In fight for more housing in Maine, one barrier rises above the rest: Us (2024)

This is the first in an ongoing series exploring the state’s housing crisis.

Nick Mascetta and his partner started looking to buy a house soon after they moved back to Maine.

This spring, nearly two years later, they were still looking.

The options were grim: Gamble on a run-down fixer-upper they might be able to afford. Or overpay.

“We’ve made two offers on places, both over asking. We didn’t get either one,” said Mascetta, a tax professional who grew up in Cumberland but lived in San Diego for 20 years after college – exactly the type of Mainer the state wants to lure back to fight “brain drain.”

The first offer, Mascetta admits, was not aggressive. The second was $80,000 above list price, just four hours after the house hitthe market. They didn’t even get a chance to negotiate.

“So, that was pretty wild,” Mascetta said. “I didn’t expect it to be this bad.”

Stories like his have become increasingly common in Maine, and many have it far worse. They are paying more than half their wages on rent or a mortgage, or living an hour or more from their jobs. Some get side hustles. Some get roommates. Some become homeless. Many can’t see a path to putting down roots and know they may have to leave.

Maine’s prolonged housing crisis – in its simplest terms – can be explained by basic economic principles. There isn’t nearly enough inventory (supply) to accommodate post-pandemic growth (demand). That has driven prices skyward and, coupled with the highest interest rates in two decades, has made homeownership mostly unattainable for the working-class residents who are needed to ease the state’s labor shortage.

In five years, the median price of a home in Cumberland County has increased 63%, from $325,000 to $531,000, a record high,while median household income has gone up 24%, from $75,254 to $88,571.

Those who rent are similarly squeezed, for roughly the same reasons. Fair market rent for a two-bedroom apartment in the Portland metro area has almost doubled in 10 years, from $1,012 to $1,859, according to federal data.

Identifying the problem is easy. Figuring out what caused it and how to solve it is another story, involving a tangle of interrelated, sometimes contradictory factors.

The Portland Press Herald/Maine Sunday Telegram spent months interviewing more than two dozen developers, real estate agents, planners, municipal officials and policy leaders about the crisis. Here’s what we learned:

• Maine underproduced new housing for decades and never prioritized the need for higher-density housing. From 2010 to 2019, according to the Census Bureau, fewer homes were built in the state than in any other decade since the 1960s. Development has picked up recently, but so has population growth.

• Most communities have held on to restrictive zoning laws that discourage development and facilitate sprawl. A landmark law passed two years ago requires towns to allow multifamily housing and accessory dwelling units on most lots, but it was watered down, and its impact might not be felt for years because it doesn’t compel new construction. Many communities also haven’t invested in vital infrastructure like sewage and water systems and are not ready to grow.

• The Mills administration has made unprecedented investments in housing – $312 million since 2019 – but the impact has yet to be fully realized. Developers say they need more favorableregulations and support from communities, and they’re wary about making money if they build lower-end or mid-level projects. The costs of building materials and labor have increased exponentially, so money won’t stretch as far as it once would have.

• Maine’s housing market has stagnated and jammed up. Homeowners who bought or refinanced in recent years and still owe on their mortgages have no incentive to sell if that would mean new mortgages at higher rates. The number of units sold in 2023 was the lowest in more than a decade. Young professionals can’t move out of apartments because young families can’t upgrade from their starter homes. Those families can’t do so because empty nesters can’t downsize – because there aren’t enough small-scale options available to them.

The biggest barrier to solving the housing crisis, though, could be Maine’s own people.

In cities and towns across the state, when talk of new development comes up, many Mainers make it clear they don’t want to change the way Maine looks and feels.

“How do we grow without wrecking the place? That’s the balance,” said Kristina Egan, executive director of the Greater Portland Council of Governments, a group of municipalities that work together on policies, including housing.

Not in my backyard is a sentiment hardly unique to Maine, though there might be an outsized attachment here to that hard-to-define, you-know-it-when-you-see-it idea of what must be protected.

Fears about growth are persistent, even when they don’t match the facts. They are voiced at municipal meetings anytime a development with density is proposed and often derail projects quickly and soundly.

