Can Bozeman provide affordable housing and preserve its small-town past?

This story was originally published by Montana Free Press.

BOZEMAN, Mont. — When developers proposed a five-story apartment complex in midtown Bozeman, they made the city a promise: Half of the 111 units would be earmarked for affordable, below-market-rate housing. 

Called the Guthrie, the proposed project took advantage of a city policy allowing developers to deviate from height and parking requirements in exchange for building some affordable units. 

But following public outcry about the building’s height and scant 37 parking spaces, the Bozeman city commission nixed the project in July. The developer has filed a lawsuit over the denial.

Now, the ensuing litigation is highlighting the difficulty of building more housing in a growing city still shaped by its small-town past.

To David Fine, Bozeman’s economic development manager, his work is about finding a balance between the community’s need for affordable housing and its values of open space, mountain views and accessible parking.

“It’s not a secret that Bozeman has been discovered over the past decade. We’ve added over 20,000 people in that time, and we’ve done careful planning,” Fine told Montana Free Press. “I think we’ll have to continue to deal with the challenges of growth and change as we move forward. I don’t really see it slowing down.” 

Across Montana, cities have faced an affordability crisis as the influx of new residents strains local housing markets. State policy has focused on cutting regulations to make it easier for developers to build new homes, reasoning that the additional supply will slow or reverse price increases by giving buyers and renters more options. But some of those policies limit what local governments can do to support affordable housing.

In 2021, House Bill 259 in the Montana Legislature banned inclusionary zoning, which Bozeman and Whitefish had used to require a set percentage of affordable units in new developments. In 2023, Senate Bill 105 banned rent control statewide. Now, cities must use economic incentives for developers to build affordable units, which isn’t “as big of a lever” as requirements, Fine said. 

The incentives are outlined in Bozeman’s Affordable Housing Ordinance, passed by the city in 2022. Following controversy over the Guthrie, the city is revising the ordinance. Fine said he expects the city commission to vote on new language this winter. 

Building units that residents can afford is key for cities like Bozeman, a growing college town where the greater area’s median single-family home price is nearing $1 million. 

More than 55% of Bozeman residents are renters, and half of those renters are cost-burdened, meaning they spend over 30% of their monthly income on rent. According to HRDC estimates, a household would need to earn $100,000 a year to comfortably afford rent in Bozeman, well over the median annual income of renter households, which is $51,000.

Particularly between 2020 and 2022, a shortage of available housing moved property owners to raise rents, a city economics report found. In those two years, the average rent in Bozeman increased by 17%, from $1,656 to $1,938. 

But from 2022 to 2023, average rents rose just 0.3%, from $1,938 to $1,944. In two years, 1,272 new units were built in town, and the rental vacancy rate rose from 4.8% to 9.4%, according to city data. That indicates the supply of housing has started to catch up with the demand, Fine said, but he expects the vacancy rate to fall as the market absorbs the new units. City data from 2024 is not yet available.

The Bozeman City Commission nixed construction of the Guthrie, a proposed project that included affordable rental units but scant parking, after some residents raised concerns. Credit: Isabel Hicks / MTFP

It’s still early, but the affordable housing ordinance has accomplished a lot, Fine said. In two years, construction has started on 387 units that used the incentives, and 1,079 more apartments are in the pipeline. But there’s still more work to be done, Fine said. 

One section of the city’s affordable housing ordinance under scrutiny is a provision that lets developments that meet affordability criteria include fewer parking spaces than would otherwise be required by city code. Fine said parking is the “most effective lever” for affordability because it requires a lot of land. 

“There are cases, with the price of land, you have to choose between long-term affordability and providing a large number of on-site parking spaces,” Fine said. 

Currently in Bozeman, affordable units built with the incentives target people making less than 80% of the area median income (AMI). But because the median income has jumped 23% in the three years — from around $62,000 for one person in 2021 to $76,300 in 2024, according to a city policy analysis — the gap between 80% AMI and market-rate rents has narrowed. That means the 80% AMI rent is not as much of a discount from the market rate as it was before, said Lila Fleishman, HRDC’s community development director.

