The developer GreenMars recently received approvals from the Portland Planning Board to build an 87-unit apartment building on an empty lot at 221 Congress St., on the East End.
But GreenMars principal Chris Marshall told Mainebiz the seven-story project is sidelined until the city alters its Inclusionary Zoning fee — or if there are available subsidies that could help make the project an affordable build for GreenMars.
“This project is now approved, but we are unlikely to start soon, as we cannot do anything until IZ is modified, or unless there are subsidies,” Marshall said. “We’re not giving up.”
The developer has completed a number of housing projects in southern Maine, with an emphasis on dwellings that are affordable to middle-income households. The company has under construction 130 condominiums at Stroudwater Commons off outer Congress Street in Portland.
Projects in limbo
The project on Portland’s East End is one of many that have been approved for Portland, but are not getting built because the Inclusionary Zoning fee requires developers of all housing projects with more than nine units to either designate 25% of the units for lower income households or pay an in-lieu fee of more than $186,000 per unit.
The fee was created by the City Council in 2015 and increased by referendum in 2020, as a tool to boost the production of affordable housing. Proceeds from the fee go into the Jill C. Duson Housing Trust Fund to help finance affordable housing projects in the city.
But developers largely agree the fee makes a project unaffordable to build, and are urging the city to alter the IZ fee so that more multi-housing projects could get underway to meet the growing demand.
A recent study of the fee structure was completed by Bath-based planning firm CZB, which Portland’s Housing and Economic Development Committee is currently reviewing.
The full report can be viewed on the city website. Briefly, findings show that housing construction has stalled under the IZ fee. When compounded by challenging development conditions including higher financing costs, rising interest rates and increasing costs for land, labor and materials, many projects are simply too costly to build.
Any changes to the IZ fee would need to be recommended by the HEDC to the Planning Board, which would then recommend — or not — changes for adoption by the City Council.
Marshall predicted that no action on IZ will take place, “Until after the summer recess. This pushes us into fall, and makes meaningful impacts on housing in 2026 unlikely.”
Marshall called the fee, “an unfunded mandate,” which has severely curtailed housing construction. The implementation of the fee was especially poorly timed, Marshall said, at a time when the state was seeing an influx of new residents and with building, financing and land costs all rising.
“The IZ fee has now cost us six seasons of construction, where market rate housing has not been built.”
“Price constraints always fail,” he added. “They always have the opposite effect of what you’re trying to achieve. They create a shortage, which creates rising prices.”
Marshall said the 221 Congress St. project might be able to go forward with a subsidy, but noted, “Even if we find a subsidy, subsidies are not the solution. There are a fixed amount of subsidies and all of them will get used. It’s just a matter if we get one that another developer doesn’t get. And morally, it still represents a price control and is still a problem.”
