Drop in fuel costs helping landlords

By Abigail Curtis, BDN Staff
Posted Oct. 29, 2008, at 11:55 p.m.

BANGOR, Maine — Mainers may be breathing a sigh of relief as they spend less money to fill up their gas and oil tanks, but one segment of the population is even more grateful for the declining costs of fuel: landlords who own fixed-income housing properties.

“The oil prices are averting a crisis,” said Kurtis Marsh, the president of the Greater Bangor Apartment Owners & Managers Association. “The prices have started to go down and I think that’s probably saved us from the worst.”

The crisis Marsh is referring to is a simple mathematics equation that has threatened area landlords who rent to fixed-income tenants. The price of heating oil shot up precipitously over the last year, but Section 8 landlords and the public housing authorities that manage them cannot charge their tenants more money to make up the difference.

Section 8 is a federal rental voucher program that is intended to expand affordable housing options for very low-income households by allowing families to choose privately owned rental housing. Tenants generally pay about 30 percent of their household income for rent and the local public housing authorities pay the landlord enough to get to at least 80 percent of fair market rent.

But the higher fuel prices put everyone in a bind.

Elsie Coffey of the Bangor Housing Authority said that earlier this fall she was anticipating a $400,000 shortfall between what she could pay for heating the authority’s 567 units — $2.36 a gallon — and what oil actually cost. The drop in price may lessen that short-fall considerably.

“If oil stays down at the price it is, come the end of the year it’ll be a big help to us,” the housing director said. “We didn’t lock in at the higher rate, and I’m glad we didn’t lock in.”

The drop in fuel prices has surely caused consternation for those landlords who locked in fuel prices earlier this year, when oil was much more expensive.

The statewide average cost for a gallon of No. 2 heating fuel was $2.93 for the week of Oct. 27. That’s down from a July high of $4.71 per gallon, according to the Governor’s Office of Energy Independence and Security.

Until the sudden drop in the cost of heating fuel, the problem was growing so acute that Sens. Olympia Snowe and Susan Collins last month sent a letter to the U.S. Department of Housing and Urban Development asking for more funds to help Maine’s public housing authorities.

“This is a critical issue,” the senators said. “Maine’s public housing authorities are near the financial breaking point. With some agencies spending twice as much on heating oil as they had budgeted, many are left with huge shortfalls.”

In the letter, the senators referred to a Westbrook Housing Authority Section 8 property, where the owner could not pay for increased heating costs and then abandoned the building and its tenants.

While there are reports that at least one Section 8 landlord in Bangor has done the same, many such local Section 8 landlords have gone to their housing authorities to request rent increases to pay for the actual price of heating fuel. Some were granted higher rents.

“When oil was $4.50, the vast, vast majority of landlords lost money,” Marsh said.

The price drop for fuel isn’t fixing all the problems for Section 8 landlords, he said, including a sense that with the worsening economic climate, the fairmarket rents paid to the landlords might not be fair enough.

“I know there are landlords who just won’t do Section 8 now,” Marsh said. “Not because the program’s bad, but frankly, the rent rates aren’t high enough.”

acurtis@bangordailynews.net

990-8133

http://bangordailynews.com/2008/10/29/business/drop-in-fuel-costs-helping-landlords/ printed on July 12, 2014