Midsize cities in the western U.S. are facing a housing crunch.

Home prices are outpacing wage growth, and renters are having trouble keeping up. Residents are particularly feeling the squeeze in places like Missoula, Montana, where the urban area’s median housing sales price recently hit a record $305,000.

Housing costs are so rising quickly in Missoula because of “remarkable growth” in the economy and population, says Eran Pehan, director of Housing and Community Development for the city of Missoula.

“We're seeing young families to retirees — really more than half of our community — that can't afford to participate in the increasingly expensive housing market. And a lot of that comes down to housing supply,” she says. “Part of what makes this community so attractive is that we are surrounded by picturesque mountain ranges and rivers, open space that really limits our ability to grow.”

The tech sector is booming in Missoula, which has brought new residents and high-paying jobs, Pehan says. But that also means there are more people seeking housing faster than the city can build homes for them to live in.

“Also, folks who can come in and put down a cash offer pay above appraised value for a home,” she says, “and we're seeing that inflate the market as it inflates appraisals for all the surrounding homes.”

Pehan, who grew up in Montana, says the state — and particularly the city of Missoula — has “changed dramatically” over the past few years. She chalks that up to the idea of “being found.”

“We are on the map as a place that provides just an exceptional quality of life,” Pehan says.

The nature of work is also changing, which means people can live and work remotely in Missoula for a company based in a larger city like San Francisco, she says. But these workers are still being paid at a higher cost of living, giving them disposable income that they would otherwise have to spend on rent if they lived in San Francisco.

“I think that we're seeing a lot of folks fleeing more urban environments to live in a place like Missoula,” Pehan says. “And while their work is not place based, their salary reflects that urban environment. And again, [that's] something that is dramatically impacting our housing market.”

Pehan says the city needs to evolve, but in a way that accommodates people of all income levels.

“The reality is, right now in Missoula, you are allowed to knock down a relatively small, affordable home and build a mansion,” she says. “All we're saying is that in addition to being able to build a mansion, perhaps you should also be able to build a duplex or a tiny home to allow for some more affordable options as well.”

In the next three years, the city is working on developing 300 permanently affordable rental homes, Pehan says.

The city will pay for those homes through federal programs, like the low-income housing tax credit, and other local investments, she says. One of those developments is being funded through a four-acre land grant by Missoula County.

“At the end of the day, Missoula prides itself in being a working-class community, and we want to maintain those working-class roots,” Pehan says. “In a town our size, that is significant and that moves the needle, and helps us to live our value of inclusivity.”

Chris Bentley produced and edited this interview for broadcast with Todd Mundt. Samantha Raphelson adapted it for the web.