Population growth, vacation rentals send local housing prices skyrocketing
Monday, August 20, 2018

Dennis Hopkins, left, and Mcleod Versland, of Irrigation Innovation, landscape a property on East Meriwether Way, Monday morning. (Enterprise photo by Nate Howard)

EDITOR’S NOTE: Following is another installment in The Enterprise’s ongoing coverage of growth in Livingston.

For a house recently put on the market on F Street in Livingston, the advertisement was a list of everything wrong with the house.

Instead of talking the property up, the owners made it clear they weren’t fixing anything — including the roof.

Within a couple hours of being placed on the market, prior to the first viewing, the house had a cash offer for the full listing price of $188,000.

“This is routine,” said Realtor Mike Wojdylak of Maverick Realty. “This is always happening here. If you’re putting a house on the market, even if it’s stick built, if it’s listed at or under $200,000, it’s gone in less than 24 hours without a doubt.”

An influx of out-of-area investors looking to develop vacation rentals and a population increase have flipped Livingston’s housing market upside down.

The median price of a house in Park County has increased by more than $100,000 in the past five years, according to Wojdylak, a realtor in Livingston who serves on a housing task force for the city.

In 2013, the median house was sold for $171,700. So far, this year, the median house price has been $275,300.

“That is obviously significant to say the least,” Wojdylak said. “When you speak to people who grew up here, if they’re a property owner, they love it. If they’ve been tenants or are not yet able to purchase a property, they hate it.”

Even houses that are bought with the express intent of tearing them down are going for $140,000 to $170,000, Wojdylak said.

“That’s just the market we’re in right now, so the average Park County resident is simply priced out of the market,” Wojdylak said.

North side could see 2,000 more houses

In addition to the growth of vacation rentals, City Manager Michael Kardoes is anticipating significant short-term growth in the city — for a total population between 8,800 and 11,000 people by 2025.

On Tuesday, the Livingston City Commission will hear a new traffic plan for the city that anticipates extreme growth beyond that.

In three parcels northwest of the city, the Northside Transportation Plan says 2,000 more homes may be added.

That would amount to a population increase of 5,600 people — a 74 percent increase for a city of 7,530 people.

Kardoes said the city is planning 50 years out, and even then, all of this growth might not happen.

The Northside Transportation Plan does not anticipate the growth happening immediately.

“Thus full occupancy of the study area in 20 years would be unlikely unless a rapid increase in the annual growth rate occurs,” the plan reads. “In any case, planning the street system for ultimate growth and implementing it in a structured and purposeful manner would ensure safe and efficient future operations.”

So far, growth has been limited on the north side of Livingston because crossing the railroad tracks can create issues for emergency vehicles when a train is coming.

But the plan adjusts to that growth with a crossing under the railroad tracks at Printing For Less Way, the creation of three arterial through streets by extending Front and Geyser all the way through to Printing For Less, and significantly more roads to help traffic better navigate the north side of Livingston.

Kardoes has estimated that the underpass and the extension of Front Street — which he called immediate needs — would cost $17.5 million.

The commission will meet Tuesday to discuss whether it wants to go forward with that project. The project would likely require a mill levy increase election, a special taxing district, as well as state and federal funds.

Need for more housing

Up to this point, new construction hasn’t kept up with the demand for more housing, driving prices up, Wojdylak said.

“We have an availability issue here,” Wojdylak said.

He said the city needs to add more land — but that would also mean more infrastructure is needed.

The anticipated 2,000 new houses on the north side are on county land that is currently not a part of the city and would have to be annexed in the future.

The Northside Transportation Plan does not include anticipated growth beyond the north side of Livingston because of its area of focus. But that growth is coming.

In town, houses are already being built on lots that people didn’t think would ever have houses, Kardoes said. West of town, a parcel of land, owned by a group of investors led by Printing For Less owner Andrew Field, was rezoned to accommodate multi-family housing near the company’s headquarters.

East of town, the city’s current growth policy anticipates new housing developments east of the Yellowstone River — with singlefamily housing on the north side of U.S. Highway 89 and multi-family housing potentially available on the Watson Ranch near Livingston Health Center all the way to the south to across the river from Sacajawea Park.

While the city has made sure the “viewshed” is preserved by limiting development on the hill near the river, residences, including apartment buildings, could be built on the other side of the river.

Bozeman outbidding builders

But that growth is limited by the availability of builders, Wojdylak said.

Builders are focusing their efforts on larger, more expensive homes — ones that wouldn’t help with housing prices — Wojdylak said. Or they’re staying in Bozeman.

“If you talk to any of them and ask why can’t you build a smaller more basic property, their answers are pretty much uniform,” Wojdylak said.

