Dab Dabney has worked in the real estate industry since the 1980s.

He’s never seen a town with fewer available rental units than Bozeman has now.

Less than 2 percent of the rental apartments and homes are vacant, according to a recent study of Bozeman’s housing needs. The study reviewed 796 non-subsidized apartments in town and found 15 available units.

As a result of the scant supply, rents are going up, said Dabney, who owns Alliance Property Management and several large low-income apartment complexes in Gallatin County.

“We have seen rents go up across the board, really beginning last summer, and that’s for the first time in a couple of years,” he said.

Dabney predicts monthly rents will increase 5 to 8 percent this year. And he doesn’t think renters’ incomes will keep up.

“You’re going to have a lot of people looking at increasing home costs and flat incomes,” he said. “They’re going to get squeezed.”

EARNING $35,000 OR LESS

Bozeman has a severe need for affordable rental housing, said Peter Werwath, a consultant who conducted the study of the city’s housing needs.

“There is a very acute need for rental units for households with annual incomes under $35,000,” he said.

The largest single indicator of a lack of affordable housing is the number of households paying more than 30 percent of their income for housing costs, Werwath said.

Nearly half — 49 percent — of renters in Bozeman are paying more than 30 percent of their income to rent, he said.

Bozeman has a fair supply of affordable homes, according to the study. The median sale price of all homes fell from $257,875 in 2006 to $207,000 in 2011, according to figures from Gallatin Association of Realtors.

But during the economic downturn, builders stopped building apartment complexes, more people opted to rent than buy a home and the number of students enrolled at Montana State University surged.

At MSU, “the rate of growth over the past 10 years has been around 200 students a year, with no new student housing being constructed in recent years,” the study says. “Assuming three people per dwelling unit, the growth rate would indicate about 60 new households a year living off campus.”

FAILED ORDINANCE

The city of Bozeman commissioned the housing study last summer in order to fix a city program intended to encourage builders to construct affordable housing.

The workforce housing ordinance was created by a community task force and adopted in 2007. It aimed to give working-class families earning less than $70,000 a year wider options for owning a home.

The ordinance required developers of large subdivisions to price a portion of new homes or condominiums under $200,000.

But the rule relied on a booming supply of developments to impose the mandate. Shortly after the ordinance was approved, the economy crashed. No affordable homes were produced.

In July, Bozeman City Commissioners suspended the ordinance for one year. They hired Werwath Associates, a Columbia, Md., company that helps cities write housing plans, to analyze Bozeman’s housing needs. The study cost $30,000.

Peter Werwath, principal of the company, presented his findings earlier this month to city officials, builders, nonprofit directors and other concerned members of the public.

He named rentals as Bozeman’s top housing priority.

“The city should consider including elements in its pending affordable housing plan that encourage construction of rental units, with a particular emphasis on production of rental units affordable to households between 30 percent of area median income and 50 percent of area median income,” the study says.

Area median income is $66,700 for a family of four.

At 30 percent to 50 percent, “this translates to $350 to $580 rents for one-bedroom units, $450 to $750 for two-bedroom units and $500 to $850 for three-bedroom units,” the study says.

TWO JOBS, ROOMMATES

Families who have lost their homes typically stay with Family Promise for 90 days, said Kacie Grue, family case manager for the Bozeman nonprofit.

But these days, they stay longer, she said.

Parents trying to get back on their feet have found good jobs, saved for a rental deposit, and have been ready to move out on their own, but they can’t find an apartment, Grue said.

“When you’re coming out of Family Promise, families are saving their money and looking to find a place to live that’s sustainable,” she said. “In order to do that, your rent needs to be less than half your income. Trying to find a place to rent that falls into that category is almost impossible.”

Parents often take second jobs, find roommates or have their sons and daughters share a room, Grue said.

“A lot of people look for a place in Belgrade,” she said. “But these days, Belgrade isn’t much better and then transportation becomes an issue. Commuting from Belgrade isn’t very sustainable if you’re trying to save money on gas. Belgrade doesn’t seem to be as affordable as it used to be.”

Grue said one single mother works two jobs so she can afford a two-bedroom apartment for her and her four kids.

“You can’t make it on one income,” Grue said. “She had to get two jobs, and I define them as good jobs.”

NO NEW LOW-INCOME RENTALS

No affordable, subsidized rental housing has been built in Bozeman since 2005 to add to the current stock of 368 apartments for low-income families and 161 apartments for low-income seniors, the study says.

There’s a more than two-year waiting list to receive federal rent subsidies, Grue said. Federal rent subsidies are provided to 273 very low income households and individuals in Bozeman, the study said.

The last subsidized rental housing project built in Bozeman is the 48-unit Baxter Apartments in west Bozeman off of Baxter Lane. Dabney built it.

This year, Dabney is applying for a federal tax credit to build an 11-unit development on Haggerty Lane.

To encourage developers to build more affordable rental housing in Bozeman, Dabney suggested the city reduce or defer impact fees and make it easier to rezone single-family properties for higher multi-family developments.

In his study, Werwath echoed Dabney and suggested the city, nonprofits and developers also could step up pre-purchase counseling and downpayment assistance programs to help lower-income families buy a home.

He said the city could encourage the preservation of mobile home parks. Renting a mobile home costs an average of $530 a month, according to the study.

Werwath said the city could encourage the parks to connect to city water and sewer and zone the property for mobile home parks. The parks tend to be zoned for single-family homes, allowing the use to change when the property is sold, as was the case with Bridger View Mobile Home Park in north Bozeman.

About 98 mobile homes were lost at Bridger View when residents were asked to leave to make way for a new housing development. But the development was never built.

Werwath also proposed the city fund an annual rent survey to keep tabs on where rental shortages exist.

Before the one-year suspension of the workforce housing ordinance ends in September, Bozeman City Commissioners will decide whether to revoke the ordinance, amend it, or to replace it with incentives for builders to voluntarily build and sell lower-cost homes and rental housing, the study says.

If the ordinance is replaced, the study says “home prices and rent targets should be much lower — geared to help Bozeman residents who are priced out of either home purchases or market-rate rental housing.”

Amanda Ricker can be reached at aricker@dailychronicle.com or 582-2628.

Selected Income and Housing Indicators for Bozeman and Other Areas, 2010

Source: U.S. Census Bureau. 2008-2010 American Community Survey, Werwath and Associates Survey

Measure Bozeman Gallatin County Billings Missoula Montana United States
Median Rent 746 799 688 691 639 850
Rental Vacancy Rate 1.8 6.0 8.1
For-sale Housing Vacancy Rate 4.3 2.7 0.3 0.8 1.8 2.5

Bozeman Rental Housing Costs and Vacancy (Small Sample)

Average vacancy 1.8%

Source: Werwath and Associates Survey

Apartment Type Rent Range Average Rent
Studio $550 $550
One Bedroom $475-$800 $604
Two Bedroom $429-$829 $738
Three Bedroom $491-$1200 $977

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