Montana needs to increase its supply of housing.
Home prices in Montana have risen by 50 percent since the start of the pandemic, outpacing the average national surge, as newly remote workers flock to the state, lured by its natural beauty and relatively affordable cost of living. Now, Montana is taking a critical first step in addressing its housing shortage: acknowledging that the problem is not with demand but with constraints on supply. What’s more, Montana is considering solutions that would enable greater density. Other states should take note.
In October, a bipartisan housing task force established by Montana’s Republican Governor Greg Gianforte released its first draft recommendations for a slew of reforms that, if implemented, could lift many of Montana’s growth controls. The task force recommended that the Legislature eliminate several state and local regulations that impose barriers to new housing, while incentivizing localities to adopt further reforms.
Notably, legislators of both the left and right have come out in support of the recommendations. They have even co-written an op-ed together urging their colleagues to end Montana’s anti-housing regulations.
How it works
The recommendations in the report can be broken down into three main categories:
- Broad-based statewide zoning preemption;
- Incentives for localities to adopt an additional set of pro-growth housing policies, and;
- Direct investment to facilitate new home construction.
Preemption: Many of the task force’s recommendations are structured to allow and encourage “gentle density” concentrated near existing infrastructure to reduce costs to taxpayers compared to building new greenfield infrastructure. This includes recommendations like preemptively authorizing multifamily zoning and Accessory Dwelling Units (ADUs) while privileging new residential construction on small lots near existing infrastructure. The effect would be to relax local zoning ordinances, which could limit local NIMBY veto power. This would open new possibilities for multifamily housing and allow small contractors and bigger developers alike to leverage economies of scale that come with such construction. These reforms, combined with expedited permit review, can substantially lower costs and barriers to housing development and boost supply.
“Strong Towns” in action: The case for density in the heartland
By recommending boosting access to duplexes, triplexes, and small apartment buildings, the report focuses on missing-middle housing densities to efficiently use existing and newly extended infrastructure. While Niskanen’s abundance agenda endorses an “all-of-the-above” approach to new housing, the density focus in this report is one of its greatest strengths. Montana’s proposed approach is the perfect recipe for any government looking to encourage the production of new affordable housing at minimal public cost by fully utilizing existing infrastructure and ensuring new infrastructure extensions are fiscally sustainable.
The report’s section on density reforms is well suited to a state like Montana. Like other western states, its natural beauty is a significant draw for existing and prospective residents alike. Therefore, it is reasonable that new housing policies would encourage denser development to grow without substantially altering the pristine wild environment that residents value. Montana’s approach is especially applicable to other parts of the country where demand for Manhattan-style living is weaker, and where incremental and missing middle densities can accommodate housing demand.
State preemptions that allow gentle density, paired with monetary incentives to favor new construction in and near existing cities are a winning combination for a variety of communities. Tying money to reforms in this way would create denser development, helping towns avoid what our friends at Strong Towns colorfully call the “Growth Ponzi Scheme” by ensuring that any new infrastructure for urban expansion is supported by sufficiently dense development to remain financially sustainable over time.
Communities could decide to repeal additional land use regulations on their own; in fact, some have already chosen to do that. Though many benefits of growth accrue regionally beyond any one small jurisdiction, reform is still an economic no-brainer wherever new tax receipts will exceed new service costs from growth–as is often the case where existing infrastructure has spare capacity or can be cheaply upgraded. Per the studies cited by the governor’s commission and the work of local advocates, this regulatory reform accommodates new residents, raises new revenue, and boosts economic growth, all while lowering housing prices and minimizing displacement for current residents.
Montana is not free from local NIMBYism, and there have been successful attempts to block new development in the state. Still, America is a free country with open internal borders, and Americans are moving to Montana post-pandemic. The only policy question is whether change is positive sum, adding net new homes to existing communities for new and old Montanans alike, or zero-sum: Displacing existing Montanans without building new homes.
Local incentives: To encourage further deregulation under local control, the report recommends creating grant and tax credit programs for local governments that are tied to an additional level of land use liberalization. These programs would improve infrastructure and other services, and they would help communities adjust to new residents while allowing housing supply to naturally meet demand. Infrastructure funding for growing localities is good policy and good politics: Growing regions objectively need more infrastructure on the merits. At the same time, ensuring public services scale with growth is essential to preventing unwanted adverse side effects from growth.
Investment: One under-discussed aspect of the task force’s report is the investment in state capacity. Niskanen has long held the view that capable states support markets. Funding state agencies to increase capabilities, as the report recommends, can help shorten review times for new water infrastructure that often acts as a barrier for new construction. Similarly, state-funded workforce development programs may help train new workers in relevant trades while pulling others into the workforce, reducing the cost of building new homes in both the short and long term. The report also recommends spending federal American Rescue Plan to remedy impediments to shovel-ready projects across the state.
Throughout the report, deregulation is framed to vindicate property owners’ rights to construct new housing. This view might be more appealing in an increasingly “red state” like Montana. While this is only a proposal, the adoption of these suggestions by the governor and Legislature would legalize all manner of new construction in Montana and provide a release valve for the surging demand that is currently driving up home prices to unsustainable levels. These reforms can serve as a guidebook for western states — or any state — that wants to rapidly construct new, fiscally responsible housing while staying ahead of anti-growth advocates.