A team of city officials and developers worked for seven years to repurpose a parcel of downtown Biddeford that was once a trash incinerator into housing.
The vision was to offer condos at market prices, which Portland-based developer Jim Brady hoped would attract young families and older Mainers looking to downsize. But the project was shelved for years as the team navigated permitting and struggled to get financing.
Things moved forward this summer after Biddeford scooped up a version of an affordable housing project that was rejected by Cumberland voters. The city gave that developer an option to buy a lot in the same parcel Brady’s company is developing in, unlocking financing for the 85-unit project and knitting together a major housing milestone for Biddeford.
It is a success story for the city, but it also illustrates a problem that is contributing to the housing shortage in Maine and nationally. There is government support for low-income housing. Wealthy people are willing to pay for the high-end homes that they want. But there are fewer rentals and homes available for those in between, referred to by experts as the “missing middle.”
“Most of the housing that’s being built in Maine is subsidized housing,” Brady, president and co-founder of Portland-based Fathom Companies, said.
Zoning laws and building requirements enacted in the first half of the 1900s in many places across the country are often blamed for favoring single-family homes. That has led to less new construction of multi-unit buildings targeted toward middle-income families, typically meaning those making between 80 and 120 percent of their area’s median income.
Buildings between two and four units that are usually targeted toward this segment were the most underbuilt type of housing over the past two decades in the U.S. according to a 2021 report by the National Association of Realtors. Only 1 in 6 renters receive federal subsidies, while a state report found that 60 percent of Maine renters are cost burdened.
States have tried to address the problem, including when Maine passed a 2022 housing reform law that allowed homeowners to build in-law apartments by right. But delivering on these projects is still difficult for Maine cities and towns having to come up with creative solutions.
“That partnership turned out to be key to get the overall project to the risk level where it made sense to our financing partner,” Biddeford Mayor Marty Grohman said of the deal that clinched Brady’s project. “Interest rates are higher and banks — or maybe investors — [are] a little more reticent than they were certainly a few years ago.”
Developers across the state are trying to make smaller projects work by convincing municipalities to sell them land below its appraised value, finding companies unable to attract the workforce they need to help purchase land and offering first-time homeownership programs, Jack Soley, a Portland-based developer, said.
“We’re looking at everything we can,” he said.
Creative solutions like these are going to be necessary. Maine needs housing across all income levels, according to a 2023 state report that found a need for at least 76,000 new units by 2030. The affordable units being constructed will be income-limited, and only 1 in 6 renters receive government assistance, the Bridge Investment Group found.
That illustrates stark need up the income ladder. Things may change slightly soon due to wider economic conditions. While labor and raw materials are unlikely to get cheaper, a continued decrease in interest rates may make banks more likely lend, Dave Pelton, the real estate development director at the Kennebec Valley Community Action Program, said.
“There are both affordable and market rate projects getting built, but the market rate construction is slowed by high interest rates,” Pelton wrote in an email. “For decades the market rate developers were able to build more quickly because they could borrow cheaply for construction costs. I think we will see that again as interest rates continue to fall.”
