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Missoula faces new construction hurdles amid affordable housing crisis

Developers and builders discussed the challenges of constructing new homes during this month’s City Club Missoula meeting.
Missoula City Club Panelist
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MISSOULA — It’s no secret that Missoula is in an affordable housing crisis and you may be thinking, why don’t we just build more affordable housing? It’s not that simple as there are many challenges to building affordable housing.

“Between 2021 and 2024, construction costs increased between 15 and 30%,” said Edlen & Co co-founder Jill Sherman.

Developers and builders discussed the challenges of constructing new homes at this month’s City Club Missoula meeting on Monday, Nov. 18, 2024, citing inflation as one of the biggest challenges.

“About 48% across our book of business, so, um, there was a huge inflationary period that has sent everyone reeling obviously,” said Dick Anderson Construction vice president Allan Frankl.

Besides inflation, Missoula also has a tough housing market for new construction with investors seeing low returns on their investments.

“It’s expensive to build here for a variety of reasons. And actually, the rents are a bit lower than some other markets. It is very difficult to get to a return that will attract investment for the project,” Sherman explained.

“All the easy projects have already been done. All the low-hanging fruit has been picked," Hone Architects & Builders president Chris Chitty noted. "All the projects that are left need creativity, they need TED scratching, they need back and forth with regulators, they’re not straightforward, they take time."

In addition to finding investment sources and easy projects, there is also the issue of zoning.

“You have to get a rezone. Because the zoning that your piece of property has already doesn’t, isn’t appropriate for what the development you need to do in order to make it pencil,” Chitty told the audience.

The last big issue comes down to labor.

“We are really getting bit by the lost generation of construction. In the 90’s and the 2000’s you were not seeing a lot of people enter the trades. You were seeing people get pushed towards a four-year degree,” Frankl said.

While there may be numerous challenges to building more housing in Missoula, there are some things to look forward to.

Dick Anderson Construction told MTN that they foresee a slower housing market, providing some relief from the chaos of the COVID-19 pandemic.