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Real estate industry decries Portland’s ‘Green New Deal’ as a stifling new development – WMTW Portland

A full year after Portland’s Green New Deal went into effect with the goal of spurring sustainable, affordable housing, real estate developers, supported by new data, say it’s been a raw deal for them that has backfired.The Green New Deal was one of five referenda Portland voters approved in November 2020, and while it set environmental and labor standards for new housing, developers are quarreling with the economic ones.The new rules, which apply to any new building with 10 or more units, require 25% of the apartments to be rented below market price, up from 10% before the referendum took effect.In addition, the rent for those “affordable” units must be no higher than what someone earning 80% of the area’s median income can afford, down from 100% before the referendum.John Finegan, an associate with the Boulos Company, a real estate brokerage, wrote a report finding the rules have had a chilling effect.”It has slowed down incredibly the amount of new multi-family developments,” Finegan said in an interview Thursday. “This development, which has historically been centered in Portland, is now moving out.”Data from the city’s Planning and Urban Development Department shows 921 new units were approved for construction in 2021 — 792 reviewed before the rules took effect and 129 afterward, an 84% decline.Finegan said, “We have a city that is desperate for housing, and if we can’t build it, rents going to keep going up, new developments are simply not going to happen.” There are only three active new apartment projects subject to Portland’s new rules. One, called Winchester Woods, will be comprised of 48 units on three acres of vacant land in the city’s East Deering neighborhood. Developer Kevin O’Rourke said Thursday he’s been able to move forward only because the land was “extremely inexpensive,” and because the city permitted him to build four buildings on the site instead of three, increasing capacity and revenue by 25%.Otherwise, O’Rourke said, the Green New Deal has “put the brakes” on development.Another pending project is Redfern’s conversion of a six-story, 1913 telephone company building on Forest Avenue to 81 rental apartments.Developer Jonathan Culley said Thursday he could pull it off only because of federal and state tax rebates for renovating a historical building. “Ground-up development is dead,” Culley said. Ten months ago, he predicted, “It is probably safe to assume that you are going to see less rental housing created in the near future than you have in the recent past.”Another planned project, on St. John Street, will yield only 10 new units when it moves forward.Gary Vogel, a real estate attorney with Drummond Woodsum, who serves on the board of the Maine Real Estate & Development Association (MEREDA) said other developers have shelved Portland projects and are pursuing opportunities in other Southern Maine cities.Vogel said lower projected rental revenues, combined with increased construction material and labor costs and the spike in Portland land values, had scared off not only developers, but also the lenders and investors who finance their projects.“So, when they look at the expenses compared to revenue they’re going to get, the revenue shrinks,” Finnegan said. “We’re not going to feel the results walking around the city until 2023, 2024, when there’s no new cranes going up and no new housing being built.”

A full year after Portland’s Green New Deal went into effect with the goal of spurring sustainable, affordable housing, real estate developers, supported by new data, say it’s been a raw deal for them that has backfired.

The Green New Deal was one of five referenda Portland voters approved in November 2020, and while it set environmental and labor standards for new housing, developers are quarreling with the economic ones.

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The new rules, which apply to any new building with 10 or more units, require 25% of the apartments to be rented below market price, up from 10% before the referendum took effect.

In addition, the rent for those “affordable” units must be no higher than what someone earning 80% of the area’s median income can afford, down from 100% before the referendum.

John Finegan, an associate with the Boulos Company, a real estate brokerage, wrote a report finding the rules have had a chilling effect.

“It has slowed down incredibly the amount of new multi-family developments,” Finegan said in an interview Thursday. “This development, which has historically been centered in Portland, is now moving out.”

Data from the city’s Planning and Urban Development Department shows 921 new units were approved for construction in 2021 — 792 reviewed before the rules took effect and 129 afterward, an 84% decline.

Finegan said, “We have a city that is desperate for housing, and if we can’t build it, rents going to keep going up, new developments are simply not going to happen.”

There are only three active new apartment projects subject to Portland’s new rules.

One, called Winchester Woods, will be comprised of 48 units on three acres of vacant land in the city’s East Deering neighborhood.

Developer Kevin O’Rourke said Thursday he’s been able to move forward only because the land was “extremely inexpensive,” and because the city permitted him to build four buildings on the site instead of three, increasing capacity and revenue by 25%.

Otherwise, O’Rourke said, the Green New Deal has “put the brakes” on development.
Another pending project is Redfern’s conversion of a six-story, 1913 telephone company building on Forest Avenue to 81 rental apartments.

Developer Jonathan Culley said Thursday he could pull it off only because of federal and state tax rebates for renovating a historical building.

“Ground-up development is dead,” Culley said. Ten months ago, he predicted, “It is probably safe to assume that you are going to see less rental housing created in the near future than you have in the recent past.”

Another planned project, on St. John Street, will yield only 10 new units when it moves forward.

Gary Vogel, a real estate attorney with Drummond Woodsum, who serves on the board of the Maine Real Estate & Development Association (MEREDA) said other developers have shelved Portland projects and are pursuing opportunities in other Southern Maine cities.

Vogel said lower projected rental revenues, combined with increased construction material and labor costs and the spike in Portland land values, had scared off not only developers, but also the lenders and investors who finance their projects.

“So, when they look at the expenses compared to revenue they’re going to get, the revenue shrinks,” Finnegan said. “We’re not going to feel the results walking around the city until 2023, 2024, when there’s no new cranes going up and no new housing being built.”

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