A bill in the Legislature to direct $80 million to affordable housing projects has the potential to double the number of units built over the next four years, supporters of the measure say.

Rep. Ryan Fecteau, sponsor of the affordable-housing bill, says, “This is really taking a hammer to the top of the iceberg. We have a lot more work to do.”

The proposed law would provide state income tax breaks to trigger investment in new low-income housing projects, a crucial incentive to ease Maine’s affordable housing crisis.

The full text of the bill has not been released, but at least 30 percent of the new units would be reserved for seniors and 20 percent would be built in rural areas. About 10 percent of the funding would preserve existing subsidized housing in rural areas.

Even if the proposal passes, it will have only a limited impact on a worsening problem, said Rep. Ryan Fecteau, D-Biddeford, assistant House majority leader and sponsor of the bill.

“Quite frankly, it is not enough,” said Fecteau, whose bill would provide state tax credits worth $20 million a year for four years to investors in affordable housing.

There are about 52 available housing units for every 100 extremely low-income families in the state, according to the Maine Affordable Housing Coalition. That means only half the need is being met for those who earn up to 30 percent of the median income.

“We have immense need in the state for affordable housing,” Fecteau said. “This is really taking a hammer to the top of the iceberg. We have a lot more work to do.”

The proposed bill would offer investors refundable credits – or tax breaks – on their income tax for investing in new housing projects. The public subsidy would trigger federal tax credits available to private affordable housing developers.

LEVERAGING FEDERAL DOLLARS

At least 14 other states offer tax incentives for affordable housing. If passed, it will be the first low-income housing state tax credit in Maine, said Greg Payne, director of the Maine Affordable Housing Coalition.

Affordable means that a household is not spending more than 30 percent of its income on housing expenses. As an example, a single person earning 80 percent of the Portland area’s median income would make $50,350 a year and be able to afford a maximum monthly rent of about $1,250 a month. In Lewiston, a single person making $35,800 could afford a one-bedroom apartment for $958 a month.

Federal low-income housing tax credits are used in nearly all affordable housing projects. Most developers rely on high-value credits that cover three-quarters of the cost of a project, leaving them to borrow 15 percent and find another 10 percent in the form of government grants or another subsidy. But those credits are doled out to states every year based on population and get used up fast, leaving more housing projects than there are credits to pay for them, said Payne, who also is the development officer for Avesta Housing, one of Maine’s biggest low-income housing developers and managers.

“The opportunity to build more quality, affordable housing to address the need is so limited because the resources to address it just aren’t there,” Payne said.

There are lower-value affordable housing tax credits available from the federal government, but those pay for only about a third of new construction. That means even if developers borrow 15 percent, they still will seek a public source to pay for 50 percent of the cost, like a bond, grants, or tax breaks like those envisioned in the bill.

A $20 million annual affordable housing tax credit could help pay for 250 new units a year, about 1,000 new homes over the four-year program, Payne estimates. That would double the number of new low-income homes built in Maine.

“We are left in this place where we can sit back and be passive and allow the existing system to produce this woefully insufficient number of new units a year, or we can be proactive to leverage new federal dollars and do something about it,” Payne said.

MOVING THE NEEDLE

Extremely low-income households, those that make only 30 percent of the median income, are especially vulnerable. Statewide, there are more than 32,000 families on waiting lists for housing.

And the need is spiking.

Applications to get into Avesta apartments grew 32 percent in the last five years, from 3,067 in 2014 to 4,046 last year, while the number of people moving into new housing has stayed almost flat, between 340 and 437 a year.

Developers who take on affordable housing projects usually cobble together federal tax credits with state grants, loans and other incentives like historic preservation tax credits, said Kevin Bunker, a Portland developer. Incentives provided to attract investment to projects don’t provide nearly the return that market-rate or luxury housing projects would.

While a state tax credit could spur more housing construction, it won’t solve the affordability problem, Bunker said.

“From the perspective of the amount of units we are building now to the amount we could build, it will absolutely move the needle,” Bunker said. “But doing that with the overall need, it is too big for us to meet.”

With a desperate need statewide, lawmakers may be receptive to a new incentive scheme said Sen. Matt Pouliot, R-Augusta. Pouliot has submitted his own affordable housing bill, but said he would likely withdraw it and co-sponsor Fecteau’s proposal.

“I think it is a great step forward for us in Maine to provide additional incentives for developers to create more affordable housing in the state,” Pouliot said.

A different tax credit proposal was passed by the taxation committee with near-unanimous support last year, but died between houses.

In one of her early acts as chief executive, Democratic Gov. Janet Mills released a $15 million state borrowing package last month to pay for 200 new units of affordable housing for seniors. The bonds were approved by voters in 2015 but withheld by the previous administration of Republican Gov. Paul LePage.

The city of Portland recently proposed that any new hotel development also subsidize the building of affordable housing to provide residences for its workers.

“The majority of the state suffers from a lack of affordable, quality housing and the waitlists continue to grow,” Pouliot said.

“Essentially, the point is there is broad, bipartisan support for this effort to address affordable, high-quality housing in the state of Maine.”

Peter McGuire can be contacted at 791-6325 or at:

[email protected]

Twitter: PeteL_McGuire

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