Activists with Housing Justice Maine call on state lawmakers in 2021 to fund more affordable housing. | Beacon
Originally published in the Maine Beacon on May 20, 2023
Dusting off an old idea, Maine could join a list of cities and states across the country that are taking matters into their own hands to address soaring housing prices by becoming public housing developers.
Democratic Rep. Grayson Lookner of Portland introduced LD 1867 to the Select Committee on Housing in a public hearing on Friday. The proposal would establish the Maine Community Housing and Rural Development Authority, which would create publicly-owned housing that the tenants themselves would manage.
“This ain’t your grandpa’s public housing,” Lookner told committee members, who have been tasked with finding solutions to the state’s housing emergency, which threatens to spiral out of control with rental prices skyrocketing and evictions spiking.
There is currently a shortage of over 20,000 affordable housing units in the state and homelessness is growing.
“This program avoids many of the pitfalls that undermine public housing nationally, such as income and racial segregation, systemic underfunding, and lack of resident governance,” Lookner said.
As Beacon previously reported, the approach is a drastic departure from the way Maine has built affordable housing for the last several decades. Since new public housing development was halted at the federal level in the 1990s, Maine policymakers have tried to meet the demand for affordable housing with the federal Low-Income Housing Tax Credit (LIHTC), a Reagan-era tax incentive that pushes public money to private developers to build temporarily affordable housing.
Tax credits are the only tool left. And they build 90% of all affordable housing in the country.
Gov. Janet Mills’ recent budget proposal calling for $80 million for new affordable housing would all be funneled into LIHTC and similar tax credits, which is the state housing authority’s only current means to build housing.
The problem, critics say, is that the tax incentives are inefficient and prone to abuse. Because it is tied to demand in the private housing market, LIHTC produces fewer units than they did 20 years ago, while costing the public 66% more through tax subsidies.
“It is not a coincidence that we find ourselves in the housing crisis that we are in today when looking at the housing policies that were implemented federally 40 years ago,” Lookner said. “Low-Income Housing Tax Credit developments often only stay at affordability for 15 to 45 years and federal public housing has been left to die a slow death by a thousand cuts since the 1980s.”
Lookner has modeled the proposal off a pilot program in Montgomery County, Maryland where local officials leveraged an initial $100 million investment in public money to create a revolving fund to build publicly-owned, mixed-income apartments in the suburbs of Washington, D.C.. After just a few years, Montgomery County officials — who presented to Maine’s Select Committee on Housing in March — say they are on track to own 9,000 apartments — all of them permanently affordable.
The key difference between Montgomery County’s public-developer model and previous federal housing projects is that it is open to tenants of different incomes, not just low-income residents. At the behest of the real estate industry in the 1930s, federal housing projects were designed to serve only the poorest of the poor. The result was concentrated poverty and racial segregation.
Under the new model, residents pay different rates in a funding process called cross-subsidization, where the higher rents pay for the lower rents. Once initial public funds are put in, cross-subsidization covers the apartment complex’s day-to-day operating expenses, allowing it to break even or potentially return a profit — which could then be used to fund other mixed-income developments.
Lookner said the public developer proposal would benefit rural communities in particular since, because it uses public money free of the whims of the market, it would avert the problems inherent to private development, where deindustrialization and capital flight has made large swaths of rural Maine unattractive to private investment.
Lookner’s proposal would be available to renters making 120% of the area median income, whereas many LIHTC developments are only available to renters making around 60% AMI.
“The authority would also create housing for the storied ‘missing middle’ of income earners, as this is not a type of housing that is usually funded by either tax credit deals or by market-rate development,” he said.
Because the model could provide housing to their middle-income members, the state’s largest nursing union, the Maine State Nurses Association, is backing the bill.
Seattle, California, Colorado, Hawaii and Rhode Island have either passed or are exploring public developer models similar to the one piloted in Montgomery County. A social housing ballot initiative in Seattle won handily in February. Last summer, the Rhode Island General Assembly passed a $10 million pilot public developer. And Colorado recently created the Middle Income Housing Authority, which plans to build 3,500 units of workforce housing.
Josie Phillips, a budget and tax policy fellow at the Maine Center for Economic Policy, said that the spate of recent public developer proposals resembles the examples of social housing found across the globe — such as in Austria where public housing is available to nearly 80% of its citizens — rather than the American version of underfunded and racially segregated public housing.
“A policy brief from the [Organization for Economic Co-operation and Development, an intergovernmental organization with 38 member countries, including the U.S.] considers social housing to be ‘a key part of past and future housing policy,’” Phillips told lawmakers.
“Ultimately, social housing is not going to be a magic bullet, but used in concert with other strategies, it can be an effective piece of the puzzle when it comes to addressing the affordable housing crisis,” she added.