Missoula developers: City regulations, delays, unpredictability drive up housing costs

The Missoula Valley spreads from the South Hills under a fall day. Developers say it’s getting harder to get new housing projects approved by the city. That’s driving up the cost of housing, according to industry experts. (Martin Kidston/Missoula Current)

Developers in recent weeks have lined up to warn the city that its regulations around housing, coupled with its extended hearing process and unpredictability, continue to drive up the cost of housing in Missoula.

That is, if developers can even get a project approved.

Two weeks ago, those frustrations peaked during four hours of hearings before the City Council, during which local officials voted to enact stiffer regulations limiting townhome exemption developments.

A week later, the City Council’s Committee on Land Use and Planning held another project over for further discussion. It also vowed to bring a second project back to committee for more review.

That latter project, dubbed Hillview Crossing, first went before members of the City Council last December. Nearly a year later, it remains mired in debate, and developers are fronting the mounting costs.

“It honestly tells you that you shouldn’t be developing property to meet the housing needs in Missoula,” said Alan McCormick, an attorney representing Hillview Crossing LLC. “This project met all the rules.”

McCormick said the project, which includes 64 housing units in 32 townhomes, was designed in coordination with city staff to meet all regulations. City staff recommended the project for approval last year, though it quickly ran into opposition from neighbors and ridicule by council members.

“The City Council took up the project, decided it didn’t like the rules, and it started adding arbitrary changes by heaping loads of conditions onto the project,” McCormick said.

“Those conditions do nothing but increase costs, decrease the likelihood that it will get built, and signal to other developers looking to build housing in Missoula to not bother, because the city’s rules don’t mean anything.”

The Hillview Crossing project prompted the City Council to enact a temporary ordinance limiting all future townhome developments. At the same time, the council gave itself a deadline to replace the temporary ordinance with something more lasting.

That deadline came last week when the council voted 7-3 to adopt its new regulations, despite opposition from the development community. Among other things, the new rules limit future townhome projects to 20 or fewer units, depending on zoning.

Mayor John Engen expressed his displeasure for the regulation, saying the city was sending mixed signals.

“We seem to be talking out of both sides of our mouth here to a certain degree,” Engen said during the hearing. “We want housing and affordability, and we want it now. We have described it as a crisis, and yet we’re tipping up regulations that I believe provide additional challenges and additional obstacles to those expressed policy goals.”

***

Over the past year, members of the City Council have repeatedly stated their role of protecting public health and safety by ensuring development plays out in a neat and orderly manner.

Members of the development community don’t dispute that role, though they believe the scales have tipped in the wrong direction, making it nearly impossible to build housing – affordable or otherwise – in Missoula.

“The city has an obligation to do its due diligence, but the question is one of reasonableness,” said McCormick. “It’s impossible to believe, when you look at the South Hills of Missoula, that this development is so challenging that it can’t be built, or that it needs heaps of conditions applied to it when you literally have hundreds of thousands of homes on the same topography, on the exact same soils, and the exact same types of streets. It’s not so much about public safety as it is, simply, not in my backyard.”

Residents in the Pleasant View and Hellgate Meadows subdivisions also have expressed opposition to a proposed development in their neighborhood that would bring several hundred units of housing onto the market, including workforce housing.

Their opposition has been rooted in concerns over density and traffic. As opponent Kevin Davis put it, “We’re still not comfortable with what rezoning can mean for this area, and what it could eventually lead to on the parcel itself.”

Those fears haven’t been overlooked by members of the City Council, who believe the city must get ahead of growth by planning for the future. Over the past year, they’ve heard dozens of hours of testimony over both Hillview Crossing and Hellgate Village, primarily from neighbors who oppose the projects.

At the same time, some members of the council believe the “not in my back yard” mentality could put a damper on future housing across Missoula if the process isn’t fixed, and fixed soon.

“The reality is, we’re all beneficiaries of development of the past,” said council member Heather Harp. “There isn’t a development in our history that was wildly accepted by those already in place.

“But what we don’t understand is the complexity and the risk that’s associated with being a developer. We have to figure out a better way to have a conversation about development if we are sincere about building up our housing stock and addressing our prices.”

According to Dwight Easton, the director of public affairs for the Missoula Organization of Realtors, the median price of a home in Missoula sits at roughly $314,000 through September.

Statistics also suggest that just 46 percent of Missoula residents are homeowners, and the price of today’s homes are quickly outpacing local wages. The City Council adopted a housing policy earlier this year, taking the first step to address the issue.

But the policy and its suite of recommendations have yet to result in regulations aimed at addressing costs. Instead, the development community contends, the opposite has taken place. Dave Edgell, who developed the Scott Street Village, summarized it by saying, “Everything you add costs money, and it costs money to the end homeowner.”

McCormick agreed, saying the city’s current rules and processes lack clarity and predictability.

“There’s no ability to come in with some reasonable expectation that your project is going to get approved,” he said. “That drives up the cost. This city needs housing inventory. Without housing inventory at all levels, from the most affordable to the most extreme, housing will go up in value and make it harder to become attainable.”

Engen has expressed displeasure with the city’s processes around subdivision review, and equal displeasure with its new ordinance guiding townhome developments. He pledged to change the rules and will bring city staff and the development community together to work on solutions.

The mayor believes middle ground can be reached while adhering to the city’s goal of protecting health and safety through orderly development.

“If I were building stuff in Missoula, I sure as hell wouldn’t want to deal with these regulations,” he said. “They’re cumbersome, they’re challenging, and they fundamentally go to that affordability issue for the end user.”