Portland bets on co-ops to meet need for affordable housing - Press Herald

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Fiston Mubalama stands outside a housing cooperative apartment building on Pierce Street in Lewiston on Sunday. Mubalama moved into a three-bedroom unit in the building over a year ago and likes the cooperative ownership model. “With the co-op, it’s way different, because we all look out for each other,” he says. Gregory Rec/Staff Photographer

Back in March, Houssein Abdi attended a special meeting to find a way to help fellow tenants whose lives were just starting to be upended by the coronavirus pandemic.

They hatched a plan to prevent any tenants from being evicted for nonpayment of rent and to help find additional support for five households struggling to make ends meet.

“We came together as an emergency and decided there would be no evictions and there would be no penalties for a person not paying their carrying charges,” said Abdi, 39, who works for the Maine Department of Health and Human Services.

But in this case, Abdi and his fellow tenants were also the landlords. And the process they used to help one another was a democratic one, rather than a decision handed down from a single property owner.

They are members of the Raise-Op housing cooperative in Lewiston, where residents are directly responsible for managing their property and setting their rents, or carrying costs. It’s a housing model that that has flourished elsewhere in the United States, including New York City and Washington, D.C., but is relatively rare in Maine.

That could all change in the coming years, as Portland places a big bet that housing co-ops can help create permanently affordable housing for the so-called “missing middle,” or those who earn too much money to qualify for subsidized housing but don’t make enough to afford market-rate housing.

Over the last year, the City Council has partnered with two fledgling organizations – Maine Cooperative Development Partners, which includes affordable housing developer Nathan Szanton, and the Greater Portland Land Trust – to develop three city properties into housing cooperatives.

The council last week approved a purchase and sales agreement with Maine Cooperative Development Partners to develop 165 Lambert St. into at least 20 units of cooperative housing in North Deering near the Falmouth line. The group is also negotiating a purchase and sales agreement for 43 and 91 Douglass St., where they’re looking to build over 100 units of cooperative housing units.

Meanwhile, the nonprofit Greater Portland Community Land Trust is working on a proposal to build 16 cooperative housing units at 21 Randall St.

Urban housing co-ops are relatively new to Maine, but are common in other parts of the county.

In the United States, more than 1.2 million families, of all income levels, live in homes owned and operated through cooperative associations, according to the National Association of Housing Cooperatives. They are mostly concentrated in urban centers, including Atlanta, Chicago, Detroit, Miami and San Francisco.

Julian Rowand, a cooperative development specialist with the nonprofit Cooperative Development Institute, said there are currently 10 rural housing co-ops in Maine, primarily for manufactured and mobile homes. But Lewiston’s Raise-Op is the only urban co-op in the state.

Rowand said Portland’s projects have been years in the making and he expects the model will play a key role in helping to address the city’s housing crisis.

“I really applaud (the City Council) for taking this step,” Rowand said. “In the last few years, people have been really interested in this as a way to preserve affordable housing and be able to afford to live in cities. … All states and municipalities need to have this in their arsenal for people to be able to own and to stay” in their communities.

Portland Mayor Kate Snyder was one of two council members who opposed awarding the Douglass Street property to Maine Cooperative Development Partners, primarily because their financing strategy would delay construction and occupancy. Instead, she and City Councilor Nicholas Mavodones supported a proposal by Avesta Housing and developer Jack Soley, a team that already had financing lined up to begin their project.

“We have very limited experience in Maine with limited equity co-ops,” Snyder said. “When we were contemplating Douglass Street, I knew the development team had already been chosen for Lambert Street and Portland would be given the opportunity to really see how this goes. That was part of my context: How do we do as much as possible as quickly as possible.”

Douglass Commons will also generate less revenue for the city and require a greater public subsidy.

Avesta offered the city $575,000 for the land compared to $475,000 from the co-op and estimated it would generate $13 million in property taxes over 30 years, as opposed to $3.7 million over 30 years. Douglass Commons will also require additional public support to be affordable. Its budget includes $371,608 in tax increment financing from the city, plus an additional $400,000 in funding from either the city’s housing trust or through its Community Development Block Grant program and another $750,000 in Brownfield funding.

City Councilor Tae Chong credited the council’s Housing Committee, led but former City Councilor Jill Duson, for its work on the co-op model over the last few years. Such a housing model will allow people, especially those earning between 60 and 100 percent of the area median income, to gain valuable experience owning and managing their units and building, without having to come up with a large down payment.

The area median income for Greater Portland in 2020 ranged from $70,630 for an individual to $100,900 for a family of four.

“It’s not a crazy, whacky scheme,” Chong said. “It’s been around for 50 years or more. It’s just new to Maine and new to Portland. And you’re not risking anything. We’re just trying to encourage the missing middle to get a fair chance to be able to stay in Portland and be able to afford it.”

The Greater Portland Community Land Trust and the Maine Cooperative Development Partners are using two different models and are in the early stages of planning.

