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  • The Center for Rural Homelessness

Maine is Building Affordable Housing While Potentially Losing More

By Mahmoud Ali

Aug 10, 2023

Ground is breaking on projects sponsored by Maine’s $20 million Rental Unit Development program, a new state-subsidized affordable housing initiative in collaboration with MaineHousing set to add 150 rental units to the state’s affordable housing stock. However, on the horizon is another shift in Maine’s housing landscape; some 7,700 affordable housing units are set to have their affordability requirements expire, thereby adding to the state’s ~24,000-unit deficit. With a wave of housing units no longer being bound to their affordability requirements, the new state-subsidized initiative is set to be a drop in the bucket. In 1949, Congress passed the landmark Housing Act. The bill provided considerable support for developers to stimulate housing markets across various geographies. One specific part of the bill, Section 515, significantly lowered borrowing costs for residents and developers of moderate- to low-income housing in rural areas at an effective 1% rate for a 30/50 year term amortized over 50 years. The Housing Assistance Council estimates that there are 13,830 Section 515 properties, and that two-thirds of which’s units are supported by Section 515 Rental Assistance.

In today’s tighter credit lending environment, maturing USDA Section 515 loans are exceedingly lucrative. With the WSJPrime rate sitting at 8.50%—5% higher than where it stood just 13 months ago—and the commercial real estate market facing considerable headwinds, most directly in the office asset class across specific geographies, the multifamily asset class has remained relatively sound in the face of high borrowing costs and fast approaching maturities. Therefore, as the 30-/50-year terms on Section 515’s mature and owners become older and indifferent about the properties, properties may be sold and leave the program. Suddenly, apartments can become unaffordable to tenants who have made them home for years.

While Maine’s new initiatives focus heavily on increasing the affordable housing stock, and understandably so, attention towards the preservation of that stock is faltering, and the impacts of which are amplified in the current economic slowdown despite some Maine NPOs efforts to slow the bleeding. One may even argue that it becomes even more urgent in times of economic turmoil to preserve the state’s housing stock, as the socioeconomic setbacks experienced by individuals priced-out of affordable housing units would surely outweigh the policy goal wins experienced by community leaders breaking ground on multi-million-dollar projects. This approach places the well-being of the unhoused population at the center of our policy initiatives by ensuring ample stock for rapid rehousing while ensuring the best use of raised capital.

Maine and Gov. Mills have demonstrated, and continue to demonstrate, an unapologetic determination to fighting rural houselessness in Maine, but in the case of fast-approaching maturities on units and properties that will be alleviating local market pricing pressures for their existing affordable housing stock, an expedient response is still required. Varied public, private, and/or public-private solutions can provide that desired expedient response, and that response can look very differently across various geographies and levels of government. In Florida for example, Greystone Affordable Housing Initiatives and Osceola County leveraged the relative soundness of the MFR asset class within the struggling CRE market to raise much needed capital. The $130 million private-activity bond (PAB) bond issuance refinanced 24 pooled Section 515 properties to offer tax-exempt bonds for investors while preserving Florida's rural affordable housing stock. Meanwhile, via federal legislation, Sen. Jeanne Shaheen (D-NH) and Sen. Tina Smith’s (D-MN) Strategy and Investment in Rural Housing Preservation Act attempts to mitigate the financial concerns attached to rural affordable housing preservation, as it seeks to maintain rental assistance for the subject property, regardless of the status of the USDA or RHS loan.

Much like Greystone and Osceola County, and the Strategy and Investment in Rural Housing Preservation Act, the State of Maine and MaineHousing’s target to explore public-private partnerships that can expand Maine’s affordable housing stock is set to improve the lives of many. Though, what often separates good public policy from “less-good” public policy is the relative impact it delivers for each stakeholder involved. It will always be good to build more houses for unhoused people, but it will always be better to build less while keeping more people, who might otherwise become unhoused, in their homes.

Mahmoud Ali is a Policy Analyst with the Center for Rural Homelessness

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