The Portland City Council voted unanimously Wednesday to require hotel developers either to build low-income housing, or pay a fee to the city.
The approval came despite concerns from some councilors that the fee did not apply to all hotels in the city and could freeze future hotel development, or at least skew the market toward more expensive luxury hotels. Hotel developers also feel like they’re being unfairly targeted.
But most councilors thought the policy would be another way for the city to address its affordable housing shortage.
“I enthusiastically support this,” Mayor Ethan Strimling said. “My only regret is we didn’t put this in place 10 years ago.”
A study commissioned by the city has shown that hotels rely on low-wage workers who can’t afford to live near their jobs. As a result, those workers live outside the city and pay a larger share of their income on transportation and parking.
Under the new rules, hotel developers will have to build one low-income rental unit for every 28 hotel units they produce.
Rents on those units would have to be affordable to households earning up to 80 percent of area median income. Affordable means that a household is not spending more than 30 percent of its income on housing expenses.
As an example, a single person earning 80 percent of the Portland area’s median income would make $50,350 a year and be able to afford a maximum monthly rent of about $1,250.
If developers don’t want to build the units, they will have to pay a $3,806 per unit fee to the city’s housing trust fund, which is used to encourage the development of low-income housing.
Planning Board Chairman Sean Dundon said the fee was established based on a study by the Greater Portland Council of Governments. The proposal was reviewed by a third party, which determined it would have a “minimal” impact on hotel projects and pricing.
Dundon said that Portland has seen a 14.6 percent growth in hotel rooms from 2013 to 2016 – much faster than the national average of 2.9 percent. He expects the hotel sector will continue to grow by another 23 percent in the coming years.
“It’s going to continue to be busy,” Dundon said, noting that hotels generally require low-wage workers and have a greater return on investment than other sectors. “It shouldn’t slow down the development of hotels.”
Portland’s Planning and Urban Development Director Jeff Levine has estimated that 50 U.S. cities, including Boston and Seattle, have some sort of affordable housing fee for new commercial developments. However, Portland would be one of the few, and perhaps the only city, to specifically target hotels.
Only three people spoke during the public comment period and all opposed the new requirement.
“They’re not even sure there is a precedent for this,” Greg Dugal, HospitalityMaine’s director of government affairs, said of city staff. “It does concern us there is one industry being singled out.”
From fiscal 2014 through 2018, 495 hotel rooms have been added in Portland, while another 178 have been added in the current fiscal year, according to the report. Another 410 rooms have been approved, but have not yet been built.
The proposed rules, which were drafted at the request of the council’s Housing Committee, will not affect those rooms. Only projects approved after Sept. 26 would be covered.
Two hotel projects already in the pipeline, totaling about 261 rooms, would be affected. Those developers would have to either build five low-income rental units each on site, or pay a total $993,000 to the city.
City Councilor Spencer Thibodeau was concerned that the proposal did not cover all hotel rooms.
And City Councilor Nicholas Mavodones said he was concerned the requirements would not generate any revenue and would not create any additional housing because developers will pass on Portland. He also was concerned the rules could face a legal challenge.
“This is new for Maine,” city attorney Jennifer Thompson said. “This pushes the boundaries a little bit. I think we’re on as firm as footing as we can be.”
Randy Billings can be contacted at 791-6346 or at: