September 18, 2020
Heat Costs

Drop in fuel costs helping landlords Fixed-income deals had owners in bind

BANGOR – Mainers may be breathing a sigh of relief as they spend less money to fill up their gas and oil tanks, but one segment of the population is even more grateful for the declining costs of fuel: landlords who own fixed-income housing properties.

“The oil prices are averting a crisis,” said Kurtis Marsh, the president of the Greater Bangor Apartment Owners & Managers Association. “The prices have started to go down and I think that’s probably saved us from the worst.”

The crisis Marsh is referring to is a simple mathematics equation that has threatened area landlords who rent to fixed-income tenants. The price of heating oil shot up precipitously over the last year, but Section 8 landlords and the public housing authorities that manage them cannot charge their tenants more money to make up the difference.

Section 8 is a federal rental voucher program that is intended to expand affordable housing options for very low-income households by allowing families to choose privately owned rental housing. Tenants generally pay about 30 percent of their household income for rent and the local public housing authorities pay the landlord enough to get to at least 80 percent of fair market rent.

But the higher fuel prices put everyone in a bind.

Elsie Coffey of the Bangor Housing Authority said that earlier this fall she was anticipating a $400,000 shortfall between what she could pay for heating the authority’s 567 units – $2.36 a gallon – and what oil actually cost. The drop in price may lessen that shortfall considerably.

“If oil stays down at the price it is, come the end of the year it’ll be a big help to us,” the housing director said. “We didn’t lock in at the higher rate, and I’m glad we didn’t lock in.”

The drop in fuel prices has surely caused consternation for those landlords who locked in fuel prices earlier this year, when oil was much more expensive.

The statewide average cost for a gallon of No. 2 heating fuel was $2.93 for the week of Oct. 27. That’s down from a July high of $4.71 per gallon, according to the Governor’s Office of Energy Independence and Security.

Until the sudden drop in the cost of heating fuel, the problem was growing so acute that Sens. Olympia Snowe and Susan Collins last month sent a letter to the U.S. Department of Housing and Urban Development asking for more funds to help Maine’s public housing authorities.

“This is a critical issue,” the senators said. “Maine’s public housing authorities are near the financial breaking point. With some agencies spending twice as much on heating oil as they had budgeted, many are left with huge shortfalls.”

In the letter, the senators referred to a Westbrook Housing Authority Section 8 property, where the owner could not pay for increased heating costs and then abandoned the building and its tenants.

While there are reports that at least one Section 8 landlord in Bangor has done the same, many such local Section 8 landlords have gone to their housing authorities to request rent increases to pay for the actual price of heating fuel. Some were granted higher rents.

“When oil was $4.50, the vast, vast majority of landlords lost money,” Marsh said.

The price drop for fuel isn’t fixing all the problems for Section 8 landlords, he said, including a sense that with the worsening economic climate, the fair-market rents paid to the landlords might not be fair enough.

“I know there are landlords who just won’t do Section 8 now,” Marsh said. “Not because the program’s bad, but frankly, the rent rates aren’t high enough.”


Heating fuel prices for week of Oct. 27

Area prices averaged from reports of local dealers. Statewide price of oil, kerosene and residential propane from Governor’s Office of Energy Independence and Security. Local price of kerosene from MaineOil. Com.

No. 2 heating oil, cash price per gallon

Bangor area: $2.82

Calais area: $2.88

Northern Aroostook County: $ 2.97

Rockland area: $ 3.10

Statewide: $ 2.93

Firewood, green, cut, split, delivered, per cord

Bangor area: $265

Calais area: $270

Northern Aroostook County: $185

Rockland area: $ 250

Wood pellets, per ton

Bangor area: $287

Calais area: $ 290

Northern Aroostook County: $ 274.50

Rockland area: $ 297

Natural gas, per 1,000 cubic feet

Bangor area: $13.50

Propane, per gallon

Bangor area: $2.95

Statewide: $3.10

Kerosene, per gallon

Bangor area: $ 3.40

Statewide: $ 3.52

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