A bill that would eliminate Whitefish's affordable-housing program drew spirited opposition from city leaders during its first hearing in the Montana Senate last week after passing the House on a party-line vote.

House Bill 259, sponsored by Rep. Sue Vinton, R-Billings, would prohibit cities from requiring developers to dedicate land or pay fees in order to keep homes priced for people with specified income levels – a system known as inclusionary zoning, which has been deployed in various forms to address affordable-housing shortages across the country. It would eliminate Whitefish's Legacy Homes Program along with a similar program in Bozeman.

The bill, which received a hearing Friday before the Senate Local Government Committee, is backed by building and real estate industry groups who say inclusionary zoning doesn't work and unfairly shifts the financial burden of providing affordable housing onto developers.

Opponents argue there's ample evidence it does work, and they note inclusionary zoning programs vary significantly from one city to the next, with various incentives built in to entice builders to participate. They also say the bill would usurp local governments' authority to address their specific housing needs at a time when Montana cities are seeing rapid growth.

"The inclusionary zoning program created by the Whitefish community is not the result of liberal Whitefish politicians shoving their radical philosophies down the throats of our businesses and our residents," Kevin Gartland, executive director of the Whitefish Chamber of Commerce, told the committee. "This program, and the larger strategic housing plan, were created at the behest of the Whitefish business community."

Gartland, whose organization represents about 450 Whitefish businesses, said he approached the Whitefish City Council to come up with affordable housing solutions five years ago because many businesses, particularly those in the tourism industry, struggle to find workers who can afford to live in the city. Whitefish, he said, suffers from a "complete and total absence of housing that's affordable to the folks who drive our economy, our workforce.

"Despite a booming economy, the emergence of Whitefish as an international destination resort, our employers struggle to fill essential job openings year-round. They've been forced to raise starting wages to $15 or more for dishwashers, housekeepers and other entry-level workers, and they still can't find applicants," Gartland said. "Our workers, unable to find housing in the local area, commute from as far as Libby and Eureka — 50 to 90 miles one way, simply to find work in Whitefish and take a job. And eventually, they tire of that commute and they take a job in the community where they live and work."

THE WHITEFISH City Council launched the Legacy Homes Program nearly two years ago. It works by using deed restrictions to link home prices to the county's median income, and requiring developers to pitch in when they build certain multifamily projects with discretionary permits, such as conditional-use permits.

Only one project has been initiated under the Legacy Homes Program, and in December, in an effort to capture more projects in the program, the City Council lowered the number of units a developer must build to trigger the deed restrictions and the need for a conditional-use permit, from eight units to five. The city's Strategic Housing Plan Steering Committee found a few developers appeared to be deliberately avoiding the affordability requirements by building only seven units per project.

Backers of Vinton's bill suggested the programs in Whitefish and Bozeman are evidence that inclusionary zoning doesn't work.

"It relies on a single industry to address a communitywide problem, and it does not work," said Abigail St. Lawrence, a lobbyist for the Montana Building Industry Association. "Inclusionary zoning has failed across the country to result in any appreciable positive impact on housing affordability."

Vinton, who co-owns a construction company with her husband, said "the reality is that inclusionary zoning has failed time and again across the country, including in Bozeman."

Opponents of the bill, including Bozeman officials, argued inclusionary zoning has made a significant impact. It just takes time.

"It has worked," said John MacDonald, a lobbyist for the city, which enacted its current program in 2018. So far, 17 homes built under the program are owned and occupied by Bozeman families, and that number is expected to rise to 50 by the end of the year, MacDonald said.

"That's 50 people in our community that have a place that they can afford," he said. "Some of these folks have been on a waiting list for over a year for affordable housing."

MACDONALD AND others said it's difficult to persuade builders to participate in affordability programs voluntarily. Bozeman has offered incentives including expedited permit review, reduced minimum lot size, fee subsidies and reimbursements, simultaneous construction of housing and infrastructure, and reduced parking and parkland requirements. When that didn't work, the city made its program mandatory in 2018, he said. But the incentives remain.

"All of these were an effort to say to the builders, 'If you help us with affordable housing, if you help us build those homes, we will help you keep your costs down, we'll ensure that you continue to be able to make money, to have a profit, and hopefully we can speed up the entire process involved,' " MacDonald said.

Whitefish Mayor John Muhlfeld concurred, saying the density incentives in Whitefish's previous program failed to entice developers.

"Every few years, the city would adjust the cash-in-lieu amount to try and incentivize builders to take advantage of the density bonus, and quite frankly it did not work," Muhlfeld said.

Whitefish City Council member Rebecca Norton also testified against the bill, saying, "We need all the tools that we can get to solve this very, very serious problem of not having adequate housing for our workers."

TESTIFYING ON behalf of the Montana League of Cities and Towns and the Montana Association of Counties, Kelly Lynch said inclusionary zoning programs have created about 50,000 affordable homes for purchase and about 125,000 affordable rental units since their inception in the early 1990s.

"There's a wide diversity in terms of these programs," Lynch said. "The communities of Bozeman and Whitefish had an extensive, yearlong dialogue with the public regarding these ordinances, and their local elected officials made a decision that these requirements best fit the needs of their communities at this time.

"Make no mistake," she told the committee. "If you pass this bill, you will be removing one of the few tools our most expensive communities have to provide actual homeownership to Montanans that can't otherwise purchase a home. These affordable units have never been as important as they are right now. If you pass this bill, you will be stopping the construction of affordable units."

The committee took no immediate action on the bill.

Reporter Chad Sokol can be reached at 758-4434 or csokol@dailyinterlake.com