WATERVILLE — As the city pushes to increase the number of owner-occupied homes, the recent development of more subsized senior housing downtown has some local landlords worried that they can’t compete.
At places such the Gerald Hotel Senior Housing in Fairfield, Gilman Place in Waterville, and now the St. Francis Apartments on Elm Street, subsidies and tax incentive programs allow non-profit groups and developers to invest thousands of dollars more in construction or renovation of rental units, which are then offered for lease at below-market rates.
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Landlords say they when they invest their own money into rental housing, they struggle to keep pace, sometimes losing potential tenants to modern buildings developed with the help of government subsidies.
On Tuesday, the city’s TIF Advisory Committee will meet to decide whether the city should create a tax incentive financing district around the St. Francis Apartments under construction on Elm Street. The panel’s recommendation will be weighed by the City Council, which will determine whether to grant the break.
A TIF allows investors in a designated project or neighborhoods get a break on property taxes produced through their investments, with a percentage of that money going back to the developer for a limited amount of time and also channeling tax revenue from a particular project into ongoing economic development programs.
The Portland developer consulting on an additional 18 units of low-income housing to the 40 already under development at the St. Francis complex told the the panel last week the project’s expansion won’t be possible without the tax break.
The first, 40-unit, phase of the complex is being built on the site of the former St. Francis de Sales Church, by Dicon, a construction company owned by the Roman Catholic Diocese of Portland. The diocese borrowed federal Housing and Urban Development money to build the project, which is owned by a corporation set up by the diocese, and potential renters must qualify under HUD standards, including income guidelines.
While the proposal for the second phase — the 18 units proposed by Developer’s Collaborative, which developed the Gilman School project in Waterville — has already been approved by the city Planning Board, some city officials question whether there is a need for more subsidized public housing and whether granting the tax break is in line with the city’s goals.
“It is a really tiny project, but what it’s really about is our priorities and incentivizing the type of development we want to see,” said Erik Thomas, a member of the TIF Advisory Committee and the Ward 4 member of the city council. “That’s what TIFs are for — they are a tool for the city to prioritize the type of projects they want to do.”
OWNER-OCCUPIED GOAL
According to the draft of the city’s 2014 comprehensive plan, one of the city’s goals in the coming year is to increase the number of owner-occupied homes.
Owner-owned housing is generally favored in communities, because people who own their own homes are more inclined to stay in a community longer, creating more stable neighborhoods, according to Frank O’Hara, vice president of Planning Decisions, an urban planning research firm with offices in Portland, Hallowell and York.
In Waterville, 46 percent of households are occupied by people who own them, according to the most recent U.S. Census, which estimated the city’s 2013 population at 15,962. The average in Maine is 72 percent. In Augusta, with a population of 18,793,54 percent of units were owner-occupied. The census also shows that the Waterville lags behind the state in both gross yearly and median income, and the poverty level was 19.1 percent at the time of the census, compared to the state’s 13.3 percent.
“We’ve made it a priority that we want more owner-occupied properties in Waterville, whether that is single-family homes or somebody living in a duplex, living in one unit and renting out another,” said Thomas. “The question is where does this development fit into that?”
Eleven percent of housing units are vacant in the city, which means that there is no need to build more housing, according to Lindsey Burrill, president of the Central Maine Apartment Owners Association, a landlords’ group.
“There is no lack of housing in Waterville. If we were in need of housing, all our units would be full, people would be fighting over them and prices would be going up,” said Burrill, whose family owns about 300 rental properties in Fairfield, Oakland and Waterville through its company, Brown House Properties.
The struggle for landlords lies in not being able to compete with developers and non-profit organizations that can apply for federal and state money and grants to invest in their buildings and as a result can often offer them for below market-rate rents.
For example, Fairfield’s Gerald Senior Residence, which opened in November at the site of the former Gerald Hotel, underwent a $6.5 million renovation, a price that averages to an investment of about $232,000 per unit in the 28-apartment building. Tenants must make between $15,000 and $22,300 per year to qualify for a one-bedroom apartment, and rent is between $500 and $600 depending on income.
“It is unattainable, I think, for myself to own a building that nice and offer it for that price,” Burrill said. “As much as I can appreciate how beautiful it is, how safe it most likely will be and how happy the residents will be living there, it’s something that as a landlord I could never offer at that price.
“So it’s a little frustrating, especially since there is no housing deficit,” she said. “People who say there is no affordable housing are creating a problem.”
Gregg Perkins, owner of Perkins Leasing and Management and Affiliated Realty, said the increase in affordable housing units built or renovated with some sort of subsidy has increased competition in the housing market. His company manages about 140 units in Waterville.
“These are projects that are often developed with taxpayer money and tax-credit structured deals and they’re turning out these beautiful new apartments for low income,” said Perkins. “Of course any tenant would love to move into a building like that and then the local guy with three or four unit buildings, he can’t compete with brand new construction like that.”
At the same time, Perkins said he has noticed an increase in the number of tenants who are paying for their apartments with government assistance. But, he noted that the same economy that is making it harder for people to pay their rent also makes it harder for landlords to make upgrades.
SAFE AND NICE
The city has its own system of checks and balances to keep buildings safe and up to a certain standard, but living in a building that is safe can be different from living in a building that is nice, said Thomas.
“Being up to code and being nice are two different things,” he said. “There are people with jobs who are struggling to pay their bills and they want a nice place to live just like everyone else. That’s what these programs are designed to do.”
In central Maine, including Augusta and Waterville, a lot of the rental housing is in older homes, and a lot of it is not in good condition, said O’Hara.
“I think it’s good to give renters a choice,” he said. “It could help landlords to fix their houses up and become more competitive, but on the other side of the coin there are places people just don’t want to live. Generally speaking, its good to have some more up-to-date housing available because it makes the community as a whole more attractive to live in.”
The St. Francis developer is seeking a tax break that would return about half of the property tax revenue generated by their investment in the project over the next 30 years.
The city would still keep some of the taxes collected, but must manage how many TIF districts are created to remain within limits set by state law. A municipality is not allowed to place property exceeding five percent of either total land acreage or total property valuation in TIF districts.
The TIF program generates money for a range of programs in the city and is sometimes used to give a tax break to investors who make investments in projects and businesses that advance city economic development goals. Waterville has eight TIF districts
Gemma French, 61, of Madison, said she has been thinking of moving to Waterville and plans to apply for an apartment when St. Francis opens. Construction is still underway on the first phase of the building, although it was originally projected to be completed in July.
French will turn 62 next year and meets income requirements, collecting $1,085 per month in Social Security. She c pays $375 per month with heat included at her Madison apartment, and has been in the same apartment, which she found through a friend, for 11 years.
“There’s always a need for that, no matter what town you’re in,” she said. “There’s a lot of people out there who would really love to get in to a place like that and kick back with the rest of the old folks and just quietly live.”
Rachel Ohm — 612-2368
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