Inclusionary zoning on the chopping block in House

Legislation would remove partial price controls on development in Bozeman, Whitefish

An open, surrounded by new construction and new homes, in the Ironwood subdivision of Billings. (Photo by Darrell Ehrlick of the Daily Montanan)

Montana realtors and home builders are gathering behind a bill that would effectively ban one of the tools that cities and towns use to create more affordable housing. 

House Bill 259, carried by House Majority Leader Sue Vinton, specifically prevents municipalities in Montana from requiring that housing is sold at a certain price or targeted toward a particular income bracket, language that would outlaw the inclusionary zoning ordinances in Whitefish and Bozeman, two of the state’s most expensive cities.

“Affordability is an issue affecting a number of Montanans, especially in some of our fastest growing cities,” said Vinton, R-Billings, who co-owns a construction company. “Some local governments find the solution of inclusionary zoning attractive because cities and towns can say they’ve done something.” 

But, Vinton and her fellow builders assert, what the ordinances actually do is exacerbate the affordability problem and shift the cost burden down the line — a claim that opponents of the bill, including representatives of both Whitefish and Bozeman, say is not supported by the body of research on the subject. 

Inclusionary zoning as a practice began in the 1970s and has since spread to several hundred jurisdictions nationwide, mostly in high-price, land-scarce coastal markets. The particulars of each ordinance vary widely, but in general either require or incentivize builders to set aside a certain percentage of units in their development for low- or middle-income residents, relative to the area median income. 

Bozeman and Whitefish, the only two cities in the state to adopt such ordinances, both have mandatory inclusionary zoning policies: Either developers meet the requirements of the local housing affordability plan, or pay a cash fee in lieu of doing so. 

Bozeman passed its ordinance in 2017 after the city said developers failed to meet affordability goals even with incentives. Whitefish’s came two years later. 

Bozeman’s program has resulted in 17 homes completed and occupied by people “who otherwise wouldn’t have gotten them,” said John MacDonald, a lobbyist for the city. Ten other homes are in various stages of construction, with 20 additional units in the pipeline for the following year, MacDonald added. 

Whitefish’s program has been slow to get moving, but its supporters say it’s too early to write it off as a failure, given the relatively long time horizon that exists in the homebuilding world.

“We’ve only had this program for 18 months in Whitefish,” said Ben Davis, a city council member who chairs the Whitefish Strategic Housing Plan Steering Committee. 

“There is no basis by which to conclude that inclusionary zoning doesn’t work,” he added.

The town recently voted to lower the number of units necessary to trigger the price controls, an effort to close a loophole that Davis has said some developers were exploiting to avoid affordability requirements. 

Builders have been opposed to the policies from the start, and several united behind Vinton’s plan in testimony on Tuesday, saying that inclusionary zoning simply constrains supply across the market with little boon to affordability. 

Jessie Walthers, with the Kalispell-based Flathead Building Association, said builders in her area often simply pass the costs on to the units that don’t fall under the Whitefish requirement, driving up prices across the market in order to alleviate price pressure for a specific segment.

Abigail St. Lawrence, a lobbyist representing the Montana Building Industry Association, argued that inclusionary zoning oversimplifies the “multidimensional problem” of housing affordability and forces developers to shoulder a disproportionate amount of the responsibility for dialing back home prices. 

“It places the burden on a single private industry,” she said.

MacDonald, who also represented the city of Missoula in testimony Tuesday, said the goal of inclusionary zoning is not to point the finger at one industry.

“We don’t believe, and don’t believe we’ve ever suggested, that the builders are the cause, nor do we believe that the solutions lie solely at the feet of the builders,” he said. “But we can’t do it without the builders as partners. This statutorily exempts the builders from that important role that we see for them.”

He and other opponents echoed issues with local control, arguing that cities have the right to consider policies to ameliorate the housing situation in their borders. 

The legislation would “usurp” those decisions at the local level, said Kelly Lynch, deputy director of the Montana League of Cities and Towns, which opposes the proposal. 

“Below-market rate homes do get built and sold under these programs,” she said.

Inclusionary zoning ordinances nationwide have resulted in around 122,000 rentals and 55,000 homes as of 2017, according to a study from the Lincoln Institute of Land Policy. 

Lynch said that of the body of research on the issue, the findings are mixed on whether these ordinances drive up prices overall, and are “highly dependent on local circumstances.”

Bryce Ward, an economist with the University of Montana, said it’s generally fair to say that both the hopes and fears for inclusionary zoning are often overblown — and either way, it’s not clear what the state’s interest is in stepping in. This perspective is generally supported by a review of the city of Burlington, Vermont’s inclusionary zoning policy, which found that the city added affordable stock but didn’t fundamentally address the crunch on affordable housing. 

Even cities that do not have such programs on the books, such as Billings, say they don’t want the state to totally rule out the possibility. 

“The increasing cost of housing is a challenge that has many elements,” said Wyeth Friday, the planning and community services director with the state’s largest city. “Inclusionary zoning is one of those tools that is in our local control to evaluate.”

The House Local Government Committee will vote on the bill later this week.