Christine Ouellet struggled to find affordable housing for years, often taking laborer jobs on farms that let workers live in barebones, uninsulated cabins.
Worried about finding a safe place for herself and her Chihuahua mix dog Willow as winter set in four years ago, she got a MaineHousing voucher that would pay all but 30 percent of her rental costs. The problem was, no apartments that took the voucher were available in her area.
Her application for affordable housing finally produced a place in Thomaston under a federal subsidy program with similar assistance. She has been living there for three years.
“It’s such a nice apartment with a new shower and refrigerator,” said Ouellet, now 33, a native of neighboring Rockland. “I was crying because I’d been living in a situation that was like camping. It was life-changing for me to get in there.”
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Ouellet is a tenant in one of the 7,734 rural rentals in Maine that fall under a U.S. Department of Agriculture program from the 1970s that gave low-interest loans to people who built affordable apartments. The program, which covers about 326 properties in Maine, included aid for low-income tenants and offered 1 percent interest mortgages to landlords buying or building affordable rural housing.
But those 40-year loans are maturing and the program is at risk of losing the units, which could leave low-income families, older people and those with disabilities unable to afford their homes. That comes at a time when MaineHousing estimates the state is short as many as 25,000 low-income housing units during an affordability crisis that is worst along the coast.
“We need to be building new affordable housing, but at the same time, we can’t afford to lose any of the existing affordable housing that we have,” said Liza Fleming-Ives, executive director of the Genesis Community Loan Fund, a community development financial institution based in Brunswick.
Recently, Genesis helped preserve 28 apartments in Thomaston under a new model that could be replicated elsewhere in the state. The model transfers USDA properties from private to nonprofit ownership and maintains them as affordable units.
The 28 apartments in buildings on Pine and Water streets near downtown Thomaston were owned by a family and sold to VOA Northern New England, a human services nonprofit based in Brunswick, in December. Genesis made loans to VOA to buy and renovate the properties.
This was the first use of Maine’s $80 million Affordable Housing Tax Credit for rural housing preservation signed into law in 2020. The idea behind the measure proposed by former House Speaker Ryan Fecteau, D-Biddeford, is to encourage the creation of affordable housing by using state and federal dollars to provide investors with a refundable credit on their state income taxes.
“It was exactly this kind of important work that we wanted to see come to fruition,” Gov. Janet Mills, who earlier this month proposed a two-year budget dedicating $30 million more to affordable housing, said in a statement.
The Thomaston units have an average rent of $775 for one bedroom and $865 for two, with most tenants paying only a third of their income for rent and the USDA paying the difference, according to Genesis. The subsidies will continue under VOA ownership.
The USDA’s Section 515 program, under which the apartments fall, financed the development of 35,000 rural apartments a year nationwide at its height in the late 1970s. Many of the mortgages ran for 40 years and have been getting paid off over the past several years. At that time, owners can decide whether to sell them to someone who would keep them affordable or on the open market.
The risk is in losing units when they are most needed. Twenty-five units in Topsham might lose affordability requirements now because the USDA has foreclosed on them and might sell them to a private owner, the Portland Press Herald reported Friday.
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Beth Nightingale, who acted on behalf of her parents in selling the Thomaston properties, said her father was dedicated to keeping the tenants in place. A developer, he built the 16 units on Pine Street in two buildings and the 12 units on Water Street in one building in 1978.
The USDA Rural Development Program provided low-interest loans to build them and assured rent payments by subsidizing them. After 40 years when the loan was paid off, they could sell them.
“It was a good opportunity to do a significant building project,” Nightingale said. “A lot of mom-and-pop owners looked at this as a way of providing for their retirement.”
Nightingale said her dad wanted to sell the buildings in 2015, when he was 75, but efforts to sell to two nonprofits didn’t work. When Genesis stepped in, the sale went through.
But the whole process took seven years, and there was another complication. Although the 40-year mortgage was coming to an end four years ago, her father had taken out some smaller USDA loans for energy and other projects that continued until 2031.
He had to stay in the USDA program until the longest loan matured, unless he prepaid the loan or transferred the properties to a nonprofit. He could not sell the property to buyers who would raise the rents.
While the family could have kept the properties until 2031, another factor made that option unaffordable, Nightingale said. Because of the long mortgage and ownership, they could no longer take depreciation on the buildings. Instead, they were getting “phantom income,” or money that they are yet to receive but that is subject to IRS taxes.
“Longtime owners pay income tax on income they are not seeing each and every year,” she said.
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Nightingale wished everything could have happened more easily and quickly, and said that regulatory reform is needed to make the USDA’s process more efficient for owners who want to sell their properties.
Still, she said her father would be happy with the outcome and that the tenants can stay in their homes.
Ouellet, the tenant who is on disability, sees it as the difference between having a safe home and not having one. She said there are two people in her building with mental health conditions.
“They’re really nice people,” she said. “I just don’t know where they’d be without safe housing.”