Both would put residents in direct control of the management and maintenance at each property. Rents, or carrying costs, would be relatively stable, since the group would just be paying the mortgage on the property and building. But the residents, through a board of directors or homeowners association, could increase those charges to pay for other amenities, like gardens, or build a reserve for maintenance and other capital expenditures.

Zack Barowitz, treasurer of the land trust, said his group’s model would be similar to a condominium, where residents would purchase their unit and common areas would be managed by a homeowners association. But sales prices of the units would be more affordable that market-rate condos because the nonprofit will own the land, and therefore not pay property taxes, and will develop the project without charging typical developer’s fees.

“You shave a little off here and there and try to make it as affordable as possible,” Barowitz said.

The resale amount would also be limited to keep the unit affordable, although the value of the unit will likely increase according to inflation, he said. Details are still being worked out about where that additional value will go: to the owner, to the homeowners association, the land trust, or some combination of both.

The Maine Cooperative Development Partners is using a limited equity model.

The Maine Cooperative Development Partners is negotiating a purchase and sales agreement for Douglass Commons, where they’re looking to build over 100 units of cooperative housing units and apartments. Matt Peters, left, Liz Trice and Brian Eng of Maine Cooperative Development Partners pose Saturday at the Douglass Street site, the former location of West School, which was torn down in 2015. The Portland City Council has also approved a purchase and sale agreement with the group to develop 165 Lambert St. into at least 20 units of cooperative housing in North Deering near the Falmouth line. Derek Davis/Staff Photographer

The Lambert Village proposal calls for 20 single-family homes to be constructed during the first phase and 26 additional homes for a second phase. And Douglass Commons contemplates a 56-unit apartment building plus 52 limited equity cooperative units in seven separate buildings.

Brian Eng, a developer with Maine Cooperative Development Partners, said residents would need to purchase a share in the cooperative to live at either of its co-ops, rather than purchasing their unit. Early estimates indicate that a share could cost $10,000, though Eng said that number could change based on project costs. And he said it would be up to the co-op members to determine how much they want to allow their shares to appreciate in value.

About 20 families have expressed interest in both projects, which still need to secure formal agreements with the city, zone changes and then undergo site plan review and approval, Eng said.

“We firmly believe that, working hard on this and doing it the right way, we will be able to offer a home ownership opportunity to people who wouldn’t otherwise be able to access,” Eng said. “We have the ability to target the missing middle. Generally speaking, you end up cooperating with your neighbors more. You end up building communities that can become platforms for personal development.”

If Portland’s projects are successful, Eng said the group hopes to expand housing co-ops throughout the state, including Biddeford, Westbrook and Mount Desert Island.

The Raise-Op cooperative began in 2008 with a three-unit apartment on Maple Street in Lewiston, according to manager Crag Saddlemire. The co-op began to grow following a string of arsons in 2014, which he said displaced about 100 people and prompted the city to go on a demolition spree. The group operates three buildings with a total of 15 units and is currently raising money to build another apartment building, he said.

Since co-ops are managed by residents, Saddlemire said they can also be “a vehicle for social change” in addition to providing affordable housing opportunities. He said that from 2014 to 2017, market rents in the Lewiston Auburn region increased by as much as 35 percent. However, housing costs at the co-op increased only 5 percent, he said, allowing residents to save between $2,000 and $4,000 a year.

“At a minimum, it’s their means of affordable home ownership that removes the more individualistic profit-making component of the equation and just focuses on the common need of having safe, healthy homes and trying to save money in the operation of those homes,” Saddlemire said. “It also becomes an organization through which a lot more can be done to benefit the residents and the neighborhood around them.”

Saddlemire said the co-op is currently looking to build a new building, which is expected to cost around $3 million. He said the project has broad support in the community, from the more liberal people who see it as a way to foster racial and economic justice to more conservative people who applaud the ownership model and personal responsibility aspect.

He’s excited about the projects planned in Portland. “They’ve got a really bold and inspiring proposal and it’s great to see folks take it to that next level,” he said.

Saddlemire said turnover at the co-op is low. But nobody has to tell Fiston Mubalama that. He applied for a studio with the co-op when he was 19 years old. Nearly five years later, after updating his application, he was finally approved for a three-bedroom unit on Pierce Street, which he shares with his wife and sister-in-law.

Mubalama said all he had to do was put down an $800 refundable deposit to move in, and his rent is currently $785 a month. He no longer needs to harass his landlord to get things fixed.

“With the co-op, it’s way different, because we all look out for each other,” the 25-year-old said.

Abdi has been living in a building owned by Raise-Op since 2015. At the time, he and his wife were expecting twins and needed a larger apartment. He’s currently paying $766 a month for a three-bedroom place for himself, wife and five children.

Abdi said he didn’t know anything about housing co-ops when he first moved in, but has come to value the management structure. His family is part of a strong community. They have more control over maintaining their apartment buildings and the amount they pay monthly to live there.

With his wife now working as a nurse, Abdi said his family, which now includes five children, ages 5-13, are looking forward to purchasing their own home with the money they have been saving.

“Now that she’s finished going to school and our life is stable, we’re planning to buy a property in one or two years if we find the right property,” Adi said.

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