Developers are planning to renovate 465 Congress St. in Portland to create 63 residential units, one of several housing projects approved in the city last year. Derek Davis/Staff Photographer

Portland’s annual housing report released this week shows that the planning board has approved more projects than ever and has surpassed its housing production goals set a few years ago, but that completion of these projects seems to be slowing.

Developers and affordable housing proponents who spoke with the Press Herald disagree over why that’s happening.

According to the report, 1,281 units were approved in 2023, and of those, only 26 have been built. Another 570 units that were approved in previous years were also completed in 2023.

Some developers and the Portland Regional Chamber of Commerce say that the inclusionary zoning requirements passed in 2020 under the Green New Deal have made it difficult to build in Portland. Others, including former mayor Ethan Strimling, say that the slow completion rates are nothing abnormal.

While everyone who spoke to the Press Herald agreed that changing economic conditions, such as rising interest rates or challenges in converting a building, can slow completion, opponents of the inclusionary zoning requirements said they are largely to blame.

“We’ve got to focus on what’s actually been built, not what’s been approved,” said Jonathan Culley, the managing partner for Redfern Properties, which has several active developments in the city. “And on page 19 of the report, it says that only two (inclusionary zoning) projects have been delivered in the four years since the Green New Deal.”

“So it’s absolutely had a dampening effect on housing production,” he said.

Jonathan Culley, managing partner of Redfern Properties, at The Casco, an 18-story apartment building in Portland that recently opened. Derek Davis/Staff Photographer

One of those projects, an 81-unit development at 45 Forest Ave., was completed by Redfern.

The Green New Deal requires 25% of the units in developments of 10 or more to be affordable or “workforce units,” meaning that they cost no more than 80% of the area median income. Developers can also opt out and pay a fee of $150,000 per unit to the Portland Housing Trust Fund, which subsidizes affordable housing.

But even four years later, it may still be too early to say how much the deal has affected development.

APPROVED UNITS GROW

Eamonn Dundon, the director of advocacy at the Portland chamber, said in an interview Thursday morning that many of the completed projects received approval before the Green New Deal requirements went into place.

“Those units had pending proceeding status,” Dundon said. “Those were the projects that got in their application before the 25% inclusionary zoning (rule) became effective.”

According to the report, the planning board approved seven projects since 2021 that were submitted before the regulations took effect, and therefore were exempt. Just six projects have been beholden to the deal, but only two have been completed, including 45 Forest Ave.

Another 15 applications approved since the deal passed were exempt because they had fewer than 10 units.

The city’s planning board approved a plan last year to covert office space at 511 Congress St. in Portland into 107 apartments. Derek Davis/Staff Photographer

Strimling rejects the idea that inclusionary zoning is slowing down development, saying that more units have been completed in the last few years than ever.

“Every year the chamber of commerce claims inclusionary zoning and rent control are killing housing in Portland. There is just no data to show that. You look at these numbers and, literally, we have more housing in the last three and a half years than we did in the four years before the Green New Deal and rent control,” Strimling said.

The housing report shows 1,281 units were approved last year, the highest amount since at least 2010, coming in a close second place was 2015 when 1,225 units were approved (though only 785 have actually been built).

Some think that because of the new rules, developers are deliberately building smaller projects, paying the fee to opt out, or pivoting their plans entirely.

Last month, developers that were slated to develop long-term residential housing on York Street opted instead to build a hotel. Dundon sees this as an example of how the inclusionary zoning requirements discourage housing development.

“York Street is a good example, because they were going to build 14 units of housing, but to do that, they were going to have to pay $666,000 in fee-in-lieu if they didn’t provide the (workforce) units onsite,” Dundon said. “Switching to a hotel, you have to pay $66,000. So it’s a huge deal, and unfortunately, it’s what our ordinances currently incentivize.”

Some say that renters are taking on the costs of building workforce units or paying the fee-in-lieu, not the developers, according to John Finegan, a broker at commercial real estate brokerage The Boulos Company.

“If you’re lumping up a (large) fee-in-lieu charge, all that does is increase what those developers have to sell for,” Finegan said.

At least two developments approved by the board last year are planning to pay those fees: one on Fore Street will pay over $2 million, and another on Congress Street will pay $2.7 million. Others are finding creative ways to work within the rules.

CREATIVE SOLUTIONS

Redfern Properties is currently planning a 324-unit project on Washington Avenue (pending a zoning change).

Culley said the project is a “creative solution” to the question of how developers can afford to build with the requirements in place.

“The project that we’re proposing would be the biggest workforce housing development, certainly since this ordinance and maybe in this century. And there are three ways that we’re doing it,” Culley said. “So we get benefits of scale, 324 units. Two, we’re building much smaller apartments, so we can get the price lower. And three, we’re doing minimal parking, because parking is sort of a cost drag.”

Strimling says this is exactly the kind of project that proponents of the inclusionary zoning requirements set out to achieve in 2020.

“Jonathan Culley said, ‘I’m building more units in order to get the density that I need in order to meet inclusionary zoning’ – That is good on every level, right?” Strimling said in a phone interview Thursday. “That means we’re getting more units across the board, more affordable units, and more market-rate units. How in the world is that negative?”

The city has approved building 140 new housing units in the Time & Temperature building at 477 Congress St. Derek Davis/Staff Photographer

Culley, who declined to say what he thinks about the requirements, conceded that Strimling is right, but emphasized that it’s impossible to know what housing is not being built because of the requirements.

Finegan, the Boulos broker, said that developers have an incentive to build in towns neighboring Portland.

‘Let’s say you have two side-by-side towns, which are identical in every way. The only difference is that one town says that you have to make 25% of your units affordable to 80% of the area median income, or pay a pretty hefty fee-in-lieu, and the town next door doesn’t,” Finegan said. “All these for-profit developers are simply going to go and build in this town that doesn’t have that red tape.”

Strimling, however, believes that it’s important to focus on how much affordable housing is being built in Portland, not just housing in general.

“Are there other developers who have gone to other towns because they can make more money off their rental housing in those towns? I’m sure that’s correct,” Strimling said. “Are they … gentrifying other communities and building luxury housing that is not going to help solve the affordable housing crisis? For sure. What we need in the city of Portland is affordable housing.”