Josh Mackey

After Josh Mackey had a difficult time finding an apartment in Portland, he expanded his search to South Portland, where he’s a gym manager, and as far south as Saco. He ended up at a one-bedroom in Portland’s West End, above, but only after expressing his frustrations to a gym member who happened to be a Portland landlord. “I feel like I got lucky,” Mackey said. ​

 

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osh Mackey wanted to be a step ahead of the competition in June when he went to an open house for a rundown one-bedroom apartment in Portland’s West End.

After losing other apartments for not acting quickly enough, he was ready to write an $1,800 check for first and last months’ rent. Then another man handed the landlord a wad of money.

“The place was a mob scene,” Mackey recalled. “This guy had first and last in cash. When other people have money in their hands, you don’t have a chance.”

The experience would help lead Mackey to the same conclusion as many others frustrated by Portland’s competitive rental market: It was time to look outside the city.

Mackey expanded his search to South Portland, where he’s a gym manager, and as far south as Saco. Many others are looking to Westbrook and Biddeford.

What they’re finding beyond the city limits are housing developers and communities working to take advantage of the Portland market by appealing to renters priced out of the city.

The ripple effect is stretching the housing supply and driving up rents in South Portland, right next door, where city officials are tweeking downtown zoning to encourage multifamily housing development.

It’s also helping to fuel the revitalization of downtown Biddeford, a half-hour away, where new apartments in former textile mills are being leased as soon as developers complete them. In both Biddeford and South Portland, neighborhoods previously overlooked or considered undesirable appear to be benefiting from Portland’s boom.

“Many people who work in Portland are saying they’re willing to commute from Biddeford,” said Bethany Siemen, property management director of The Mill at Saco Falls, a 66-unit apartment building in Biddeford. A heated one-bedroom unit goes for about $925 a month in The Mill, about $300 less than similar properties in Portland by the same developer, The Szanton Co.

“And it’s not just the cost. It’s the availabilty,” Siemen said. “I just signed a tenant today who said they felt lucky because they had been looking for a place in Portland for six months.”

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he influence of Portland’s hot housing market is apparent across the Fore River in South Portland, where real estate watchers say apartments that were renting for $950 a month in January were going for $1,150 a month by July. Apartments with views of Portland Harbor or Casco Bay are going for $1,500 to $2,000 a month, depending on amenities.

“We’re the closest neighbors, so we’re pretty much in lock step with Portland,” said Michel Duvernay, a landlord and property manager who oversees 20 leased condominiums on South Portland’s waterfront.

Duvernay, who is a board member of the Southern Maine Landlord Association, pegs South Portland’s rental occupancy rate at less than 1 percent – far below the 5 percent to 7 percent that experts say gives tenants enough choice in cost, quality and location. The most recent U.S. Census information available backs him up, showing a 0.0 rental vacancy rate in South Portland in the five-year period ending in 2013.

South Portland’s rental rates started increasing significantly a few years ago, according to the American Community Survey’s five-year estimates for 2009 and 2013. Median gross rent in the city – gross rent includes the cost of heat and utilities – increased 16.2 percent, from $881 to $1,024 per month, while the statewide median gross rent increased 11 percent, from $688 to $764 per month.

The actual cost for market-rate apartments tends to be higher than U.S. Census gross rents because the federal survey includes subsidized units.

During that period, the number of renter-occupied housing units in South Portland increased from 3,880 to 4,176, likely reflecting the growing number of condominiums and single-family homes that are being leased, as well as some new construction.

More recently, short-term rentals, such as those offered through the website airbnb.com, are reducing the overall number of rentals available in certain neighborhoods and likely contributing to the increasing cost of long-term rentals. Short-term rentals are an attractive prospect considering that landlords can charge $175 to $245 per night for a house or apartment in one of the city’s waterfront neighborhoods.

The trend is forcing South Portland officials to consider proposing ordinances to at least control the behavior of short-term tenants in otherwise long-term residential neighborhoods, said Tex Haeuser, the city’s planning and development director.

