The Portland City Council voted Monday to strengthen rules designed to prevent the loss of housing units in neighborhoods throughout the city.

The changes were made to the city’s housing replacement ordinance, with requires developers to replace housing units that are converted into offices or other uses, or pay into the city’s affordable-housing fund.

Over the years, developers have found ways around the ordinance by investing in upscale housing in different neighborhoods from where low-income housing was removed, or avoiding the fees or replacement rule altogether. The penalty for failing to replace a housing unit is $64,200 per unit.

Mayor Ethan Strimling said the original ordinance contained too many loopholes and exemptions, allowing developers to circumvent its intent.

“This is hopefully going to keep the housing in communities that need them, or put money into our housing trust fund that will help build the housing we need,” Strimling said after the council passed the changes.

Originally adopted in 2002, the ordinance was amended in 2011 to eliminate a loophole that helped one developer avoid paying $2.5 million. In that case, 54 low-income, single-room apartments at the Eastland Hotel were converted into luxury hotel rooms.

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

The replacement clause has been used for only one project. Two triple-deckers, with 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., in the hot real estate market of Munjoy Hill.

Under the rules adopted by the council Monday, developers must replace any lost housing units within the same U.S. Census tract, or within 1,500 feet of the lost unit. The replacement requirement or fee will also apply to any housing unit that is demolished or vacant for more than three years, unless that occurs for reasons beyond the owner’s control, such as a fire or natural disaster.

It will also limit the time a developer has to replace a housing unit.

Planning and Urban Development Director Jeff Levine said the city has accepted letters of credit from developers who have promised to rebuild on sites where housing was demolished. “You can’t have the city hold a letter of credit indefinitely,” he said.

The council action is the latest initiative to address the city’s housing shortage, which was detailed in a six-part series published in November by the Maine Sunday Telegram.

Other policies include relaxed zoning requirements on the peninsula and a requirement that 10 percent of the units in developments of 10 units or more be affordable to middle-income families.

Also Monday, the council added parking restrictions on several streets to prevent workers at Maine Medical Center and other businesses from parking their vehicles there all day. The changes will cost the city $1,600 for new signs and staff time.

The spaces, which previously had no time limit, will be restricted to one and two hours in an effort to promote more turnover. The changes affect portions of St. John, Valley and Congress streets.

City Manager Jon Jennings said there are other issues to address in that neighborhood, but dealing with the parking is “a good first step.”

In other action Monday, the council set a Feb. 1 public hearing on a $29.7 million bond to rebuild Hall Elementary School, all but $1.4 million of which would be paid for by the state. The council will hold a workshop Jan. 11 to discuss the details.

Randy Billings can be contacted at 791-6346 or at:

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