The builders can get higher profit margins for larger houses. Why would they build a smaller house and sell it for $225,000 when they could build a larger house for not that much more money and sell it in the mid $300,000s? It doesn’t make sense for them, he said.

He described the lack of builders as a “brain drain” because many builders are going over to Bozeman where they can get more money.

“I’ve had painters tell me flat outright they won’t work here,” Wojdylak said.

Painters can charge $50 an hour in Bozeman, compared to about $30 or so in Livingston.

“They tell me, ‘Why would I do that when I can come over to Bozeman?’”

The houses that are being built are often being sold before they’re finished, he said.

For new construction, Livingston has generally been about 12 percent to 15 percent cheaper than Bozeman, but in recent years that margin has tightened to about 5 percent to 7 percent. Wojdylak said Livingston will likely always be a little cheaper than Bozeman because of the pass and access to bigger stores, more jobs and the airport.

“I don’t know that I’d say we’re hitting the top of the market just yet,” Wojdylak said. “But we’re narrowing the gap.”

He said the growth in Livingston is both Bozeman natives being priced out of town, as well as out-of-area people moving in.

Role of vacation rentals

To City Commissioner Sarah Sandberg, the root issue behind the housing price spike is obvious: vacation rentals — and she thinks the city should take a look at it.

“I continue to bring up Airbnbs in the community as taking away our housing,” Sandberg said at the most recent City Commission meeting. “There is nothing stopping outside investors coming in buying housing.”

The city has no laws regulating vacation rentals.

In 2016, the Planning Board looked at vacation rentals to see if any new policies are needed and determined the effect was not significant enough to warrant any policy changes.

At the time, the board found there were between 30 and 40 vacation rentals in the city limits.

Today, there are 82 properties listed in Livingston on Airbnb. On VRBO, 45 properties are listed.

The board found that vacation rentals benefitted Livingston by bringing in revenue for landowners, bringing tourists to town and diversifying the economy. It found that they harmed the city by reducing the quality of the community, reducing longterm rental stock, increasing parking stressed and potentially reducing property values.

But the profit margins of vacation rentals has led to higher housing prices, Wojdylak said.

“Those are the issues that are taking housing away,” Sandberg said.

But other commissioners tend not to respond to Sandberg’s comments. At least two of the five commissioners own vacation rentals.

Rental market

Among the concerns the planning board raised was the long-term rental stock, and it’s not only potential homebuyers who are facing a crunch, renters see an effect, too.

Michelle Becker, who is a broker and owner of Maverick Realty, said the long-term rental market has tightened since the housing market recovered in 2010 and 2011 because increasing housing prices have driven many people who owned rentals to sell their second or third homes to investors.

“It has just steadily increased pressure because of those houses that were taken out of the rental pool,” Becker said.

While not all of the houses were in the rental market, many were, and that further displaces renters, she said.

Becker said the problem has gotten even worse because of an increase in the number of people wanting to rent in the community.

When a new rental is posted, Becker said she hears from people across the country, not just Park and Gallatin counties.

“It used to be that people moving here were relocating here for a job,” Becker said. “People don’t even talk about coming here because they secured employment. They talk about coming here because this is where they want to be, then they’ll find employment.”

Even two years ago, when HRDC conducted its most recent housing market study, the housing agency only found one vacant apartment. It found zero vacant apartments that were rentrestricted, for seniors or lowincome individuals or families. Waitlists for rent-controlled housing, the study found, were years long.

Effects on people

The rental crunch has real effects.

For senior citizens, it means years of waiting on an apartment to stay in the town they’ve always called home.

For business owners and local government, it means a shortage of qualified workers.

For domestic violence survivors, it means more time at a shelter, waiting for an apartment to open up.

Becky Byrd, executive director of the Park County Senior Citizens Center, said that the center’s wait list for its apartments is at least two years long, and many people come in weekly to inquire about housing.

County Planner Mike Inman said one side effect of the housing crunch has been an increase in the number of people finding alternative housing options, such as living in a tent or people turning garages into apartments.

Often, these housing arrangements aren’t up to code, Inman said, though the county generally only responds to complaints, not seeking out enforcement of these issues.

Inman said the problem extends well beyond Livingston — into Paradise Valley and Gardiner — and affordable housing was considered one issue that needs to be addressed in the county’s recent growth policy update.

He said the growth of vacation rentals in Gardiner makes it hard for employees of places like Xanterra and the Gardiner Public Schools.

“The short term rental market is huge, it puts a strain on month-to-month rentals,” Inman said. “Look at Gardiner and see what the long-term market is. The short-term rentals displace families that would otherwise be living there.”