“Fear of change is such a strong human emotion,” said Quincy Hentzel, president and CEO of the Portland Regional Chamber of Commerce, which sees a lack of workforce housing as a central issue for its members. “People are comfortable with what they know, and they fear what they can’t see.”

But change is coming, she said, and communities have a chance to shape it.

Indeed, many housing policy experts believe Maine has a once-in-a-generation chance to decide how to accommodate growth. Failure to push forward could set the state back decades. Additional sprawl. Widespread gentrification. Mass exodus of working-age residents.

“I think the stakes for Maine are pretty high,” said Jeff Levine, a former planner for the city of Portland who now divides his time consulting and teaching urban studies and planning at the Massachusetts Institute of Technology. “We have a really strong opportunity to position the state for success if we do this right.”

HOW DID WE GET HERE?

Greg Payne, the governor’s senior housing adviser, said the Great Recession of 2008 is often seen as the precursor to today’s housing crisis, but decisions – or indecision – decades earlier are just as much to blame.

“Long before 2008, there was a severe lack of housing for low-income households,” he said. Now, the crisis has simply widened to hit many morestate residents.

Communities in Maine didn’t develop denser housing because there was no demand. The state’s population growth routinely lagged behind the country’s. And municipal zoning laws in many areas were geared toward single-family homes on large lots.

The result was a lot of sprawl – combined with rules that made life hard for those less privileged.

“The zoning we put in place 100 years ago was exclusionary – racist, classist,” said Portland real estate agent and developer Tom Landry, who has been making the case for more, denser growth for years. “It was all about keeping the ‘other’ out.”

And its consequences are hitting hard now with the growing need, even if some change is happening.

“With the benefit of hindsight, if we had started the work of updating (the zoning) a decade ago, we would probably be in a better place than we are now,” Landrysaid.

It’s a nationwide problem.

The country simply did not build enough homes to account for its population growth in the latter half of the 20th century. Some estimates put the national shortage at more than 3.2 million units.

More building is urgently needed. But builders are mostly conservative. They aren’t going to construct 400 units of housing without certainty that they will sell.

Things started to improve slowly in the yearsafter the Great Recession, but thenthe pandemic hit, followed by inflation, workforce shortages and high interest rates.

Construction has ramped back up, but so has the number of people moving to Maine. Between 2018 and 2022, nearly 70,000 people – or 5% of the state’s population now – moved to Maine, according to census estimates. MaineHousing estimated last fall that the state’s housing supply was short by more than 80,000 homes.

The private market seems to understand that more than single-family housing is required because multifamily and apartment construction has increased. But much of that has been either high-end or income-restricted housing, which shuts out the entire middle class, including millennials with young families or looking to start families and put down roots.

“We finally have people that want to be here and that can work here,” Landry said. “But now they can’t afford to stay …”

“We also need to prevent the bad development of the past – suburban sprawl, I don’t think anyone wants that.”

That means building more residential cluster development (multiple homes close together sharing open space), as well as multifamily apartment and condo buildings. Outside of Portland, though, such projects have been scarce.

In some ways, what Maine needs now is a return to how communities were developed a century ago. Before the 1950s and the arrival of suburbia, people clustered in dense villages and downtown areas where they could walk to neighbors’ homes, church, schools and stores.

“That type of development is basically illegal to build now,” said Egan, of the regional council of governments. “There are whole neighborhoods that couldn’t be built today with current zoning.”

Many towns have height restrictions, parking requirements, minimum lot sizes and other rules that make density near impossible, developers say.

Portland has begun its ReCode rezoning effort, which aims to allow for more of these sorts of communities and could play a critical role in how the city manages future growth. Many cities across the country already have done zoning overhauls, often with the same back-to-the-future intent.

L.D. 2003, the landmark state housing law passed two years ago, was meant to edge Maine toward more density. It allows property owners to build as many as four units on any undeveloped lots where single-family homes are currently allowed and to build accessory dwelling units on any lots with existing single-family homes.

