Confronted with a housing shortage and rising rents, Portland officials are looking to beef up an ordinance aimed at preserving the number of housing units in the city, while also generating revenue for other affordable and workforce housing projects.

On Tuesday, the Planning Board will consider changes to the city’s Housing Replacement Ordinance, which is designed to discourage property owners from converting residential buildings to nonresidential uses, and if they do, require them to pay into a development fund.

“We’re attempting to close any loopholes that skirt its intent,” said outgoing City Councilor Kevin Donoghue, who has made housing issues a centerpiece of his three terms on the council.

A loophole in the original ordinance that allowed a developer to avoid paying $2.5 million in fees was closed in 2011.

The additional changes would require apartments that are lost to be replaced in the same general neighborhood, as defined by U.S. Census tracts, within three years. Another change would deem housing units that have been vacant for at least three years to be a “loss of (a) dwelling unit,” unless that unit has been condemned due to circumstances beyond the owner’s control.

The board is charged with sending a recommendation to the City Council, which will have the final say.


Jeff Levine, the city’s planning and urban development director, said the city is looking to clarify the ordinance rules, since some property owners hope to fulfill the requirement to replace housing units simply by “piggybacking” on other proposed developments. The new rules would make clear that the person eliminating housing units would have to have a comparable ownership stake in the new development.

“There is a need to clarify the rules under which units are actual replacements and not simply housing that may have been developed elsewhere in the city regardless,” Levine said in a Nov. 24 memo to board members.

Chris O’Neil, a lobbyist for the Portland Community Chamber of Commerce, said the business group has historically opposed the ordinance. If the council insists on keeping the rule, it should eliminate all exemptions and drop the per unit fee to a “reasonable” level of around $15,000, said O’Neil, conceding it’s unlikely his idea would get adopted.

“So many times over the years, the rule has been invoked and the entity that is eliminating units of housing gets out of it,” O’Neil said. “It’s the chamber’s opinion, there’s probably a good reason to get out of it.”

Adopted in 2002, the Housing Replacement Ordinance was largely ineffective until 2011, when the City Council clarified that the rules also applied to renovations of existing buildings and not exclusively to demolitions or rebuilds.

That loophole allowed Ohio-based Rockbridge Capital to avoid paying an estimated $2.5 million for the loss of 54 single-room apartments when renovating the former Eastland Hotel into the Westin Portland Harborview Hotel.


In 2009, a project at 660 Congress St. also was granted a waiver for $406,000 in fees, but the project never moved forward.

Other projects have been waived administratively.

Levine said the ordinance is typically used to require developers to pay into the city’s Housing Trust Fund, which is used to encourage housing built for middle-income and low-income families. The replacement cost, which is tied to inflation, is currently $64,200 for every lost unit. The city can use those funds for a wider array of projects than it can with federal funds.

According to the city’s housing staff, developers have paid nearly $1.1 million into the Housing Trust Fund for removing housing units. More than $600,000 has been allocated for housing projects. Most recently, the trust funds were used to help finance 65 Munjoy St., an eight-unit affordable homeownership project.

Only one project has utilized the replacement clause, Levine said. Two triple-deckers, consisting of six units, were removed from the India Street neighborhood by hedge fund manager and philanthropist S. Donald Sussman. Rather than pay for the lost units, Sussman partnered in the development of a luxury condominium development at 118 Congress St. on the sizzling hot real estate market of Munjoy Hill.

The change is the latest policy proposal seeking to address Portland’s housing crisis, which was the subject of a monthslong reporting project by the Portland Press Herald/Maine Sunday Telegram. The city has tried to streamline its permitting process and relaxed some zoning and parking requirements to promote residential development on the peninsula. It is considering offering some city land to developers who want to build middle-income housing.

Levine said the ordinance only applies to a change of use in existing residential buildings. Instances where property owners reduce the total number of units by increasing the size of the units are not covered by the rules, he said.


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