Democrats cast doubt on whether the ‘Montana Miracle’ is making housing affordable

When it comes to making housing more affordable in his suddenly high-priced state, the cornerstone of Montana Gov. Greg Gianforte’s record has been the “Montana Miracle.”

The so-called miracle is a package of bills state lawmakers passed with bipartisan support in 2023 that drastically rewrote zoning laws across the state. It streamlined the process for approval of subdivisions, limited parking mandates, allowed duplexes on any property where single-family homes were allowed and authorized property owners to build accessory dwelling units by right. The state set up a fund to help builders pay for water and sewer improvements, but only for dense developments.

The goal of the legislation was to increase housing supply, Gianforte explained to the Bipartisan Policy Center earlier this year. “That was the problem,” said the Republican governor. “Everybody discovered that Montana is more beautiful than any other state in the country. The show Yellowstone and the pandemic combined and then everyone was moving there.”

“Our population over the last 10 years has grown by 10%. The number of new doorknobs has only grown by 7%, plus we had these added homes taken out of the inventory for second homes,” Gianforte said. “We had a supply problem … so we focused on supply issues.”

The sweeping approach earned Gianforte plaudits across the country, particularly among the newly energized YIMBY (Yes in My Backyard) crowd.

But as the governor faces reelection in the reliably Republican state, Democrats are questioning whether Gianforte’s housing actions have improved the lot of everyday Montanans. 

A national real estate group just ranked Montana as the least affordable state in the country for housing, even ahead of states like California and Hawaii. Montana has seen one of the biggest increases in homelessness in the country. Gianforte has even talked about people living full-time in RVs on the street outside his Bozeman home. And rapidly increasing home prices has led to rapidly rising property tax bills, something Democrats say Gianforte could have prevented.

“The Montana Miracle is not much of a miracle,” Ryan Busse, Gianforte’s Democratic opponent, told Route Fifty in an interview. “Housing prices are still going up, and much of what [Gianforte] did files in the face of the idea of local control.”

Busse, an author and former executive of gunmaker Kimber Manufacturing, has struggled to gain traction in the heavily Republican state. Cook Political Report, which analyzes elections nationwide, ranks the Busse-Gianforte race “solid Republican.” Gianforte initially dismissed his Democratic opponent as not a “serious candidate” worth debating because Busse at the time had not yet released his tax returns, although the two are now set to face off in mid-October after Busse shared the documents.

But Busse sees the issue of skyrocketing housing prices—and especially the huge property tax bills that have come along with them—as a way to show that the incumbent is more concerned with wealthy residents than with middle- and working-class Montanans. Gianforte is a software engineer who built a company and sold it to Oracle for $1.5 billion in 2011, and he now owns four homes in Montana.

“The property tax thing is very, very illustrative of his disconnect from everyday people,” Busse said. “If he was really concerned about housing, he wouldn’t jack up property taxes on every Montana homeowner.”

The previous four governors—Democrats and Republicans—lowered residential property tax rates when it looked like they would disproportionately harm homeowners, but Gianforte did not, Busse noted. He let the rates go up and instead cut income taxes for the highest earners. “If you don’t [lower residential property taxes], it gives big, centrally assessed corporations a big tax cut, because their portion of the tax burden goes down, and the homeowners’ portion of the tax burden goes way up,” he said. “It’s not just an affordability thing, it’s a fairness thing.”

Meanwhile, Gianforte successfully fought efforts by counties to lower the residential property taxes they collected on behalf of the state. Busse said the state didn’t need the extra money. “Given his track record, I’m surmising that he wants to use [the increased revenue] to justify more tax breaks for upper-income tax earners,” the Democratic candidate said. “Why didn’t he just fix the tax rate for homeowners initially? It’s a policy disaster. It’s political malfeasance.”

Busse said voters are “red hot” about the property tax increases. “It’s a shock to the system,” he said. “Republicans have been told for 75 years that Republicans are not supposed to jack up your taxes, and here they definitely are. It’s a political bombshell, and Republicans are very, very upset about it.”

Sudden Spike in Housing Prices

Before the pandemic, housing prices in many Montana markets particularly in the western part of the state were already climbing, said Patrick Barkey, the director of the Bureau of Business and Economic Research at the University of Montana. “But it really exploded in the immediate aftermath of the pandemic,” he said, “even by late 2020.”