But many who pushed for the changes say the law was stripped of its most important provision: a statewide housing appeals board that could settle local disputes. It had to be left off to get the final bill passed.

As it stands now, L.D. 2003 created no mandate to build or grow, and communities still have a lot of say over what gets built and where.

“If you can solve zoning and expedite approvals, you can increase supply to the point where things become affordable,” Landry said.

Other states are actively creating new legislation to spur more housing. Massachusetts in 2021 passed what’s known as the MBTA Communities Act, which requires 177 cities and towns served by Boston-area mass transit to permit multifamily housing units in dense areas.

Levine, the former Portland planner who works at MIT, has followed the Massachusetts debate closely. Yes, there have been high-profile cases of towns that have fought back, including Milton, which has now been sued. But many cities and towns have quietly adopted the provisions.

“What’s encouraging about that is you hear about the communities fighting it, but there are many others that are really using this as an opportunity to do some real planning,” Levine said.

Still, zoning isn’t the only barrier.

JUST SAY NO

Many Maine communities have blocked large-scale housing developments in recent years, and the list is growing.

Voters in Cumberland in March overwhelmingly rejected a 107-unit apartment complex of affordable workforce and senior housing.

On the same day, two hours north, two-thirds of Kingfield voters shot down a 45-unit development to house workers in the ski industry.

And just this week, Wells residents temporarily banned building large housing projects and expanding existing ones – by a vote of 980-82.

“Every time it happens, it’s disappointing,” said Dan Brennan, executive director of MaineHousing. “But the bottom line is: The state is built on local control, and communities have a right to govern their communities.”

Sometimes public outcry has been enough to stop projects before referendum votes.

In 2021 in Cape Elizabeth, developers walked away from a 46-unit project after learning opponents had gathered enough signatures to call for a vote.

In 2020 in Freeport, a developer proposed building 329 single-family homes, 70 duplexes and another 60 apartment units on a 250-acre piece of land off Desert Road. The project had the support of the town’s biggest taxpayer – L.L.Bean – and would have been built slowly, in phases, over 20 years. But residents flooded planning board meetings and took to Facebook, and the developer – KV Enterprises – walked away.

A few years later, the same firm proposed nearly 400 units in the center of Gorham. That project also has faced opposition and needs additional backing from town officials. Gorham residentshave bristled at another proposed large development on the site of a former golf course.

In fight after fight, the arguments are the same. Residents worry about the value of their homes, about taxes, about increased burden on schools and roads and services. They don’t oppose development, they insist, that this just isn’t the right fit.

Developer Loni Graiver has been on the losing end of plenty of NIMBY fights, but after his most recent defeat in Saco, he took drastic action. He suedthe town.

He brought his proposal – 332 units, mostly condos, in a development he planned to call Lincoln Village – to the planning board in August 2022. The site was in a commercial zone. Density wasn’t a problem. The town granted preliminary approval in June 2023 if he agreed to meet its requirements, which he did.

By then, Save Saco Neighborhoods, a loosely affiliated community group, had started to mobilize. At two public hearings in October, dozensof residents got up to speak against Graiver’s plan.

By November, a majority of planning board members voted down the project.

Graiver couldn’t believe it. He had already invested $2.7 million.

“The city caved to public pressure,” he said.

Graiver said he believes it’s the first time a local planning board has reversed its own decision, and that’s one reason he sued.

He wonders if developers need to learn to be more proactively persuasive.

“NIMBY groups have done a better job at organizing and being louder than people in the real estate industry,” he said.

Developer Kevin Bunker says the pushback has increased as the crisis has worsened.

“Part of it is picking spots,” he said. “I’m not afraid of having the conflict, but I try to have a real good grounding where I can be politically successful. Developers see opportunities everywhere – but you have to filter out 98% of those opportunities.”

Bunker founded Developers Collaborative with his mentor Richard Berman shortly after he finished graduate school. His career started around the same time as the Great Recession.

But he found a niche working on affordable housing projects and using a recently passed state law that created historic tax credits. Once he built a reputation, he moved on to bigger projects in downtownsand villages, adopting smart growth principles that discourage sprawl and try to limit environmental impact.

