New housing model in Montana turns tenants into shareholders

Collin Bangs got a phone call when the historic property on Wolf Avenue in Missoula went up for sale.

His daughter, Melissa Bangs, lives next door. She’d seen other apartment complexes sell, new owners hike up rents, and longtime residents displaced.

Collin Bangs, a developer in Missoula who has long worked in affordable housing, said his daughter told him a sale on the open market would devastate her neighbors.

“If that happens, half of those people will be homeless,” Bangs said his daughter told him.

She asked him to buy the property instead and hold onto it for a spell.

If he could buy it, she’d rally the tenants and housing organizations to find a way to preserve affordability there, and she figured the tenants would have a shot at staying in their homes.

Now, the land under the homes is in a trust.

A statewide organization that helped craft a new design for affordability at Wolf Avenue is using the first-of-its-kind model in Montana in a second project — and plans to use it again.

Additionally, most of the former tenants are shareholders in the project, including a 75-year-old poet, a chef and a theater instructor. Their homes are secure.

Melissa Bangs said she intervened for the individuals and for the community. She asked: Don’t the people who teach us, feed us and entertain us deserve to live in this community, too?

“I didn’t even know what the answer would be,” Bangs said. “But I was sure there had to be an answer, that there had to be a pathway for preserving existing affordable housing.”

The project doesn’t just represent security for the current residents, said Emily Harris-Shears, housing policy specialist for the city of Missoula.

“Eight units at a time is really meaningful when we’re thinking about the impact of this over generations, and over the lifetime of a community land trust,” Harris-Shears said. “That means that so many more households will be able to benefit from that than they would if it didn’t exist.”

In Montana, urban areas especially are in trouble because of a lack of affordable homes to buy or rent and tight vacancy rates. A healthy vacancy rate for rentals is around 5%, and Missoula sat at 1.2% for most of 2022, according to data from the Missoula Organization of Realtors.

But there’s a big gap between being a renter and being a homeowner, and the new model also helps fill it, said Brittany Palmer, with the North Missoula Community Development Corporation. The NMCDC is a nonprofit that works on affordable housing in the neighborhood.

(The MOR said the vacancy rate bumped up to 2.3% at the end of 2022, but Palmer said when work started on Wolf Avenue, it was at just 0.5%.)

“It provides another access point for stability that’s not quite home ownership, but it is community control over housing, which I think is really cool,” Palmer said.

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The property on Wolf Avenue is comprised of eight units, the smallest at 395 square feet and largest at 950 square feet, according to NeighborWorks Montana.

Kaia Peterson, executive director of NeighborWorks, said since the property converted to the land-trust-and-co-op model, all the monthly payments increased, but in some cases, just by $30.

In all cases, she said the monthly payment — formerly rent, now a shareholder payment — is well below market, generally $570 to $700 for the small- to medium-sized units, and $1,070 for the largest one.

By comparison, the median cost of a studio in Missoula was $821 in 2022, according to the Missoula Organization of Realtors.

Figuring out the new model took work by the tenants, NeighborWorks, and other organizations that work in affordable housing. The goal of affordability was clear, but the formula they’d end up using wasn’t a given.

Peterson said the result for Wolf Avenue represents a different approach to helping current renters buy their building so it remains affordable, “a mash-up of models.”

Essentially, a nonprofit holds the land in a trust; a cooperative business formed by the residents owns all the apartment units; and the residents buy shares in the cooperative.

(Similar to a mortgage payment that pays off a housing loan and allows a homeowner to accrue equity, the residents’ monthly payment buys down a shareholder loan and allows them to accrue equity.)

NeighborWorks has helped people who live in manufactured home communities convert their properties into resident-owned complexes for close to 15 years. For the first time, Wolf Avenue used that idea for an apartment building.

But that wasn’t the only affordable housing tool that was necessary.

The total property cost close to $1 million, more than what the residents could afford collectively. So the project also used a community land trust model, a tool the North Missoula Community Development Corporation has used in the neighborhood before.