“It’s a phenomenon that is removing rents from the market for short-term visitors,” Haeuser said. “We know it’s growing because we’re starting to get complaints where owners aren’t there and the place turns into a party place.”

View of Portland

A cyclist bikes along the Greenbelt Walkway in South Portland with Portland in the background. Portland’s tight housing market has forced some renters to expand their search to nearby communities.

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outh Portland officials have noticed and responded to the growing demand for housing in the city’s more urban and waterfront neighborhoods, especially the abutting Knightville and Mill Creek areas.

The city retooled Knightville’s zoning after the Casco Bay Bridge opened in 1997 and diverted traffic from Portland directly onto Broadway, beyond Ocean Street and Waterman Drive. The move converted the drive-through downtown into a quiet waterfront neighborhood that in recent years has attracted a variety of residential and commercial development, including apartments, condominiums, specialty shops and a planned brewery.

This year the city updated Mill Creek’s master plan, hoping that property owners eventually will replace 1960s-style shopping plazas with a more attractive, walkable, livable mixed-use urban village that includes apartments and condos above street-level businesses.

Haeuser and others increasingly view the Knightville and Mill Creek neighborhoods as an extension of Portland’s popular Old Port area, right across the Fore River. City officials are promoting the idea with developers as far away as Boston, but Mill Creek property owners have yet to express interest in a neighborhood renaissance despite the opportunities spilling over from Portland.

“The market demand is there, but none of the property owners has said they’re ready to act on it,” Haeuser said.

Some developers are looking to capitalize on the demand elsewhere in South Portland, but multifamily housing development has had its challenges.

Last year the City Council rejected a proposal for a 32-unit multifamily project on 2.5 acres at 590 Highland Ave., near the high school, because the project was considered too dense. And Hardypond Construction of Portland dropped plans to develop multifamily housing on 6.5 acres at the end of Summit Terrace, off Broadway near Southern Maine Community College, after neighborhood meetings drew sustained opposition.

“Even where there are pockets left for development, it’s pretty difficult to get community support,” Haeuser said. “A lot of us don’t like density, but what about our kids? Where are they going to live?”

Some smaller proposals have had an easier time winning community approval.

Gorham Sand & Gravel recently won the Planning Board’s OK to build a five-unit complex on a vacant lot at the end of Sunset Avenue in South Portland, where a much larger proposal was stymied by neighborhood opposition about a decade ago.

Westbrook is another rental destination for tenants who are priced out of Portland, although the impact there so far is harder to see. The median monthly gross rent there increased a more modest 11 percent, in line with the state average, from $788 in 2009 to $875 in 2013, according to the American Community Survey.

Brit Vitalius, a Portland-area real estate broker who specializes in multifamily properties, believes Westbrook’s proximity to Portland makes it ripe for a renaissance similar to Jamaica Plain, a Boston neighborhood that was revitalized in the 1980s and 1990s. But while there’s strong interest in South Portland, where the inventory of two- to four-unit properties is relatively low, similar properties in Westbrook tend to sit on the market for a while.

“I keep saying Westbrook is the next Jamaica Plain, but it hasn’t happened yet,” Vitalius said.

Still, some major rental housing developments are planned west of Portland, potentially tapping into the real estate ripple effect.

Risbara Bros. Construction of Scarborough won approval in June to build 98 market-rate apartments as part of a massive housing project off Spring Street in Westbrook. The $30 million, 37-acre project includes 53 single-family and duplex homes and 32 condos.

And farther to the west in Windham, Hardypond Construction has submitted a proposal to redevelop a former mill complex that would bring 109 apartments to the village area of South Windham. Rents would range from about $750 to $1,000 a month, with more expensive apartments offering views of the Presumpscot River.

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he ripple effect is more measurable in Biddeford’s old mill district along the Saco River, the site of several recent housing projects.

