Maine needs 84,000 new homes by 2030. This housing project shows why that will be difficult
A recent study found Maine needs at least 84,000 new homes of all kinds by the end of the decade to meet current and future demand.
The need to build more housing — particularly homes that are affordable to low- and middle-income Mainers — has been a running theme in conversations throughout the state about resolving chronic homelessness, addressing workforce shortages and welcoming asylum seekers.
But the housing production goals are daunting, developers say, because the process is increasingly complex, slow and expensive.
To illustrate why, Maine Public visited one affordable housing development in Portland and spoke with the developers who conceived of and completed the project, along with a few residents who live there now.
Phoenix Flats, a 45-unit apartment building on the corner of Franklin and Middle streets, took about $16 million, roughly a dozen funding sources and four years to complete, opening last June.
The studio and one-bedroom apartments are primarily reserved for older people and people with disabilities. And through an agreement with the city of Portland, 13 units are set aside for those who have been living at local homeless shelters for six months or longer.
Saa Rosenblatt answers the door of her Phoenix Flats apartment dressed from head to toe in pink.
"This is the living room, which has a unicorn feel," said Rosenblatt, who begins a tour of her one-bedroom apartment. "You see the big unicorn right here on the table."
Each room had its own theme. She calls the kitchen the "rainbow room." In the bathroom, there are strawberry decals everywhere — on the walls, on the vanity and on the shower curtain.
"Last but not least, Barbie room!" said Rosenblatt, pointing to her bedroom.
Rosenblatt had some of these decorations before moving here, but she kept most of them packed away in boxes.
"Because I didn't have a place to call home," she said. "I was always staying places, never felt comfortable."
Rosenblatt said she's lived in six different places since moving to Maine six years ago. She has a disability and said that has often made it more difficult over the years to juggle multiple jobs and maintain stable housing. She said she was bullied at her last apartment in Old Orchard Beach and worked with a local housing authority to find a new place.
Eventually, she made the top of the waiting list for Phoenix Flats.
All of the apartments are restricted to households making between $41,000 and $57,000, and 13 units are set aside for those who have been staying at the Portland homeless shelter for six months or longer.
"There were times where I was really excited, and then there were times when I was like, 'This is never going to happen,'" said Weston Arthur Hurd, who became homeless after a recent hurricane.
He had been living in New Orleans and eventually made his way to Portland, where he had been homeless once before.
He first landed at the Oxford Street shelter and then in one of the hotels that the city of Portland had been using to shelter unhoused people during the pandemic. Hurd said he and his caseworker started applying for affordable housing right away. He heard that a new development, Phoenix Flats, would open by the time the hotel program was supposed to end last March.
But the new building wasn't ready then. And with no other place to go, Hurd was moved to the Homeless Services Center, which had just opened on the city's outskirts.
"It felt very institutional," he said of the homeless shelter. I've never been to prison. But to me, a prison where you could have free of range of walking, that's what it felt like."
It was difficult to rest or have his own schedule inside the shelter. And Hurd said there wasn't much to do but wait.
He had been waiting for nearly six months, when his caseworker told him that the apartments were ready.
"And you're going to be one of the first people in the building," Hurd recalled. "I was like, 'Yes. Thank you, thank you, thank you, thank you.'"
The Portland-based nonprofit Community Housing of Maine, which developed Phoenix Flats, acknowledged that construction setbacks meant that Hurd and others waited longer to leave the homeless shelter.
When the project was initially contemplated back in 2019, the plans called for a 13-month build.
But construction took nearly twice as long as anticipated, due to labor shortages and delays in receiving certain building materials because of pandemic-related supply chain issues. Electrical switch gear, for example, arrived one year later than expected, said Brian Kilgallen, a development officer for Community Housing of Maine.
Construction timelines have improved but are still longer compared to pre-pandemic days, Kilgallen said.
Before the developers can put a shovel in the ground, they must spend months designing the building, setting up utility connections and completing environmental testing. They must prepare presentations and apply for municipal permits and grants.
Applying for financing is a time-consuming puzzle on its own, partly due to the sheer number of funding sources that these projects require. Kilgallen said it's a matter of meeting certain deadlines at specific times of the year, and potentially trying again one year later if a deadline is missed or you're not approved.
This process, known as "pre-development," usually takes about two years for most projects, Kilgallen said.
Then, there's usually something unexpected that comes up and delays the project. Kilgallen said the state required the developers to do a minor archaeological dig at Phoenix Flats, because an old privy was found on site while the soil was being tested.
Phoenix Flats is an affordable housing project, which means that most occupants are paying no more than 30% of their income on rent.
The federal government sets specific income thresholds, known as the area median income, or AMI, and maximum rent levels to ensure that households of varying sizes are not spending more than 30% on housing.
The rents vary depending on the size of the household, their income, and the size of the home.
