The seemingly imminent sale of the Whispering Pines apartment complex in Topsham will likely strip the development of some of its affordability requirements, leaving the head of the local housing authority frustrated at the government agency signing off on the deal.
“We’re just beside ourselves understanding why the federal government would allow that to happen given the demand for affordable housing all across the country,” said John Hodge, executive director of the Brunswick-Topsham Housing Authority. “It doesn’t add up.”
The Whispering Pines complex on Winter Street was funded partly through loans from the U.S. Department of Agriculture intended to provide housing for low-income families, elderly residents and people with disabilities, according to a 2019 analysis of Topsham’s housing inventory. Recipients of these Section 515 loans must agree to set their rent prices below market rates.
After the 25-unit development slipped into foreclosure under ownership group Winter Street Associations, the USDA’s Rural Development Office gave preliminary approval to a short sale of the property, an agency spokesperson confirmed via email. The sale would allow the owner to sell the property for less than the value remaining on the mortgage, leaving the taxpayers who funded the original building to take a loss on the difference.
Jeffrey Martin, owner of Foreside Real Estate Management, said Monday he had reached an agreement and expected to close the deal on the property within days or weeks. As part of the deal, the Whispering Pines units, as well as four other Foreside units in Brunswick, will maintain some affordability restrictions for at least 15 years, but those restrictions will differ from those currently in place at the Topsham complex.
Currently, rent for a two-bedroom apartment at Whispering Pines ranges from $913 to $963 based on tenants’ incomes, according to Foreside. Households making more than “moderate” income levels as defined by Rural Development, which in Topsham would amount to roughly $68,500 for a family of three, do not qualify to move into the complex.
Under the new agreement, Foreside must keep rents below Section 8 voucher limits — currently $1,483 for a two-bedroom in Topsham. There will be no income limits residents must meet.
In practice, the changes will not affect the property’s current tenants, most of whom already use Section 8 vouchers that will absorb jumps in rent up to the voucher limit, Martin said. Most or all tenants who reside in Whispering Pines on the date of the sale will also qualify for separate Rural Development vouchers, designed to protect residents of properties losing their affordability restrictions.
“We’re not expecting anybody to move out or be transferred out because of the sale,” said Martin, who added that his team will spend $1 million on needed renovations in Whispering Pines. “It’s their home; we hope that they’re there forever.”
Martin said Foreside has demonstrated a commitment to providing affordable housing to low-income residents. He pointed to the team’s practices at the former Jordan Courts apartments in Brunswick, which have maintained rents within Section 8 voucher limits even though those units no longer have affordability requirements.
“John Hodge’s group does some great work, but they can’t do it alone,” he said. “We understand that we’re at a critical stage of affordable housing in Southern Maine. We’re just doing our part.”
Still, Topsham losing income-capped units and relying on vouchers to cover rent price hikes is a troubling development at a time when MaineHousing estimates a statewide shortage of 20,000-25,000 units aimed at low-income residents, Hodge said.
“It is great that (Martin) is going to accept vouchers,” he said. “But now we’re going to have some units where there’s going to be a rent set at a voucher limit – if you don’t have that voucher, you’re not going to be able to afford that apartment.”
After learning Whispering Pines could lose its affordability requirements, Hodge’s team entered into negotiations to purchase the property and put in a final bid of $250,000 that would go to Rural Development to recoup a portion of the taxpayers’ losses, plus a side agreement for $350,000 that would help cover the ownership group’s tax liability. David Cope, the ownership group’s managing partner, preferred Martin’s “substantially larger” offer and submitted that to Rural Development for approval, Hodge said.
While Foreside’s offer may have resulted in a smaller up-front loss for the taxpayer, any difference between the two bids would be dwarfed by the value of securing 25 affordable units, Hodge argued. He estimated the cost of building an affordable complex that size at $8.75 million, vastly more than the roughly $1 million to $1.2 million the Housing Authority believes remains on the Whispering Pines mortgage. (Because Rural Development authorized a short sale, Martin’s bid is likely less than whatever remains on the mortgage).
“As I read the news yesterday about a lawmaker’s push to provide $200 million for affordable housing, I sit in disbelief that the federal government is going to let 25 affordable units go private in the next few days,” Hodge said. “Where is Rural Development in this process?”
Under normal circumstances, when a housing complex is at risk of losing its affordability requirements, government agencies, sellers, potential buyers and nonprofits try to work together to make sure the property goes to a mission-driven buyer that will guarantee affordable rent levels, said Liza Fleming-Ives, executive director of the Genesis Community Loan Fund. Thanks to a USDA grant, Fleming-Ives’ team helps facilitate the often-complicated deals that transfer ownership of affordable units from one party to another.
“It takes a lot of partners to keep an eye on where there are properties that may be vulnerable,” she said. “It does take communication between partners to make it work.”
In rarer, recent cases when foreclosed properties are sold at losses, that communication between Rural Development and mission-driven housing groups has been lacking, according to Hodge.
Before Martin bought the affordable Jordan Courts through a short sale in 2020, the Housing Authority failed to submit a bid because its staff didn’t know the units were at risk of being sold.
In recent weeks and months, Hodge has struggled to get an explanation from Rural Development as to why they would accept a private offer when the Housing Authority put in a competitive bid that would maintain income limits on the property.
A spokesperson from Rural Development’s national office declined to elaborate on the deal or its potential impact on renters, except to say, “discussions are ongoing.”
Correction: This article has been updated to clarify that the purchase agreement includes a provision guaranteeing all 25 Whispering Pines units and four additional units in Brunswick will be priced within voucher limits for 15 years, according to Foreside owner Jeffrey Martin.
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