Portland mulls doubling affordable housing fee for hotel projects

Hotel under construction at 215 Commercial St. in Portland.

File Photo / Tina Fischer A 15-room boutique hotel at 215 Commercial St. in Portland was assessed a Hotel Inclusionary Zoning fee totaling $70,380.

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By Tina Fischer

A proposed hike in the city of Portland's controversial hotel development fee is on the agenda for the city's Planning Board meeting Tuesday night.

The board will review a recommendation from the City Council's four-member Housing and Economic Development Committee to raise the fee charged to developers who choose not to build affordable rental housing in the city, from the current fine of $4,831 per guest room to $9,520 per room.

In early 2019, the city implemented the Hotel Inclusionary Zoning Fee to encourage developers of new and expanding hospitality builds to also build one unit of affordable housing for every 28 hotel rooms in a project. (Properties with fewer than 10 rooms are excluded.)

The fee is assessed only if a developer chooses to opt out of the requirement. Since the ordinance was enacted, not a single developer has answered the call; instead, developers have paid the fine, sometimes known as a linkage fee. Many cities use linkage fees to offset the impact of new development.

The money goes into Portland’s housing trust fund and is used to help defray the cost of affordable housing projects.

Development pipeline

There have been no new hotel projects approved since a moratorium went into effect in December 2024, but 15 projects were granted approvals prior to the suspension.

Three of the projects are not subject to the fee, and five have been built, adding 242 rooms and contributing $920,975 to the housing trust fund.

The city estimates that if all 12 of the approved projects subject to the fee were built, they would add 1,010 hotel rooms to Portland and contribute $4.5 million to the fund’s coffers.

Brandon Mazer, planning board chair, told Mainebiz that it’s not yet entirely clear though, how each of those projects might be affected by a fee hike.

“There are some pending projects that [the proposed fee increase] may or may not affect," he said.

The purpose of the original fee ordinance was to help address the affordable housing shortage. The city has said the pace of hotel development between 2012 and 2018 exacerbated the housing crunch by adding lower-wage jobs and by usurping properties that could have supported affordable apartment projects.

The increased fine is proposed to better reflect the cost of building housing, which has risen dramatically in the past few years. The Planning Board is charged with making a recommendation to the City Council, which will have the final say on the proposal.

The Planning Board meeting, at City Hall and online, is set to begin Tuesday, Sept. 23, at 5:30 p.m.