The rapid rise of monthly rents in Portland could be slowing down, according to the city’s largest market-rate landlord.

But the construction of new apartments needed to ease the region’s rental housing shortage could soon slow down, too, said the city’s busiest housing developer.

Tom Watson, owner of Port Property Management, and Jonathan Culley, developer and owner of Redfern Properties, spoke Wednesday at the Portland Regional Chamber of Commerce’s monthly business forum, Eggs & Issues.

They sat on a panel along with Tuck O’Brien, the city’s planning director, and Dick Barringer, a professor at the University of Southern Maine’s Muskie School of Public Service, that discussed the future of rental housing in Portland. The event, held at Holiday Inn By the Bay, was attended by more than 400 people.

The Portland Press Herald published a weeklong series in the fall on the shortage of apartments and rising cost of rents. The report, called “Welcome to Portland: No Vacancy,” found that the prices of apartments being offered for rent in the city had risen 40 percent over the past five years, while renter incomes had fallen during the same period. The average renter household would have to spend nearly 60 percent of its income to afford the median cost of a two-bedroom apartment in the city, according to the newspaper’s analysis. People who spend more than 30 percent of their income on housing are considered cost-burdened.

Watson, whose company owns or manages at least 800 apartments in the city, said his company’s rents went up 9 percent last year, while the industry standard was a 3 percent increase, and they had gone up an average of 6 percent annually for the past five years. He said rents are now leveling off, at least for the short term.

“Our feeling is that the rents have been pushed enough,” he said.

Culley, who recently built the city’s first new market-rate apartment complex in decades, agreed, saying his tenants won’t pay any more this year than they did last year.

However, the panelists also agreed that new housing construction is needed in and around the city to ease the shortage and stabilize rent prices in the long term. Hundreds of housing units are now in the pipeline, but Culley warned that the pace of construction may taper off.

The slower rent growth, along with rising construction costs due to a shortage of labor, is creating a situation where new construction projects aren’t viable, said Culley, who also has apartment buildings under construction in East Bayside and on Congress Street.

Despite the demand for apartments in Portland, he said, the $1,500 rent for a one-bedroom that would have to be charged to justify a new project is $600 more than what most residents want to pay.

Renovating old, run-down and often bug-infested buildings also forces landlords to increase rents, Watson said. In order to make back the cost of upgrading a $1,000 apartment in seven years, he said, he would have to increase the rent to $1,250 a month.

The practice of upgrading aging apartment buildings has recently displaced many low-income tenants from their apartments, forcing them to look for new housing in a tight market. Some landlords have said that the buildings they’re upgrading do not meet city code standards and should not be inhabited, though city officials have disagreed.

Barringer, the professor, and O’Brien, the city planner, said they would like to see more housing built off the peninsula – along Marginal Way and Brighton Avenue or around Woodfords Corner.

But Culley said the zoning wouldn’t accommodate an apartment complex in Woodfords Corner, not to mention the inevitable opposition from neighbors.

“Everyone who tries to do something seems to get sued,” he said.

And until there’s enough density in those off-peninsula neighborhoods, there’s no reason to create effective public transportation, which is a major factor in making those areas more appealing, said Barringer.

Unless there’s a greater appetite for living in those areas, Culley said, building there is not worth the risk.

An increase in job creation, however, could change that.

“We’d all feel better about building if we saw an office tower going up downtown,” he said.

 

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