Now, he’s established and successful enough to build housing of all types (although he avoids single-family) and what he calls “compassion projects,” including Freedom Place, a Portland sober house for women, and the city’s homeless shelter.

He said Maine doesn’t have enough developers to meet today’s demand even if communities were more welcoming.

Financing remains a big issue.

“It’s hard to get banks to say, ‘Yeah, we’ll give you $20 million,'” Bunker said.

Construction costs also have more than doubled in less than a decade, from $130 per square foot to about $300, he said. And with the labor shortage and material delays, projects take longer, constructionincreasing from 12 months for a 30-40 unit building to 16 months or more.

Some community leaders who have promoted development have seen the consequences of speaking out.

When he was mayor, Jason Levesque was bullish about making Auburn a YIMBY (yes in my backyard) community.

“I thought it was the right thing to do,” he said. “The only regret I have is that we didn’t do more.”

His enthusiasm likely cost him his job. Not everyone wanted Auburn to grow, and Levesque’s opponent seized on that anti-growth sentiment to derail his 2023 reelection bid.

Levesque won’t pin his defeat on a failure to get voters behind his pro-growth message.

“It’s the biggest excuse, and I won’t use it,” he said. “People only pay attention when it’s an emotionally charged issue, and then they can rally against it.”

Even with widespread NIMBY sentiment, there have been victories.

On the same day voters in Cumberland and Kingfield rejected housing developments, Kennebunk approved a zone change that clears the way for a 70-unit senior complex.

In a lot of communities, those who have the most power are settled and not feeling the effects of the housing crunch directly, said Bunker, the developer.

But what happens if the people who teach their children, cook and serve their meals at restaurants, respond to their emergencies and nurse them when they’re sick can’t afford to live anywhere nearby?

“People who are taking a step back and looking at the big picture, they want to have a conversation,” Bunker said. “What really drives NIMBY is individual fear about their own house, their own property, their own life. People think about themselves – but this might be an area where we try to think about the collective good.”

THE AFFORDABILITY PARADOX

While communities fight over new housing, there is little turnover in existing stock. Add the influx of new residents and you get high prices nobody predicted.

At a Maine real estate conference in Portland this spring, agent Elise Kiely told industry members that 904 properties sold for more than $1 million in Maine in 2023, up from 307 properties in 2019. In that same time, 185 homes sold for more than $2 million, up from 59.

In 2023, Kiely said, 43% of all sales were cash – presumably paid by buyers able to leverage equity from previous home purchases. One-third of all buyers were not residents of Maine at the time of the purchase.

“It’s not a COVID hangover, because hangovers are short,” she said. “This is a COVID tail, and it’s long.”

Payne, the governor’s housing adviser, said Maine’s attractiveness to outsiders is a paradox.

“It’s an enormous opportunity for long-term economic gains, but it creates this short-term housing challenge,” he said. “Most people moving here have higher incomes and that gives them a competitive advantage. And the people who already own are not interested in leaving their low interest rates behind, so more and more people are fighting over fewer and fewer homes.”

On April 1, there were 426 Cumberland County listings on Maine Listings, the website for all properties. Only 14 were listed for $200,000 or less and 13 of those were mobile homes. In the $300,000 – $400,000 range, which likely includes the homes where many working-class people live, there were 42 properties listed – only 20 of those single-family houses and nearly all far from Portland, in places like Naples and Bridgton. On the high end, 83 listings topped $1 million.

One of the cheapest single-family homes in Greater Portland was a three-bed, one-bath, one-story ranch with less than 1,000 square feet in Westbrook, for $365,000; another roughly the same size in Windham was asking $335,000.

Holly Mitchell, of Portland, has been a real estate agent for 14 years.

“I remember when I started in 2010, I would be meeting with sellers to say they would need to bring money to closing because they were underwater on their loans,” she said. “Buyers actually got to negotiate prices. Offer deadlines didn’t exist.”

