June 21, 2018
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Balancing the benefits of affordable housing

By Matt Wickenheiser, BDN Staff

AUGUSTA, Maine — Developers who work on affordable housing projects around the state debated the best ways to compare costs and assign value to cost-containment when the Maine State Housing Authority decides which projects get funding.

David Bateman of Portland-based Bateman Partners LLC is a member of a housing authority committee looking at getting cost-containment factored into the approval process. He noted that of the most recent new construction projects approved by the authority, six of them averaged about $176,000 per unit to develop. The other two were outliers and came in at more than $200,000 per unit, he said.

He suggested the authority should score projects seeking approval on another category, one that would aid projects that fall within average costs, and knock out those that come in at higher levels. That would provide incentive for developers to try to use scarce resources wisely, he suggested.

“Competition — that’s what drives products, that’s what keeps costs in line,” he said.

Bateman was speaking as a member of a panel at a discussion hosted by the Maine Real Estate & Development Association on the costs and benefits of affordable housing.

Others on the panel, such as Avesta Housing’s Greg Payne, who is also coordinator of the Maine Affordable Housing Coalition, said the challenge would be to weigh the value of cost containment against other benefits of affordable housing, such as locating it in downtown areas where there may be greater need and more services for lower-income people, as well as greater access to work opportunities. Another would be the value of refurbishment and reuse of historic buildings that otherwise would deteriorate. Those types of projects — in urban settings and renovation work — often would cost more than new construction in rural areas, he noted.

Peter Anastos, chairman of the authority’s board, said the different types of projects, namely new construction, adaptive reuse and urban historic reuse, would have their costs compared to averages in their own categories, not against each other.

“To put [cost containment] scoring in there is almost like a no-brainer,” he said.

Panelists also talked about the best way to measure the need for affordable housing. Kevin Bunker, founding principal at Developers Collaborative in Portland, suggested a Massachusetts Institute of Technology study from a few years ago may be the best source for that. It showed 86,000 households in Maine that were low income, and putting more than 50 percent of their income toward housing, said Bunker. That, he said, is the state’s true need.

Sen. Christopher Rector, R-Thomaston, another panel member, said about 50 percent of the population of Rockland have incomes that are 200 percent below the poverty rate. He’s seen their homes — trailers built 40 years ago that were never meant for Maine’s climate, said Rector.

“I think the need is an acute one in many, many ways,” Rector said.

The group also talked about how to compare the cost of developing affordable housing with the cost of developing market rates. It’s difficult, they suggested, often times apples and oranges. You can’t compare single-family structures with multifamily units, they said. There’s a lot of “soft costs” in multifamily development, from architectural design and other costs, that don’t exist in most single-family developments, said Bunker.

There are costs such as sprinkler systems, compliance with the Americans with Disabilities Act and other costs inherent in multifamily units, as well, said Cordelia Pitman, director of preconstruction services for Wright-Ryan. And developing in a city often has other costs built in, from more expensive property to costs such as special scaffolding to work in tight locations, to different construction techniques to protect neighboring properties.

One way to benchmark Maine’s affordable housing development costs is to compare it to other states, suggested Payne.

“Maine is pretty much on target,” he suggested, adding the state comes in a bit lower than New Hampshire and Vermont.

The discussion comes at a time when affordable housing costs are a hot-button issue in Maine. State Treasurer Bruce Poliquin, who sits on the housing authority’s board of directors, has taken the quasi-governmental organization to task for considering projects he charged were too expensive. As recent as last week, Gov. Paul LePage expressed a desire to have more control over the housing authority.

The current political environment was not lost on panel participants.

Bill Shanahan, is president of the Northern New England Housing Investment Fund, a private, nonprofit corporation that provides equity capital to affordable housing developers throughout Maine and New Hampshire. He said that since the state’s political leaders have been leveling accusations at the housing authority, banks and out-of-state investors have been nervous about investing money into projects here.

“It was a struggle to put it in context; this is political, this is personalities,” said Shanahan, adding, later, “These kinds of discussions detract from the value of the program. I don’t think it was constructive.”

Shanahan’s corporation has raised more than $369 million in equity capital, investing it in the development of 1,926 units of affordable housing in New Hampshire and 2,017 units in Maine since 1996, and currently manages 15 equity funds that invest in affordable housing developments receiving the federal Low Income Housing Tax Credit.

Anastos, who wasn’t on the panel but was attending the talk, said afterward his main concern is controlling costs to allow more projects to be developed, in order to provide more affordable housing.

“It shouldn’t be political,” he said. “[But] I’m not saying it isn’t.”

Correction: A previous version of this story reported that Sen. Christopher Rector said about 15 percent of the population of Rockland have incomes that are 200 percent below the poverty rate. Rector said 50 percent of the population of Rockland have incomes that are 200 percent below the poverty rate.

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