An audit of the Montana Board of Housing found flaws in the way the board awards housing tax credits across the state, according to a report issued earlier this month. However, the Board disputes many of the assertions in the report.
The Legislative Audit Division, a taxpayer-funded state agency, found that “projects targeting the lowest income and areas of greatest need were not consistently prioritized by the Board.”
A map of the areas of greatest need for affordable housing in Montana overlayed with where projects have been funded or not funded.
The report found that Montana compares poorly with other states in how often it serves the lowest income populations when awarding housing tax credits. The audit also found the board’s annual awarding of federal Low-Income Housing Tax Credits is not transparent and decisions are not based on set criteria, as is industry standard. The audit also found that the board’s knowledge of statewide affordable housing need is not data-informed.
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Montana has an estimated shortage of over 17,000 affordable rental homes for extremely low-income renters (generally meaning households earning up to 80% of Area-Median Income), the audit report’s authors found.
“The Montana Board of Housing’s award of federal tax credits to address this shortage is not in line with standard practice,” the report states. “To improve how awards are made in Montana, the board needs a more data-informed understanding of the statewide need for affordable housing, stronger policy incentives for developers and outreach to specific populations. Additionally, instituting a transparent, structured evaluation of projects when making awards is crucial. Given the significant shortage of affordable rental homes compared to the number of units created by the LIHTC, it is crucial the board focus on addressing the most urgent needs in Montana.”
The seven-member, Governor-appointed Montana Board of Housing is the state agency that decides which projects across the state get federal Low-Income Housing Tax Credits. Every year, somewhere between 9 and 17 developers of affordable housing projects across the state apply for the competitive 9% tax credits that are allocated to Montana by the federal government. Only about five developers are awarded every fall.
Since the program started in 1987, about 10,000 affordable rental units have been created or preserved using the tax credits. However, because so many projects have been denied the tax credits over the years because there are only so many to give out, developers have often complained when an affordable housing project in a place like Billings, for example, gets the award over Missoula.
For example, in 2018, a Missoula developer said he was “extremely shocked and disappointed” that the Board of Housing denied his request for $7.6 million tax credits for a 102-unit project for seniors on limited incomes. In that instance, the Montana Board of Housing instead chose to give $8 million in tax credits for a 50-unit project in Billings.
“They funded a project that is half as many units for the same number of dollars, actually more dollars,” developer Alex Burkhalter of Housing Solutions in Missoula told the Missoulian at the time. “Stuff like that makes it hard to swallow. We’d have been able to deliver twice the units for less money.
But the director of the Board of Housing at that time, Bruce Brensdal, said the board had to make hard choices because there’s never enough tax credits to fulfill all requests.
On Monday, Amber Robbins of the Legislative Audit Division presented the report and its findings to the Legislative Audit Committee, made up of state lawmakers.
Robbins and her colleagues looked at data from all 50 states and interviewed housing officials in five other states.
“We learned that the Board does not distinguish where affordable housing is most needed in Montana and the board’s approach is primarily to evenly distribute tax credits across the state,” she said. “In contrast, some states use wide-ranging statewide data to understand statewide need. And some states such as Wyoming and North Dakota even pay to have a statewide housing needs assessment conducted.”
From 2018 to 2022, a map of places where the auditors found affordable housing was most needed did not exactly match up with places where the tax credits were awarded. For example, Great Falls was listed as a higher area of need than Helena, but Great Falls had two projects funded and two not funded while Helena had three projects funded and one not funded.
“We found that the board funded projects in some of the more needy areas in Montana but not consistently,” she said, adding that the board prioritized geographic distribution. She also noted that many needy areas, such as from Reservations or areas in eastern Montana, did not submit applications.
“While we recognize there are factors outside the Board’s control in terms of where developers choose to site projects, the Board could set more formal priorities and policy incentives that better incentivize developers to target areas of greatest need,” Robbins said.
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