Bozeman with an additional 63 in the development pipeline.

“But we are experiencing rapid changes whether we like it or not,” he said, adding that his bill is a way to improve the situation around the margins. 

Ideas on how best to respond to those changes diverge even within a given city’s government. For example, while Bozeman’s official position is to oppose the bill, Mark Egge, a data scientist who serves on the City Planning Board, testified on his own behalf in support of the proposal during the hearing Tuesday. 

“In communities across Montana, escalating home prices are being driven by onerous restrictions on local development,” he said.

No matter what happens, the state needs to “get to the benefit of arresting the growth in housing prices,” said Ward, the UM economist. 

“When an input is more expensive, you try to use it more efficiently,” he said. “But with land, sorry, land is special, you can’t do that. Do we want to head toward coastal California? ‘Cause that’s kind of the destination we’re moving toward right now.”