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January 25, 2022

Residential construction permits in Portland down 82% since Green New Deal

Courtesy / Kevin O'Rourke Winchester Woods was the first development to fall under new, stricter affordability rules in Portland.

The Green New Deal, which mandates that certain new residential construction in Portland meet affordability requirements, has led to a dampening of development in the year since its passage.

In 2020, prior to the new inclusionary zoning provision, 756 residential units were put on the planning books. In the roughly one year since passing the provision in November 2020, only 139 units had been put on the books — a decrease of 81.6%, according to a study by the Boulos Co.

The three projects that are on the books in Portland include a 48-unit development called Winchester Woods in Portland’s East Deering neighborhood, as well as a 81-unit project at 45 Forest Ave. and a 10-unit development at 392 St. John St.

The Green New Deal requires that in developments of 10 or more units, 25% of those units must be affordable to people making 80% of the area median income. The rule applies to new construction, substantial rehab, adaptive reuse or conversion from nonresidential to residential use. 

The previous rule required 10% of new units to be workforce units and defined workforce units as affordable for households that earn 100% of the area median income. 

“The reason it was voted on was a very legitimate housing problem. Housing is a big issue. Voters hoped it would increase the amount of affordable housing but it ultimately led to fewer units altogether,” John Finegan, an associate with the Boulos Co., told Mainebiz.

Traditional workforce housing, which often uses subsidies and public financing, will continue to be developed unhindered by the new ordinance.

Developers also can choose to pay $150,000 per workforce unit to the city as an alternative to providing workforce units, known as a fee-in-lieu. As a result, luxury units can be more profitable because the $150,000 fee-in-lieu remains flat, regardless of the quality or sale value of the unit, the Boulos report said. 

Yarmouth-based developer Kevin O’Rourke, who is building Winchester Woods, previously told Mainebiz that two factors helped his project to be possible: the acquisition of the land at a low price and the development under a Planned Residential Unit Development provision, which gave him a 25% density bonus.

“The new [inclusionary zoning] provisions have not stopped new multifamily development in its tracks, but they have made it very difficult, and they are having a noticeable negative impact on the housing being built in Portland, a city hungry for housing,” the Boulos report said. 

“These developments take years. People will continue to see development going on, big cranes going up because those projects were already on the books before the referendum passed, but by 2023, 2024 there will be a noticeable decrease in development,” Finegan said. “Development will stop. There’s a two- to four-year pipeline in development projects and they’re already starting to dry up.”

Higher construction costs and labor costs also play a role, Finegan said.

Under the new rules, the maximum affordable rent must include electricity, heat, hot water, cooking energy, sewer, water, and trash collection. The current maximum affordable rents for workforce units are $1,189 a month for a studio apartment, $1,398 for a one-bedroom apartment and $1,598 for a two-bedroom apartment.

According to the Boulos report, Christine Grimando, director of Portland’s Department of Planning & Urban Development, cited one strategy deployed by developers to skirt the new provision is to reduce the scope of their projects. 

“For example, one multifamily project originally slated for 20-plus units is being redesigned as a nine-unit project, just below the threshold that triggers inclusionary zoning,” the Boulos report said. “This trend is resulting in less housing overall and no additional affordable housing being built in Portland. Other developers are actively working with the city, trying to find ways to bring forward housing proposals that can meet the current requirements. Unfortunately, most are finding it difficult to make the projects financially viable.” 

“The new requirements will likely reduce the number of both new workforce and market rate housing units in Portland. It is likely we will see an increase in smaller condo and apartment buildings where a larger multifamily might have otherwise been the highest and best use,” the Boulos report said.

For developments with 10 or more units, there are two viable routes: traditional workforce housing and luxury units. 

Cities and towns outside of Portland, where there are no inclusionary zoning provisions, are seeing a boom in development. 

“Neighboring towns like South Portland, Biddeford, and Westbrook are going through renaissance moments of their own now, and these new (inclusionary zoning) provisions may disperse some of the cash and intellectual capital that has had its eye on Portland,” the Boulos report said. “Inclusionary zoning may be the catalyst that spreads the previously Portland-based development across the state.”

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January 27, 2022

"For example, one multifamily project originally slated for 20-plus units is being redesigned as a nine-unit project, just below the threshold that triggers inclusionary zoning,” the Boulos report said - get it right, it's not stopping them from building, they are intentionally avoiding it. They could take steps to accept a little less profit but instead they choose, quite intentionally, to avoid housing working people.

January 26, 2022

The GND has also driven up the costs of all public projects. It has driven up the cost of Portland’s school renovations.

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