All of a sudden, housing prices in the Missoula area are four times higher now than they were in 1995—the same rate of growth in that time period as homes in Los Angeles.

“But the growth here,” Barkey said, “has mostly happened in the last three and a half years. So it has been a big event.”

The rise of remote work meant people could live in Montana, even if their offices were thousands of miles away. Montana is known for low taxes and wide open spaces, and the Kevin Costner-led TV series Yellowstone displayed much of the state’s natural beauty while people were isolated in their homes.

But local officials weren’t anticipating the impact those factors would have on Montana. The state’s population has been growing steadily for decades, but politicians like Gianforte were more concerned about people moving out of state than with outsiders flocking to new homes there. 

In most Montana real estate markets, Barkey said, it was hard to build new homes. In some places, rivers and mountains limited open space. “But most of them were constrained by local political sentiments against building,” he said. “It didn’t happen all at once, but it was the cumulative effect of many, many small decisions to restrict housing.”

Todd O’Hair, the president and CEO of the Montana Chamber of Commerce, said the state has been a “victim of our own success.”

The housing shortage “has become a significant challenge for economic growth in the state, affecting not only our ability to recruit new businesses to the state, but also affecting legacy businesses that have been in the state for years and their ability to retain local talent,” he said.

The lack of available housing has also made it harder to construct new housing because construction workers can’t afford to live near their work sites.

The transition has taken a lot of people by surprise, O’Hair said. “I heard a funny saying—and I think it’s pretty accurate—that ‘Montana isn’t the state I moved to two years ago,’” he said. “People moved here in the last 10 years, and it changed underneath their feet. They’re surprised at the rapid change they’ve seen. But even to Montanans who were born and raised here, that momentum has caught up to all of us in the changes we’ve seen.”

Jacob Kuntz, the executive director of the Helena Area Habitat for Humanity, was one of those people struck by the sudden change in housing availability. When Gianforte started a “Come Home Montana” campaign in 2022 to entice people who had lived in Montana to return home, it struck a nerve with him. The Habitat for Humanity chapter ran a full-page ad in a local newspaper with the message, “They can’t come home.” The problem, of course, was that housing was too expensive and there wasn’t enough.

“The ad we took out wasn’t intended to be specifically critical of the governor’s housing policies,” Kuntz said. “We saw it as a moment to communicate with our local community to say that if we’re going to build a home, a community that is going to be affordable for the majority of people … we’re going to have to start thinking differently, and here’s how we do that.”

“The governor was pretty annoyed, as you can imagine,” Kuntz said, “but to his credit, he created a task force and he invited me to come on to that task force.”

Making of a ‘Miracle’

Gianforte describes that task force as the key to getting major changes on housing policy passed through the legislature, which only meets for one 90-day session every two years. It included more than two dozen people, including lawmakers, housing advocates, bankers, home builders and local officials. (Barkey, Kuntz and O’Hair were all among the members.)

The governor said he kept the task force (and later legislators) focused on the big picture in order to help them resolve their differences.

“We want our teachers and our police officers to live in the communities they serve,” he told the Bipartisan Policy Center. “As prices increased, it was less obtainable. This was the No. 1 issue facing Montana working families, and we had to do something about it.”

Kaitlin Price, a spokesperson for Gianforte, added in an emailed statement, “Increasing Montanans' access to affordable, attainable housing is a top priory for the governor. To bring the American Dream of homeownership into greater reach for Montanans, the governor in July 2022 launched his Housing Task Force and charged the diverse, bipartisan group to provide recommendations the legislature could consider and he could sign into law.”

The task force’s recommendations were focused on removing regulations that made it harder to build housing and on encouraging denser development.

In 2021, Gianforte signed a law banning cities from requiring “inclusionary zoning” with a certain amount of units set aside for affordable housing, which the cities of Bozeman and Whitefish had required. But in the 2023 package, the legislature also curbed “exclusionary zoning” that makes it difficult or impossible to build certain types of housing—usually multifamily housing—in specified areas.

Other 2023 changes required cities to develop master growth plans, so that builders would have an easier time knowing what could or could not be built on parcels without extensive public hearings. The package also included changes to attract more construction workers, such as allowing journeymen to oversee more apprentices at the same time.

