Let's Focus on Property Tax Solutions Not Political Soundbites

Montana is facing a growing housing crisis, driven by an influx of out-of-state home buyers and telecommuters. This is pushing up prices, making it difficult for Montanans to find affordable housing, and increasing residential property taxes.

A solution I propose for consideration is to change the way property taxes are calculated for vacation homes and short-term rentals. Currently, all residential properties are taxed at the same rate, regardless of whether they are owner-occupied, rented out long-term, rented out short-term, or vacation homes. Proponents of this tax change argue that vacation homes and short-term rentals should be taxed at a higher rate to reflect the fact that they place a greater burden on community resources. This money would be used to lower taxes on owner occupied homes and long-term rentals.

However, a major tax change would take time to implement and would require public support. In the meantime, the 2023 legislature authorized two $675 property tax rebates per owner dwelling. Given that most Counties and Cities lowered their mills (kudos to them), this 370 million in rebates will completely negate property tax increases on the average Montanans’ home for the next two years.

Some now propose lowering the 95-school equity mills the state collects and redistributes to local schools as a solution. First a brief history: The 95 statewide school equity mills exist because the state lost a lawsuit for failing to meet Montana's Constitutional requirement that "equality of educational opportunity is guaranteed to each person of the state". These mills redistribute money from wealthier school districts where few students live to lower the taxes of the very residents and homes in lower tax value school districts where students do live.

Lowering the 95 mils would have numerous negative consequences. First, it would likely lead to a court injunction, as schools would have little option other than to file a lawsuit to protect their equity funding. Second, even if the court did not grant an injunction, lowering the equity mills would over time shift the burden of funding schools to local property taxpayers who live in active school districts. This would disproportionately harm Montana families and children while benefiting vacation homes, short term rentals, powerlines, pipelines, and railroads.

Ultimately, the best solution to Montana's housing crisis is a comprehensive approach that includes both tax changes and other measures to increase the supply of affordable housing. However, any real solution will take time and commitment. Soundbites might be good for election fodder, but real solutions require careful planning and execution.

The Montana property tax system is complex. There is no easy solution to the problem of vacation homes and short-term rentals driving up housing costs. It is time to have a thoughtful and informed discussion about this issue in order to find the best way to protect the interests of all Montanans.