Montana’s new property tax reform was meant to bring clarity and relief after several volatile assessment cycles. Instead, a late-session drafting mistake has added new uncertainty, particularly for multifamily property owners.
As reported by the Missoulian, an error in the final version of the 2025 tax legislation unintentionally raised the tax rate on multifamily parcels from 1.35% to 1.89%. For many owners, that change translates to a sharp increase in this year’s tax bill. For larger assets valued above $1.5 million, portions may even be taxed at higher graduated rates.
While lawmakers have said the error will correct itself when the new tax structure takes full effect in 2026, that does not help owners facing 2025 bills that are already being mailed out. The impact will vary by property and jurisdiction, but owners should prepare for higher-than-projected expenses this cycle.
What Owners Can Expect
- Short-term cost pressure. Increased property taxes often lead to tighter margins, especially for stabilized assets with limited rent flexibility.
- Possible rent adjustments. Some landlords may choose to offset tax increases through modest rent changes, though market tolerance varies by submarket.
- Lender and valuation considerations. Changes to net operating income (NOI) can influence refinancing terms, sale valuations, and investor returns.
- Temporary nature. The rate adjustment is expected to revert in 2026, though it is unclear whether the Legislature will pursue refunds or credits for affected owners.
SterlingCRE’s Take
The recent spike in property tax bills for Montana’s multifamily owners adds another layer of pressure to a sector already navigating uneven conditions.
In markets like Bozeman, where vacancy rates have climbed and rent growth has slowed, it’s difficult to see how much more downward pressure rents can sustain as demand weakens further.
Missoula may have slightly more room to absorb the temporary shock. But even there, higher operating costs will test affordability as that added load will likely be passed through to tenants in the form of higher rents. For investors, these unexpected tax increases are unlikely to restore confidence in a market where enthusiasm had already begun to cool.
The result is a patchwork of conditions across the state with some areas absorbing the changes more easily than others. As the multifamily market continues to recalibrate after several years of rapid expansion and shifting fundamentals, this unforced error by the legislature makes the affordability picture more difficult to navigate in the near term.
Our team is monitoring how this affects valuations, deal flow, and rent growth expectations across the state. For now, owners should review their 2025 tax statements carefully, adjust operating budgets where needed, and consult with tax professionals to confirm how the rate applies to their specific holdings.
