Members of Portland’s real estate community say a citywide referendum passed to promote affordable housing and green building is having a chilling effect on new development, but city officials say it’s unclear what has caused a slowdown in new projects and whether it will persist.

Housing projects can take years to plan, officials said, so it is too soon to know the “Green New Deal” referendum’s long-term impact. Other factors such as the coronavirus pandemic, the labor shortage and higher materials costs also make it difficult to draw conclusions, they said.

But developers say the sentiment among their community is that projects once aimed at Portland are likely to migrate elsewhere.

Portland has seen a decrease in the number of new residential projects proposed since the city’s Green New Deal referendum passed in November 2020, said Christine Grimando, the city’s director of planning and urban development.

Last year was a banner year for residential development in Portland. The city approved 921 new housing units, spread across 10 different projects – more than triple the 289 units approved in 2020, and almost double the 463 approved in 2019.

However, Grimando noted that the majority of those units – 792 of them – began the review process before the Green New Deal changes went into effect and so were subject to the previous regulations. Only 129 of the units were submitted or “put on the books” following the referendum

A recent report from Portland commercial real estate brokerage The Boulos Company, which cites similar but slightly different numbers, suggests that this represents an 82 percent decrease in new projects.

John Finegan, an associate broker at Boulos and author of the Green New Deal section of the report, said that because multifamily developments take so long to get underway, Portland residents will continue to see new housing construction well into 2022 and likely 2023.

Within a few years, though, he expects it to be a different story.

“The impact it’s having is kind of tragic,” Finegan said. “We’re living in a city that is starving for new development, but we’ve hamstrung the developers with so many rules that it’s making it damn near impossible to build.”

Grimando agreed that the changes may be deterring some new proposals, but said the 82 percent figure is somewhat skewed. Portland had a number of unusually large projects submitted in 2020, she said, with several proposing well over 100 units, so there was bound to be a sizable decrease following the referendum’s passage.

“In any year, even if the Green New Deal changes hadn’t come in, I wouldn’t expect that 921-unit number to just keep going,” she said. Previous years have seen closer to 400 or 500 new units.

OFFICIAL: ‘TIME WILL TELL’ 

The city’s Green New Deal, which primarily addresses energy efficiency standards for new construction, includes a new inclusionary zoning provision requiring that in developments of 10 or more units, at least 25 percent of them must be considered affordable or “workforce units.”

The rent cannot be more than what someone making 80 percent of the area’s median income can afford. That sets the maximum rent for a one-bedroom apartment at $1,398 per month and $1,598 per month for a two-bedroom unit, including utilities.

Developers also have the option to pay $150,000 per required workforce unit to the city as an alternative to including them. The funds are then used to subsidize affordable housing developments in the city.

Before the Green New Deal, 10 percent of new units were required to be workforce units, which had to be affordable to households earning 100 percent of the area’s median income.

Among other reasons, the referendum was passed to help alleviate Portland’s acute affordable housing crisis, but some real estate professionals say it’s having the opposite effect, causing developers to look to other towns where they can build more affordably and recoup their investments.

Because large residential projects take so long to go through the approval processes, submission and permitting can happen in different years, making the year-to-year comparisons somewhat misleading.

And because they take so long, it would take several more years to say whether new projects have stopped being proposed as a result of the ordinance.

It’s not possible to track what projects aren’t coming in, Grimando noted.

The costs for building materials and labor also are sky-high, causing some developers to put projects on hold until the market calms down.

“It does look like there’s some dropping-off as the year went on,” she said, “(but) exactly isolating how much and how much of a trend we have, it’s a little early to say … Time will tell if that is truly where the new trend line is.”

WILL BUILDERS WANDER?

Former Portland mayor Ethan Strimling is a proponent of the Green New Deal and said the changes are doing what they are designed to do: add more housing, particularly affordable units, that the city desperately needs.

Strimling said he’s not concerned about the decrease in project volume and argued that developers likely pushed out projects that were close to completion before the ordinance passed so they would fall under the old regulations. It will take a few years to see what the real impact is, he said, but Strimling expressed confidence that people will “still be building just as much as they always were.”

But Jonathan Culley, managing partner of Redfern Properties in Portland, said he and other developers may have to start looking elsewhere for places to build.

NewHeight Redfern is working through plans to turn Northern Light Mercy Hospital’s building on State Street in Portland into 165 residential units. Brianna Soukup/Staff Photographer, file

Redfern has three projects underway in Portland, which cumulatively make up more than half of the 921 units approved in 2021. Two of those were permitted before the changes: an 18-story project with 263 apartments at 201 Federal St., and redevelopment of the former Northern Light Mercy Hospital at 144 State St. into 165 apartments.

Culley said the third project, 81 units at 45 Forest Ave., was only possible because he will be able to recoup a lot of his investment through historic tax credits.

“Ground-up apartment construction is not viable with the 25 percent workforce housing (requirement),” he said. “Unfortunately, what this is likely to do is cause developers to focus outside of Portland city limits.”

Developers do seem to be taking note of the potential in other southern Maine towns.

According to the Boulos report, there is a 336-unit apartment complex going up in Saco, and the Lincoln Lofts redevelopment project will add 148 units in Biddeford.

Officials in Westbrook and South Portland both said that development efforts in their cities – in terms of both developer interest and submitted applications – have been steady or increasing.

But that doesn’t necessarily mean local developers are ready to discard Portland.

According to Grimando, the city is still seeing “significant” quantities of development applications, and the number of building permit applications has remained high.