Revising the ordinance to incentivize more affordable units tied to 60% of the AMI would lower the cost of affordable units and help the people most in need, Fleishman said. The change would lower the rent cap of some affordable units from $1,962 for a typical two-bedroom apartment to $1,472, according to the policy analysis. The rent for affordable units in the proposed Guthrie would hover in that range, around $1,600 a month.

Fleishman emphasized that “there’s not a lot of tools on the local level. There’s limited tools in general, particularly in the regulatory environment of Montana.” This is just one ordinance, and it “can’t do everything all at once,” she said, but it can help address some of the trends that were exacerbated by the pandemic. 

Despite New Construction, Barriers to Housing Remain

Fleishman said that after COVID-19, population growth, the cost of construction and interest rates skyrocketed. The shifting market even forced HRDC to stop offering some resources, like a down-payment assistance program, because they became too expensive to operate.

“Our resources just don’t go as far now,” Fleishman said.

And even with affordable housing being built, steep barriers remain, including application fees for renters that have become commonplace.

Ashlie Nettleton, a 27-year-old Bozeman resident, currently lives in her car.

At her last apartment in Bozeman, the landlord raised the rent from $1,375 to $2,600 over two years. It was tough, and sometimes, Nettleton and her dad had to skip meals to afford rent, she said. In 2023, it became too much, and she started looking for other options. 

“I just want people to remember that pretty much anybody is one step away from being in this situation,” Nettleton said. She’s worked three jobs at times and currently drives school buses and for Uber.

Nettleton estimated she spent hundreds of dollars on application fees during her search. Most of the time, she paid the $25 or $50 fee to apply for housing and never heard back. Because of bad credit, she didn’t qualify for income-based housing.

“If you have something like an eviction on your record, an inability to pay first and last month’s rent, the security deposit, a bad reference, it’s going to be really, really challenging for you in this market,” Fleishman said.

Some landlords say soaring property taxes have forced them to raise rents.

Jack Austin, a Miles City resident who rents two homes in Bozeman below market rate, said his property taxes jumped by some 65% in 2023, as state tax appraisals saw soaring property values in fast-growing areas. He said controlling property taxes is the only way to keep rental costs down in Bozeman. He commended Senate Bill 194, which proposed property tax breaks for landlords who offer rents below the market rate. The bill failed to gain traction in the 2023 Legislature.

Organizers Pushing the City for More Solutions

Still others, like Benjamin Finegan who helped start Bozeman Tenants United in 2021, are urging the city to think creatively about solutions.

Finegan said he’s crammed seven people into a four-bedroom house to afford rent, watched friends work three jobs to stay in Bozeman and said goodbye to loved ones forced out of state by the cost of living, including his mom. It’s common for people here to spend one-third or even one-half of their monthly income on rent, he said.

A construction crew is busy at work on a recent sunny afternoon in Bozeman. Hundreds of housing units are currently under construction near the Montana State campus. Credit: Isabel Hicks / MTFP

“That’s not sustainable. It’s leading to people grinding their lives away at work and not having any savings to show for it at the end of the day,” Finegan said.

Last year, the group won a fight to ban future unoccupied short-term rentals in Bozeman. That will help address the rise in wealthy out-of-staters buying property to use as Airbnbs, Finegan said. Currently, organizers are pushing Bozeman to put money toward legal representation for tenants being evicted or living in unsafe conditions.

At the end of the day, it’s about providing more renters with more opportunities, Fine said. 

What Bozemanites have experienced since 2020 is ultimately a cultural shift, he said. People who could have been homeowners a few years ago are now, by default, renters. 

Fleishman echoed the change. “There’s just been an acceleration of the market in a way that people who had opportunities a few years ago, they just don’t have the same opportunities now,” she said.