The Cape Elizabeth Town Council has approved zoning changes that would allow a controversial affordable housing project to be built next door to the historic Town Hall and new Village Green.

The council voted 5-2 Wednesday for the zoning amendments needed to build Dunham Court, the first affordable housing project to come before town officials in 50 years.

Councilors Valerie Deveraux and Caitlin Jordan voted no.

The $13.5 million project still needs Planning Board approval and has yet to complete its financing scheme, including a Tax Increment Financing agreement with the town that would give the developer a $795,000 property tax break over 15 years. The council put off discussion of the TIF agreement to November.

The Szanton Co. of Portland wants to build the 46-unit project just off Ocean House Road (Route 77). The four-story building would include 35 one-bedroom, eight two-bedroom and three three-bedroom apartments. The project is being pitched as housing for workers, empty-nesters and others who can’t otherwise afford to live in this affluent seaside town.

Tenants in Cape Elizabeth need a median annual income of $92,000 to lease a two-bedroom apartment at the median price of about $2,300 per month including utilities, according to the Maine State Housing Authority. Prospective homeowners need a yearly household income of $174,000 to buy a median-price home of $625,000.

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Supporters of Dunham Court say the town center is exactly where an affordable housing project should be built, within walking distance of the local supermarket, pharmacy, public schools, community center, police and fire station and Thomas Memorial Library. Opponents don’t like the project’s location, size or financing, and they have threatened to gather signatures for a town referendum to block it.

With the zoning changes, Dunham Court could be built 10 feet taller than the 35-foot height limit in the town center. Other zoning amendments halved the amount of land needed per unit, more than doubled the allowable building footprint, and eliminated a requirement for first-floor commercial space.

Dunham Court’s financing would include $9.6 million borrowed through MaineHousing and $3.6 million in equity raised through the sale of federal low-income housing tax credits. Under a 15-year TIF agreement for the 46 units, the town would return 75 percent of an estimated $70,653 in new property tax revenue generated by the project, or about $52,990 annually. The Szanton Co. would use the tax rebate to pay the debt on Dunham Court.

If the project is approved, Dunham Court would be an energy-efficient building with a fitness center, community room for residents, free Wi-Fi, heat, hot water, parking, indoor bike storage and coin-operated laundry.

Thirty-seven apartments would be reserved for households below 60 percent of the area median income, which is $42,000 for one person, $48,000 for two people and $54,000 for three people. Nine apartments would be leased at market rate. Subsidized rents, made possible through government financing, would be $1,080 for one bedroom, $1,299 for two bedrooms and $1,495 for three bedrooms; market rents would be $1,495 for one bedroom and $1,695 for two bedrooms.

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