The Habitat for Humanity’s Kuntz said one of the most important things the legislation did was to provide “cover” for local officials to enact changes that otherwise might be unpopular with their constituents. “There’s a bit of tension between community leaders who know that things need to change and the population that doesn’t have an economic interest in seeing change,” he said. Now those leaders can say, “Well, look, the state is saying we have to do that,” Kuntz said.

O’Hair from the chamber of commerce said the new laws have already had an impact. Rents are stabilizing in hot markets like Missoula and Bozeman, the vacancy rates are increasing and more homes are coming online, he said.

The governor reconvened the task force this last year to offer more suggestions for the upcoming legislative session, presuming, of course, that he wins.

Is It Enough?

Busse, the Democratic candidate, said Gianforte hasn’t used all of the tools he could in order to make housing more affordable. Busse suggested the state should use low-income housing tax credits to spur more development. And he said the governor’s Labor Department has been focused on culture war issues, like vaccine mandates, rather than developing a workforce that could help ease the housing crisis.

Kuntz has also said that the state needs a broader approach to alleviating the shortage than “trickle down” incentives for builders.

“These builders could be building single-family detached homes for the next 20 years and not move the needle at all on the housing crisis. In fact, it would have exasperated. So there's going to have to be government involvement,” he said.

“Cutting red tape and getting communities to think about getting to a better density is absolutely a good thing, but cutting red tape alone is not going to get this done,” he continued. “And by the time we come to realize that, it’s going to be 10-15 years down the road. So that won’t get it done, but neither will just throwing piles of money into it without some sort of nuance. Unfortunately, it’s really complicated.”

The Helena Habitat chapter is hoping to show Montanans and people around the country how to create an affordable community. It’s developing a 250-acre project in East Helena, the largest Habitat project in the world, according to Kuntz.

“We are going to design a neighborhood from the ground up that features a lot of these principles,” he said. “We are going to be able to show communities can pay for themselves in the tax base while lowering per-unit taxes and create that missing middle housing that is so desperately needed these days.”

Property Tax Fall-Out

 One of the most visceral impacts of the rising housing prices in Montana, which is felt even by people who already own a home, is the corresponding increase in property taxes.

Property taxes in Montana depend on several factors, including home prices, a county’s tax rate and a state-mandated levy to equalize school funding.

Not surprisingly, when taxes go up, public officials frequently blame each other.

The state revenue department warned the legislature in November 2022 that rising home prices would lead to a major property tax increase. Its analysts told lawmakers that to keep the balance of revenue coming from residential, commercial and agricultural properties the same, they would have to cut the residential property tax rate from 1.35% to 0.94%. The Republican-led legislature did not change the rate, but at the same time, they cut income taxes for the highest earners. Property tax owners could get a rebate, but only if they applied for relief in what Democrats say is a cumbersome process.

“This new taxation increased revenue collected by the Montana state budget by more than $500 million during two years. Taxes increased for most homes in Montana,” wrote former Gov. Brian Schweitzer, a Democrat, last month. “Montana has never had more elected Republicans than we do today. Republicans control all the branches of government. These tax increases were placed on your shoulders without the help or consent of any Democrat. The Montana Republican Party is now the party of higher taxes and more government spending.”

Gianforte blamed the increases on local governments, but most of those are controlled by Republicans, too.

Republican Fergus County Commissioner Ross Butcher, the immediate past president of the Montana Association of Counties and a member of Gianforte’s housing task force, said he understands why people are suddenly interested in property taxes. “There’s a reason politicians are talking about the property tax,” he said. “People are definitely feeling the property taxes.”

But Butcher takes issue with the governor blaming local officials for the property tax increases. State law already restricts how much counties can tax their constituents without a specific vote.

Not only has the state blocked counties from lowering property taxes, Butcher said, but has shifted responsibility for basic services to local governments while the state runs a surplus.

“The last biennium, they had almost a $2 billion surplus in the state general fund, which is due to higher revenues from income tax than was anticipated,” he said. “That tells me we’re overtaxing the income side of it, while most local governments are struggling to meet the demand of a lot of services that are being pushed to the local government like mental health services.”

On the other hand, Butcher said he understands why lawmakers didn’t adjust the statewide rates. “You would have seen this big swing the other way,” he explained, “which would have been a huge tax hit on commercial properties.”

Editor's note: This story was updated on Oct. 2, 2024, to correct the description of 2023 housing legislation that revised Montana's zoning laws.