Developers of a divisive affordable housing proposal in Cape Elizabeth have pulled the plug on the project after opponents gathered enough signatures to force a referendum on recent zoning amendments that would make construction possible.

Dunham Court would have been the first affordable housing project in Cape Elizabeth in 50 years. The proposal to build a 46-unit apartment complex near Town Hall came at a time when affordable housing has become extremely scarce in Cape Elizabeth and throughout Greater Portland.

Supporters thought the town center was exactly where an affordable housing project should be, within walking distance of the local supermarket, pharmacy, public schools, community center, police and fire station, and Thomas Memorial Library. But the $13.5 million project drew significant pushback from opponents who criticized its location, size and financing.

The Szanton Co. of Portland said Tuesday that it was no longer viable to move forward with the project because the referendum could reverse the town council’s recent approval of necessary zoning changes.

“It’s clear that Cape Elizabeth hasn’t decided whether it wants affordable housing in its town center,” Nathan Szanton, CEO of  The Szanton Co., said during a news conference outside Town Hall.

A date for the referendum has not been set, but Szanton estimated the process would take three to eight months and said it would require a political campaign to preserve the zoning amendments.

“So, we’re reluctantly announcing today that we’re not going to fight the referendum,” Szanton said. “It must be held, because the signatures have been gathered and certified, but we are stepping back and giving up our purchase-and-sale agreement on the site.”

Szanton said it was unfortunate that his company couldn’t fulfill its vision to bring people, vitality and quality affordable housing to Cape Elizabeth’s town center.

“We’re feeling sad for certain, but we’re feeling as though it’s the right business decision,” Szanton said in an interview after the announcement. “It began to feel like we were spending so much time, effort and money trying to force ourselves on a community that appears to not want us or is a long way from making up its mind on affordable housing.”

Now, Szanton said, his company will refocus its efforts on projects being developed in communities that want affordable housing, including Bath, Portland and Lewiston. On Tuesday afternoon, the company broke ground in Old Orchard Beach for a 55-unit project near the town center for residents 55 and older. It will include 42 units for households earning below 60 percent of the area median income and 13 market-rate units.

Szanton’s decision to drop the Cape Elizabeth project drew a mixed response from townspeople.

“Good riddance Dunham Court,” said Cynthia Dill, a former legislator who has been a vocal opponent. “I could not be prouder of our community for standing up for its values. … We can do better.”

Jamie Garvin, Town Council chairman, said he was disappointed with the developers’ decision but understands their rationale. He said it’s unlikely that another developer would come forward with a project that is substantially different from Dunham Court.

A MIXED REACTION

“It’s an unfortunate loss for the community of Cape Elizabeth,” Garvin said. “Affordable housing is something that is needed throughout the Greater Portland area and all of Maine. There are thousands of people in need of affordable and attainable housing. Every community in the area has a role to play in contributing to a solution to that problem.”

Save Our Center, a group opposing the project, announced at the end of October that it submitted 1,125 signatures to the town clerk in support of a referendum on the zoning changes.

The town council is scheduled to hold a public hearing on the referendum Wednesday night and opponents believe overturning the zoning amendments is “as important as ever,” said a statement on Save Our Center’s website.

“There’s no longer a project on the table, but if the (zoning) ordinance package stands, there could be five of them headed our way,” the group’s statement said.

The group said it wants the Town Council to convene an independent committee to study various options “to bring affordable housing that integrates newcomers and invites a diverse range of people and families into our neighborhoods, schools and the fabric of the community.” The panel also would develop a plan “to guide us in diversifying our housing across the entire town.”

The Szanton Co. of Portland wanted to build Dunham Court just off Ocean House Road (Route 77). The four-story building would have included 35 one-bedroom, eight two-bedroom and three three-bedroom apartments. The project was pitched as housing for workers, empty-nesters and others who can’t otherwise afford to live in the affluent seaside town.

The Town Council voted 5-2 in October to approve four zoning amendments that would have allowed Dunham Court to be built next door to the historic Town Hall and new Village Green.

REFERENDUM WILL STILL BE HELD

The project needed those amendments because it would have been 10 feet taller than the 35-foot height limit for the town center district. The amendments also halved the amount of land needed per unit, more than doubled the building footprint limit, and released the developer from having commercial tenants on the first floor. The project also needed a tax increment financing arrangement with the town that would return a portion of property taxes to the developer over 30 years.

Tenants in Cape Elizabeth need a median annual income of $92,000 to lease a two-bedroom apartment at the median price of about $2,300 per month including utilities, according to the Maine State Housing Authority. Prospective homeowners need a yearly household income of $174,000 to buy a median-priced home of $625,000.

At Dunham Court, 37 apartments would have been reserved for households below 60 percent of the area median income, which is $42,000 for one person, $48,000 for two people and $54,000 for three people. Nine apartments would have been leased at market rate. Subsidized rents, made possible through government financing, would have been $1,080 for one bedroom, $1,299 for two bedrooms and $1,495 for three bedrooms; market rents would have been $1,495 for one bedroom and $1,695 for two bedrooms.

Despite the demise of Dunham Court, the town will still hold the referendum as required by the town charter for all certified petitions, Garvin said. The Town Council will hold a public hearing Wednesday night on whether that vote should be held during a special election or during the next municipal election in June 2022. The council is scheduled to set the date for the referendum at its Dec. 13 meeting.