Missoula Current: Tester bill would provide tax credit to first-time homebuyers

As Missoula and other Montana cities work to address housing and affordability, proposed legislation would give first-time homebuyers a boost through a refundable tax credit.

The First-Time Homebuyer Tax Credit, sponsored by Sen. Jon Tester, would provide a 10% tax credit toward the purchase of a qualified home, or up $15,000. Tester said the measure would help more Montanans achieve ownership.

“Montanans in every corner of our state are struggling with the rising cost of housing, and it’s one of the biggest issues I hear about when I’m in Missoula,” Tester told the Missoula Current. “I’m committed to doing everything I can to help drive down those costs and boost supply in Missoula and all across our state.”

Housing costs across Montana and much of the West are on the rise and have been for years. In Missoula, the median price of all housing types stands at $569,600 while its roughly $770,000 in Gallatin County.

With costs what they are, coming up with a down payment can be a challenge, housing officials have said. For those who are short, a $15,000 tax credit could be helpful.

“Home values in Missoula are up more than 70% over the last five years, making it harder and harder for young Montanans to purchase their first home,” Tester said. “That’s why I’m proud to lead legislation that would provide a tax-credit for first-time homebuyers to help cut costs and bring homeownership within reach for more Montana families.”

This year’s housing report produced by the Missoula Organization of Realtors dug into the market’s housing affordability index, or the measure between median wages versus median housing costs. A score of 100 means the two are perfectly aligned while anything less suggests housing costs are outpacing median wages.

Matt Gehr with Mann Mortgage said that with 5% down, the affordability index sits at 61 and with 20% down, it stands at 74. Both figures have improved from prior years, but housing continues to be unaffordable for many.

“If you have a 5% down payment, you’d need a household income of $165,000 to comfortably afford the median housing cost,” said Gehr. “If you have 20% down, you’d need a family income of just over $136,000 to cover a median home in Missoula.”

While the median cost for housing in Missoula has ticked up to $569,000, that includes all housing types. On their own, the median price for townhomes in Missoula is $470,000 while for condominiums, it’s $365,000.

A number of new subdivisions approved in Missoula and Missoula County include both townhomes and condos, along with single-family homes and apartments. Housing variety is detailed in the city’s housing policy as a tool to address affordability.

As proposed, the First-Time Homebuyer Tax Credit directs Housing and Urban Development to establish a program for advance payments of the tax credit, meaning it can be applied at the time of home purchase.

Under the proposed tax credit, the home must be the homebuyer’s principal residence and be financed using a federally backed mortgage.