New Portland Housing Rule Aims to Curb Rising Rents

Oct 23, 2015

PORTLAND, Maine — The city has imposed a new requirement aimed at ensuring middle-income earners don't get squeezed out of the increasingly expensive housing market.

The inclusionary zoning rule, as it's called, will mandate that developers of large projects make at least 10 percent of the units available at a cheaper price.

Opponents, however, fear the measure will actually drive up property prices and act as a chill on investment in Maine's biggest city.

This is the sound of Portland's property boom — heavy construction equipment lays the foundation for what will be a multimillion dollar, 53-apartment complex due to open next summer in the east Bayside neighborhood.

Under the new rule, which takes effect next month, the developer of a project of this size would be required to ensure that at least five of those housing units are affordable to middle-income earners, or pay a penalty of $100,000 per unit.

Portland Mayor Michael Brennan says the measure is needed because Portland has such a tight housing market.

"Sixty percent of people in the city of Portland rent, and right now we have anywhere from 0 to 2 percent vacancy rate," he says.

The city describes middle-income earners as those with an annual household income of between about $78,000 and $97,000. An affordable rent is described as up to 30 percent of income.

Construction on an apartment complex in east Bayside.
Credit Tom Porter / MPBN

Brennan says this kind of "inclusionary zoning" is crucial in making sure that ordinary people have the opportunity to both live and work in the city.

"We've had a lot of development in the city and it's been very positive for the city, and we're continuing to want to grow as a city, but we also want to have equitable development so as we're moving forward we don't leave anybody behind," he says.

"There is a well-documented, significant gap between the median housing price being produced and the median income of the city," says city councilor Kevin Donoghue, who introduced the inclusionary zoning amendment.

Donaghue says the housing that is being produced in Portland — especially on the downtown peninsula — is "unfathomably expensive" compared to what most working Mainers earn.

"This is a step that's necessary to ensure that this luxury boom yields some housing for people who work for a living," he says.

But the city council was not unanimous in its support of the new rule.

"The inclusionary zoning proposal goes far beyond what government ought to do to encourage the development of affordable housing," says David Brenerman, one of the two council members who voted against the rule.

While he supports the development of affordable housing, he says if it's mandated by ordinance there will be unintended consequences.

A point echoed by Chris Hall of the Portland Regional Chamber of Commerce.

"Inclusionary zoning makes it more expensive to build affordable housing," he says.

Hall says that imposing what is effectively a tax on property developers will only make housing more expensive for most people.

And even though the new rule does contain added incentives for developers — allowing them to build higher, for example — he's worried it will discourage the building of more homes in the city.

"We want more housing, we know it's a problem," Hall says. "But we're just not sure government regulation is the right way to get there."

Portland property developer Jim Brady voiced similar concerns at Monday night's council meeting.

"The ultimate long-term effect is we will have less housing at higher cost, and there are plenty of examples around the country, including San Francisco, that have experienced exactly that scenario," he says.

But Not all property developers are opposed to inclusionary zoning.

"We think it will not will have a negative effect on development," says Dana Totman, president of Avesta Housing, a nonprofit developer of affordable housing. "It will simply allow some that development to serve people of more modest means."

According to one estimate, rents in Portland have risen by more than 17 percent since last year.