To put that into perspective, for a two-person household earning 50% of the area median income, or $47,350 a year in Portland, rent for a one-bedroom apartment at Phoenix Flats can't exceed $1,110 a month.
For a one-person household that makes 60% of the AMI, or $49,740 a year in Portland, maximum monthly rent for that same one-bedroom apartment would be $1,332 a month.
The challenge for developers is that each apartment at Phoenix Flats cost $323,612 to build. And it's not easy to make a return or break even, because the monthly rent for these apartments is capped.
The capped rents are well below what developers would need to charge if there were no affordability clauses tied to those apartments and no subsidies to help them pay for the cost of building.
Otherwise, developers would need to take out a traditional construction loan at a bank, and they would need to charge high enough rents to pay back that loan, plus interest, and potentially turn a profit.
"That’s the reason why the rents in Portland are considerably higher," Kilgallen said. "All of the new construction rents that you’re seeing out there now are upwards of $3,000 apiece."
But to make these income-restricted projects work, developers must cobble together a variety of funding sources to subsidize the costs of building.
The funding sources
All told, it cost about $16 million to develop Phoenix Flats from start to finish, and it took about 12 different sources to finance the project directly or keep the land acquisition, development and maintenance costs down.
More than half of the funds for the project came from federal and state tax credit programs.
The federal Low Income Housing Tax Credit, created back in 1986, is the primary way that affordable housing is financed today in the United States.
The federal government allocates credits to each state depending on its population size. In Maine, MaineHousing is responsible for allocating tax credits to developers for approved income-restricted, affordable housing projects. Developers then sell these tax credits to private investors and receive funds in return that are used to pay for the project.
Phoenix Flats received $6.4 million through the federal program and $2.8 million through the Maine Affordable Housing Tax Credit, a state program that the Legislature enacted back in 2019.
The remaining funds came in the form of a loan and subsidy from MaineHousing and a few different grants through the city of Portland. There are also funds from Efficiency Maine, because the building meets Passive House energy efficiency standards.
Community Housing of Maine put its own loan into the project, and Phoenix Flats also received an interest-deferred, amortizing loan from a bank.
In addition, there were a few indirect sources that helped keep the costs down. The land itself was free through donations from the city of Portland and a private landowner.
There's also commercial space on the first floor of the building. A restaurant will take over that space, and will eventually pay rent to Community Housing of Maine.
Chipping away at Maine's housing production goals
The 45 new apartments at Phoenix Flats was a small part of the 680 new units of affordable housing that Maine added in 2023.
The state added more new homes last year than in 2022, when just 156 new affordable units were created, according to MaineHousing.
Developers and state officials say the cost of constructing new buildings and the complexity of securing enough funds to subsidize these projects are creating the conditions where Maine is slowly chipping away at its housing goals, a few dozen apartments at a time.
And unfortunately, the Phoenix Flats story is not particularly unique.
The nonprofit developer Avesta Housing opened Porter Station in Portland late last year. That project took four years, about eight different funding sources and roughly $21 million to develop 60 mixed-income apartments.
Community Housing of Maine has two more properties on the former Mercy Hospital campus that are expected to open later this year. Kilgallen said those projects have similar price tags, and will each produce about 40-50 apartments.
According to MaineHousing data, nearly 800 new units are under construction now. That will help, but last year's housing production study suggested most municipalities need to double the number of new homes that they're building to meet the goal of adding 84,000 new homes by the end of the decade.
"There’s not a better way to do it, at least that we have," Kilgallen said. "It would be cheaper, it would be less expensive, if there was a direct subsidy from either the state or federal government that simply paid the money directly into the development."
But direct subsidies from the federal government went away as tool to develop affordable housing in 1980s. And though direct federal subsidies were perhaps more expedient and less complex than what developers are working with now, there was often a stigma to the "public housing" that was built decades ago.
But Kilgallen said he believes those negative perceptions are beginning to ease, especially when local residents see what affordable housing projects are being built today.
"We try to create as few barriers to housing as we possibly can for people, and to get them into housing, really stable housing, so that they can start to grow and really succeed," Kilgallen said.
For Phoenix Flats resident Weston Hurd, he said he's getting reestablished now that he has a place of his own. Finding work again is a priority, he said. And he likes that he can walk to the library or to Portland pub gatherings where he's starting to meet people again.
"There's a lot of things that, when you become homeless, people don't realize that you have to put by the wayside," Hurd said. "Your whole social life is thrown awry."
Saa Rosenblatt said she's getting reestablished too.
"I have never been able to say, 'This is home,' or felt so happy to come into an apartment," she said. "My brain is able to think better. I'm not as depressed as I used to be."
It took a few days, but Rosenblatt said she eventually felt comfortable enough to unpack the boxes she had been carrying with her from place to place.
And of course, she decorated.