Category Archives: Montana real estate

What do you think of the Missoula Tourist Home Ordinance?

At a recent dinner with friends, the subject of housing came up as it often does when people learn I’m a real estate agent. Turns out the house next door to our hosts home was purchased by an investor and is now used as a Tourist Home and it was affecting them in a variety of ways.

Residential real estate has historically been a great investment, whether you reside in the home or are an absentee investor renting property at a monthly profit and earning appreciation as well over time. Rental periods are typically one year or more on investment properties, but short-term rentals have also been part of the formula with furnished executive and insurance rentals earning higher weekly or monthly returns.

In recent years, sites like Airbnb.com and VRBO.com have shifted the short-term rental market more directly to residential owners and neighborhoods, providing more options for visitors and opportunities for homeowners and investors to profit, essentially becoming part of the hotel/motel market. In Missoula, a house rented short-term (daily or weekly and not occupied by an owner or manager) is called a Tourist Home.

On November 3, 2016 the Missoula City Council approved the use of residential properties in all residential and commercial zoning districts as Tourist Homes, so long as they are:
Registered with Development Services at City Hall
Pay the required registration fees
Notify neighbors within 150 feet of the Tourist Home of its existence and use.
Meet the other requirements of the Ordinance
Note: this ordinance does not override Homeowner Associations and CCR’s that may prohibit rentals in certain buildings or neighborhoods.

The rules for Missoula Tourist Homes are in place for now, but the debate over whether their impact serves the community probably has not.

Supporters of the new rules say that Tourist Homes have been operating illegally in Missoula for some time and the new rules create a means for regulating short-term rental activity; regulations providing a means to register Tourist homes and for residents to make and address complaints about registered and unregistered Tourist Homes.
Many landlords believe they should legally be allowed to rent short-term as well as long-term.
Others believe homeowner’s should be allowed to do what they wish with their properties, including rent them short-term.

Missoulians who oppose Tourist Homes believe they reduce residential home availability and therefore drive up prices in a housing market where prices already outpace wages. Residents note erosion in the quality of neighborhoods when nearby homes begin operating like motels.
Local business owners say higher home prices, resulting in part due to Tourist Home activity, make it difficult to hire because incomes are insufficient for employees to qualify for a home purchase near to their workplace.

Today, the median price for a Missoula home is $249,000. The Montana Association of Realtors says it takes an income of $80,000 to purchase that median priced home with a typical 4% down payment and 30 year loan. With Missoula median family incomes ranging from $43,560 for a single person to $62,220 for a family of four, there’s an affordability gap for working families.

Up to 2 Tourist Homes may be owned by any one individual or LLC in residential districts, and homes zoned commercial are not subject to the rules, which opens up opportunities for investors and homeowners in the Tourist Home business. As of this writing, just one Tourist Home has been registered, and 7 applications are pending. But today, a search on Airbnb.com for Missoula Entire Homes brings up 114 rentals. In Sept, there were just 59. One week after the ordinance was approved, that number rose to 89.

Cities across the country are dealing with the short-term rental issue in different ways. Seattle and Los Angeles are considering regulations limiting short-term rentals. Some cities have strict zoning and licensing regulations. Other cities like Denver and San Francisco require that the house be a principle residence. In New York, advertising a short-term rental on Airbnb is now illegal. And in some places there are no regulations at all. Cities with regulations cite the loss of affordable housing as a main reason for instituting ordinances.

As a REALTOR®, my professional and personal duty is to help clients achieve their real estate objectives, whether it’s for investment or personal use. It’s also important to me that I understand the impacts of housing ordinances that affect my community, friends, and clients – and what you think of those ordinances.

What do you think of the new Tourist Home Ordinance in Missoula? If the rules around Tourist Homes were revisited sometime in the future, what would your position be?