A Portland nonprofit is seeking approval to demolish a small house on the border of the city’s East End and Munjoy Hill neighborhoods to build a four-story apartment complex for low-income residents.

Avesta Housing’s 18-unit proposal is part of a growing number of housing projects in a city with a notoriously tight rental market, especially for people at the lower end of the income spectrum. Greg Payne, development officer with Avesta, said the property at 134 Washington Ave. was selected because it is a large lot located on the peninsula close to services and shopping.

“It is directly in front of a bus stop, and that is important for folks to get around,” Payne said. “And it has a lovely view of the cove.”

Located on the boundary line between the East Bayside and East End neighborhoods, Washington Avenue is a mixed neighborhood of single-family homes, houses divided into apartments and businesses ranging from auto shops to photography and pottery studios.

Avesta purchased the single-family home in May 2013 and recently received approval for low-income housing tax credits from MaineHousing.

Avesta’s application to the Portland Planning Division proposes a $1.7 million building featuring 18 efficiency apartments, each measuring approximately 340 square feet. Standing 44 feet tall, the four-story apartment building would be one of the tallest structures in the mixed-use neighborhood at the base of Munjoy Hill.

Payne said Avesta plans to work with partner organizations to market the apartments to veterans, a group with higher rates of homelessness or housing insecurity. That approach is modeled after Avesta’s Oak Street Lofts project, which opened in January 2012 and was marketed toward artists in a section of town bustling with art galleries and studios but limited options for low-income artists.

Eight of the 18 units would be reserved for households earning 50 percent or less of the average median income – or less than $27,300 for one person, according to federal data – while the remaining 10 would be for those earning 40 percent or less.

The company’s application states that the Oak Street Lofts project showed there was “immense demand for efficiency apartments in the $525-$675/month range, which is affordable for many low-income workers but in extremely short supply in the Portland area.”

“We want to make sure the housing we are building is the type of housing that people need and are looking for,” Payne added.

The average rent for a studio apartment (including heat) in Portland in 2012 was $695 a month while a one-bedroom apartment was $875 a month, according to annual surveys conducted by the Maine Real Estate Development Association. Those averages were 17.5 percent and 10 percent higher, respectively, than in 2010.

According to the U.S. Department of Housing and Urban Development, the “fair market” rent for an efficiency apartment in Portland this year is $688. The fair market rent for one-bedroom and two-bedroom apartments is $819 and $1,012, respectively.

But price is not the only potential obstacle for those seeking rental housing. Availability has become a major concern in recent years.

A 7 percent vacancy rate is considered healthy for rental housing. Portland’s vacancy rate has been hovering around 2 percent.

“That really amounts to a housing crisis, and the people this really hurts are the low-income folks,” said Mark Adelson, executive director at the Portland Housing Authority, which administers Section 8 and other federal housing assistance programs in the city.

But Adelson noted that for the first time in 20 years developers have begun building new “market rate” apartment complexes – apartments where rents are not subsidized – precisely because the rising rental rates mean the owner can recoup building and financing costs. And that is important, Adelson said, because adding new rental units at all income levels helps to moderate the overall price.

Kevin Miller can be contacted at 317-6256 or at:

kmiller@pressherald.com