In a community land trust, a nonprofit generally holds the value of the land in trust, and residents own the home that sits on top. (In this case, the residents own shares in the value of the homes.)

Most of the property value is in the land, so the setup means less potential equity for each owner. However, on the flip side, it also means the property remains affordable in perpetuity.

Palmer, with the Northside nonprofit, said community land trust organizations are “radically open source with one another.” So when she started looking for places that had already used a land trust with a cooperative ownership model, nonprofits outside Montana readily shared legal documents.

To be sure other tenants in other buildings could use the work done to convert Wolf Avenue, she said lawyers who worked on the Northside conversion still had to do “a ton of work” to ensure the documents worked for the state of Montana.

“We really put a lot of energy and effort into doing it 100% right this first time so that it can be replicable,” she said. “But we sure got a head start by reading out to our community land trust partners.”

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Financing was critical to the deal.

A low-interest loan from the Clearwater Credit Union to Bangs made the initial sale pencil out, his daughter said. Collin Bangs said Garden City Property Management’s maintenance expertise and generosity also were critical and helped shore up the building given its age.

A low-interest loan and 40-year-term from NeighborWorks to the cooperative made the subsequent deal work. (Residents of all but one unit decided to purchase shares; the residents who didn’t buy may still do so in the future.)

A $340,000 grant from the City of Missoula’s affordable housing trust fund helped buy down the overall cost of the project to make the individual shares affordable for the residents, Harris-Shears said.

The city started the fund with federal COVID-19 relief money, and it has had $1.7 million altogether since it was first established in 2020, she said. She said a competitive application process ensures money from the fund leverages even more dollars for affordable housing.

Palmer said that local fund was important because the building is older, and federal money has restrictions on things like lead-based paint.

“It’s important to know that this local affordable housing trust fund in Missoula is the only way that this could happen,” Palmer said.

Eight units alone may seem like a drop in the bucket given the need in Missoula; Harris-Shears said a recent report on housing for the entire county identifies a shortage of 2,400 units at all levels.

However, the homes on Wolf Avenue will remain affordable to people at 80% or below area median income in perpetuity with help from the city’s investment.

“We have to take bites out of the apple when we can get them,” Harris-Shears said.

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The deal might have created some migraines for the people trying to sort out all the details over two years of intensive weekly meetings.

But now, the wins are clear.

The original seller received his asking price for the property, according to those who worked on the cooperative deal.

Minus a small tax loss, Collin Bangs recovered his original investment, and he said he gets a write-off on the loss.

He also made good on his promise to his daughter, the neighbor who catalyzed the preservation of the building into affordable homes.

“The biggest risk to me was that I wouldn’t be able to keep my pledge to Melissa that regardless of what happened, we’d find a way to keep it affordable and keep those people in there,” Bangs said.

And the residents are in control of their own homes — and stand ready to help others.

Melissa Bangs said when she sees her smart, funny, generous neighbors, it’s hard to capture the magnitude of the feeling that washes over her.

“Their home is now their home,” Bangs said.

But she said there’s a lesson in the project too, and that’s that people with tenacity and grit can play a role in saving affordable homes, saving the soul of a community.

“I am certain that to save this community, we will need many creative solutions, not just this one,” Bangs said. “We will need many creative solutions, and there are so many brilliant, inspired people and collaborations in the works.”

Peterson, with NeighborWorks, said access to capital at low interest rates is critical for the model to be used again. She and Palmer also said staff support from housing experts to help residents iron out details is necessary.

At the end of May, Reid Reimers, one of the residents and shareholders, had just sent in his first monthly shareholder payment instead of rent.

Now, he and other residents are holding their doors wide open for others who might want to figure out how to create a similar cooperative. They sorted through more than a few details.

What are the maintenance priorities? What if someone is late with rent? What are the rules for pets?

“This is a crazy process, but here’s how this might be able to help you,” he said.