Indeed, the economics of unit size and of buying vs. renting both beg the definition of affordability, as the standard of “affordable” is already somewhat woolly. A small condo, 425 square feet at $210,000, might be affordable for a single junior associate at a law firm who may prefer to rent anyway. On the other hand, a 700 square foot, $270,000 apartment might be both affordable and livable for a dual-income household each of more moderate income—a nonprofit employee and a relatively well paid service worker, for example.

According to Jesse Thompson, the first one-third of purchasers at 60 Parris are people who are 35 or younger and going from renting to owning and who are used to living in smaller spaces. On the other hand, Alexander’s projects One Joy and West Port Lofts have sold mostly to buyers seeking second homes, investors, and older purchasers. As of this printing, 7 of 12 units at One Joy have sold. Among the unsold are the most expensive unit ($359k) and the inclusionary-zoning unit ($208k), which is deed restricted. [Disclosure: the author is employed at a firm that manages property for both Redfern and Todd Alexander.]

Imperfect Projects in an Imperfect Housing World

These are not perfect projects by any stretch. For starters, even 100% AMI means that the projects are not affordable to the bottom half of income earners, and the effect of a few projects (fewer than forty units) is bound to be negligible in a town of 65,000. One could also quibble with Soley’s assertion that he did not receive subsidy because he paid a low price for the land through a City RFP (Soley counters that the land was distressed and the needed remediation brought the price up to market rate). There is also the question of whether twenty-three first-time owners can self-manage; professional management would add approximately $20 a month to HOA fees.

Part of the attraction of projects like these to developers is that in addition to working without subsidy, they are working within current zoning requirements. But zoning restrictions drive up the price by placing limitations on the size of the buildings, and—more dramatically—so do parking requirements. Roughly two-thirds of the 60 Parris Street site is devoted to surface parking, albeit separately deeded. Owners who want a parking space must pay an additional $12,000, plus a monthly fee is $50. But if the developer had achieved a zone change, and built on all or most of the lot, the number of units might have swelled to 60-75 units. Ultimately, it is difficult to speculate on how much a larger project might have dropped the sale price because most buyers (and renters) require—or think they require—parking, and most neighbors would object to a project without it.

Pushing and Pulling

Christian Milneil, who sits on the Board of Commissioners for the Portland Housing Authority, has another take on why developers are dipping into the middle market:

“Most of what's been built in the past ten years has been for the higher end of the market, and that segment is pretty saturated now, especially given how we're in Maine, which is not a wealthy state. There are several projects aiming for that high end of the market that have been approved at the planning board but haven't been able to move forward with construction, presumably because they aren't pre-selling enough units at prices that would pay off their construction loans.”

Milneil, who takes an orthodox view of economics, sees market forces—rather than developer consciences—as the driving force behind these projects.

“There's tremendous demand for mid-market housing and until recently developers haven't been addressing that market segment at all. So I don't look at projects like 60 Parris or One Joy Place as examples of developer altruism; it's just an example of how smart developers who are willing to build more affordable homes are going to have an easier time finding customers in this environment.”



If that is the case, then we might be seeing a form of filtering, at least when it comes to new construction. Historically, the availability of workforce housing has been largely a matter of filtering. This is the conventional wisdom in economics which states that simply adding to the housing supply can lower the price of older and previously higher-end housing (thus the “filter”).

That process appears to have stalled in certain hot markets. The perception, at least, is that when demand is strong on the high end, more and more units are produced for that market segment via new production, conversion, and renovation. However, in Portland, as in other markets, the high-end of the market has remained so strong that prices have not dropped despite the increase in supply and many older units are being gentrified. Those hoping to get a decent deal because of increased supply are being unrealistic, says Thompson, because “The system is broken all up and down the line.”

Perception Problems

Whether this upward pressure is finite or not, fast rising prices, have left many Portland residents suspicious of development of any kind, and they can be quite vocal when it comes to their assessment of housing prices.

Community pushback is a powerful force. Often, well-meaning neighbors will lament the high cost per square foot of new development, or the strain it imposes on on-street parking, without acknowledging that there are few options for building (relatively) affordable units that don’t involve some burden being shifted to taxpayers. Furthermore, it is not necessarily widely perceived that compact, walkable, and transit-oriented development builds stronger neighborhoods. Additionally, Thompson tells me that much of the pushback that they received was concern that people would sell or “flip” their units in a matter of three or four years—but is that a problem? “I’m not sure why only people in their 50s, 60s, and 70s should be allowed to build equity in their housing,” Thompson asserts. “Why can’t people do that in their 20s, 30s, and 40s?”

In most urban neighborhoods around the country (never mind suburban and rural communities), single family homes are still the predominant housing type. This is helped along by preferential tax treatment: even in New York City, single family houses are taxed at a much lower rate than higher-density condominiums. In Portland, most new luxury condos tend to be built in the “townhome” style (rather than flats or floor-throughs). “A townhome is more like a single family house, which is what most buyers around here want,” says Alexander. Perhaps this is because people tend to equate houses with “homes,” while apartments are rentals. (Incidentally, townhome-style units tend to be cheaper to build than multi-units, which may require steel, bigger contractors, and more complex designs.)