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The funds allocated through MaineHousing can be used to hire homeless prevention specialists or provide direct financial assistance to help families.
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Portland's planning board approved the development, which also includes 20 income-restricted apartments and 48 other units that will be rented at market rates. It will be built in phases at the site of Portland's former Oxford Street shelter in the Bayside neighborhood.
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In his annual "state of the city" address, Portland Mayor Mark Dion said homelessness and public safety concerns are the top issues facing the city.
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Preble Street caseworkers say they found housing for 277 homeless veterans across the state within the last year, and 28 received a placement during the month of September alone.
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Maine currently has three Housing First properties, which includes 24/7 support services, and intends to open up more than a dozen additional sites around the state.
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The city aims to move the encampment's 73 residents into some form of housing, while keeping them connected to other resources.
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The first year of the project gave twenty single mothers $1,000 a month with no restrictions on how the money could be spent.
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The project will provide housing and 24-7 support services to residents, who have experienced chronic homelessness, or have struggled to stay in stable housing before.
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If passed, the measure would prevent municipalities with more than 20,000 residents from adopting moratoriums on emergency shelters. But critics contend that would be a violation of Maine's principle of "home rule."
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The warming shelter will be run by Kaydenz Kitchen Food Pantry on a nightly basis into early April.