Portland hires planning firm to study controversial Inclusionary Zoning ordinance

A proposed apartment building in Portland

RENDERING / COURTESY REDFERN PROPERTIES A 327-unit apartment building planned for Washington Ave. is one of multiple housing projects on hold pending revision of the city's 'IZ' ordinance.

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By Tina Fischer

Portland’s Inclusionary Zoning ordinance, which developers say has curtailed new housing construction in the city, is now under review by an outside planning firm. The city has contracted with national planning firm CZB, which has offices in Bath, as well as western New York and Colorado.

Approved by voter referendum in 2020, the ordinance mandates that all housing projects with 10 units or more commit 25% of the units to lower- to middle-income households or pay an in-lieu fee of $182,830 per unit.

With rising construction and financing costs, the ‘IZ fee’ has made many projects unaffordable for developers. A number of approved projects — which could create hundreds of units of housing for Maine’s largest city — have been paused, due in large part to costs imposed by the ordinance.

The project is being funded through a $50,000 state Housing Opportunity Program grant and is expected to take four months to complete.

The issue was the subject of an Eggs & Issues panel discussion Nov. 6, hosted by the Portland Regional Chamber of Commerce. At that time Redfern Properties developer Jonathan Culley said his company has approvals for more than 800 housing units — on Washington Avenue and on Kennebec Street in Bayside — that he has put on hold due to current economic conditions.

Culley said the 327-unit Tavata complex planned for 165 Washington Ave. is a prime example of the ordinance’s constraints on development. Under the current fee structure, Redfern would have to pay “$15 million to the city right off the bat” in fees, to build that project, Culley said.

Redfern has built numerous apartment and condominium projects in Portland, the most recent of which is the 263-unit, 18-story Casco apartment building at 201 Federal St.

City planning director Kevin Kraft said since 2020, Portland has given the go-ahead for over 45 separate housing projects. This year alone approvals have been issued for 1,300 units.

Culley predicted that without changes to the IZ ordinance, few projects will be built in 2026 and 2027.

The IZ ordinance was originally adopted in 2015 and at that time required 10% of units in new housing developments to be affordable to households earning at or below 100% of the area median income. In 2020, Portland voters altered the ordinance to mandate that 25% of new units must be affordable to households earning no more than 80% of the area median income.

Because the 2020 referendum was adopted by referendum, the city has been barred from making changes to the ordinance for five years.

Kraft told Mainebiz that the review by CZB is focused on the IZ ordinance for housing construction only, not the IZ rule for new hotel construction. In early November Portland City Council voted to nearly double the fee that developers are assessed in lieu of building affordable housing, from $4,831 to $9,520 per guest room.

There had been a moratorium in effect on the construction of new hotels, which ended in November.