The median monthly gross rent in that city also increased 11 percent in recent years, from $756 in 2009 to $839 in 2013, according to the federal survey.

Pleasant Point in Downeast Maine

Since 2010, 413 apartments have been built, planned or proposed in the former factory buildings, along with more than 100 small businesses, including specialty manufacturers, service providers, a few restaurants and a brewery.

The tally of apartments includes 238 market-rate units, 104 subsidized, income-restricted units and 71 senior housing units, said Daniel Stevenson, Biddeford’s economic and community development director. There are long waiting lists for the existing 166 units, and new apartments are leased as soon as they’re built.

“All units that have come online in the mill district are at 100 percent occupancy,” Stevenson said. “And there’s huge demand for units that are being built or planned.”

Much like Portland, rents in the mill district are attracting people who are downsizing, moving back to urban centers and seeking community amenities such as the Amtrak train station right next door, nearby ocean access and walkable shopping and dining out, Stevenson said.

The spinoff effects of Portland’s tight housing market are coming at an opportune time for Biddeford.

Municipal officials decided in 2012 to spend $6.7 million to buy and shut down the Maine Energy Recovery Co. trash-burning plant at the edge of the mill district, immediately making apartments in the district more enticing. Downtown Biddeford is reaping the benefits as boutique retail businesses and restaurants open along Main Street, taking advantage of the $20,000 spent locally each year by each household in the mill district.

“Closing Maine Energy changed everything,” said Doug Sanford, a developer whose company has built 100 luxury and standard market-rate apartments within the Pepperell Mill Campus.

Sanford had a list of more than 500 people waiting for his apartments in August. They feature high ceilings, exposed brick and expansive river views. Rents range from $900 a month for a standard studio to $2,200 for a luxury two-bedroom unit, and all include heat, electricity, cable television and high-speed Internet access.

Similar demand is buoying rents next door at The Mill at Saco Falls, an 1845 brick factory where The Szanton Co. has built a combination of market-rate and federally subsidized workforce housing. Rents include heat, solar hot water, wifi Internet access and a fitness center.

The Mill had 42 households on a waiting list for 66 units in August, confirming the need for Szanton’s ongoing construction of 80 additional units. And some of the demand is definitely coming from Portland.

“Five of those 42 households have current addresses in Portland,” said Siemen, The Mill’s property management director.

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fter months of searching and almost giving up, Josh Mackey’s apartment quest came full circle. Mackey mentioned his frustrating search to a gym member where he works at Anytime Fitness in South Portland. The man happened to be a landlord who owns several apartment buildings in Portland, and he showed Mackey a few units that would be available in September. Mackey settled on a one-bedroom in Portland’s West End – less than 2 miles from the gym – that costs $1,000 a month, including heat and off-street parking.

After a long, worrisome search, it was a personal conversation that allowed Mackey to stay in Portland.

“I knew I wanted to be closer to work,” he said. “I feel like I got lucky.”

But luck remains in short supply for many looking for rents in Portland these days.

Jenique Tairne, 39, faced a similar challenge after the West End apartment building where she lived with her husband and two young children was sold. When the lease on their two-bedroom unit ran out, the new owners increased the rent from $1,395 to $2,000 per month.

Tairne, a homemaker, searched high and low for another apartment in Portland, then expanded her hunt to surrounding communities. She made multiple calls each day, often getting responses to only one or two of them.

Many affordable rentals were rundown and seemed unsafe. “I would say (to others), ‘Don’t even try to rent here,’ ” Tairne said.

Finally, she and her husband found an apartment in a two-family on a quiet dead-end street in Westbrook for $1,150 per month, excluding utilities.

Initially, Tairne wasn’t excited to move to Westbrook. She never thought she’d want to live there and it increased her husband’s commute to his information technology job in Portland. But her housing priorities have changed.

“We are all settled and happy,” Tairne said. “It’s such a relief to have a safe place to live right now.”