Mitchell has seen some signs of a softening market. Homes are staying on the market for more than a day. Some have lowered their asking prices. Prospective buyers no longer take drastic measures to beat out other bidders.

“I’m starting to see my inspector more,” she said because buyers are no longer waiving inspections to get a competitive edge.

But it’s too soon to know whether this is a shift, she said: “I think there are people on the sidelines waiting for the rates to come down.”

Mitchell said the market has been toughest for first-time buyers. “If there is more competition, that floor keeps moving up,” she said.

Her clients Emily Constantian and Brad Miller, both 33, moved to Maine from the Chicago area in September 2021. She’s from Minnesota and he’s from Pennsylvania.

They had no ties to Maine but had visited once and liked the vibe. When Miller was looking for new jobs, he found one here.

“We were ready to go anywhere,” Constantian said.

By the time they entered the market, they knew it would be tough. In a little overa year, they have looked at more than 20 homes and made offers on seven.

“We came in second once,” Miller said with a laugh.

In almost all cases,well-over-asking-price cash offers prevailed.

“Our biggest competition has been from boomers,” he said. “We’ve seen them at open houses. They have cash, they might be looking to downsize but in nice neighborhoods. They are looking for the exact same things we are.”

The couple still looks at listings, but now thinks that the timing might not be right.

“It’s an emotional rollercoaster,” Constantian said. “We’ve almost taken a pause now because we’ve been in it a whole year, and it kind of takes over your life. At a certain point, you just want to live your life. I don’t want to schedule our weekends around showings for houses that we aren’t going to get anyway.”

They have been looking at listings in the $400,000 range, knowing thatthey’ll have to offer at least $50,000 more just to be in the game.

They would be fine with a fixer-upper, but that approach has its problems.

“In some cases, the bank won’t finance if it needs a certain amount of work,” she said.

They are fortunate to be in a stable rental.

“The biggest frustration is: When is it going to change? And will it get worse?” Miller said. “Maybe it’s hopeful thinking, but the longer we’re here, the more people we know, maybe we might hear of something before it’s on the market. I don’t know.”

The market is equally challenging for those who qualify for affordable, or income-restricted, housing.

Rebecca Hatfield, president and CEO of Avesta Housing, one of the state’s largest affordable housing developers, said demand for what Avesta offers has ballooned. Between 2020 and 2022, the number of applications for its units doubled. Last year, Avesta collected 6,500 applications for 420 available apartments. That means only about 1 in 15 people was chosen.

“It’s really a result of decades of underproduction, particularly in our region,” Hatfield said.

Developers of high-end projects know they can turn a profit – even with higher costs. But that’s not true for affordable or workforce housing, and often there are no government subsidies to lessen the risk.

A lack of affordable housing means more and more workers can’t afford to live in or even near where they work, which in turn highlights other problems: a lack of reliable public transit, poor road repair, and greenhouse gas emissions.

“I can’t tell you the number of employers who have hired someone who then (has) to back out because they can’t find an affordable place to live,” said Hentzel, the Portland chamber president.

The chamber is talking with businesses about helping to solve the problem.

“Maybe some places have properties or other resources, or can work in collaboration with developers,” she said. “Businesses need to be a part of the solution. They can be a loud voice around advocacy for housing.”

MOMENTUM AND ROADBLOCKS

Progress, where it’s happening, often moves quite slowly.

Michael Foley was the mayor of Westbrook from 2019 until January, a period ofsignificant growth, including the approval of several large-scale affordable developments. In 2023, Westbrook had more building permits than any other Maine community. Schools weren’t overrun, as some people feared. In fact, enrollment dropped slightly.

Now, Foley is the town manager of Gray, which also wants to plan for growth, one reason he was drawn to the job.

Gray’s leaders have expressed a desire for denser development in its village but they needsewer and water upgrades first.

“We’re probably two, three, four years away from having this done,” he said.

But he agreed that other communities need to do their part.

The Greater Portland Council of Governments is one of the local organizations trying to build consensus to do so. The organization has begun tracking communities’ metrics such as permitting data to try to promote a sense of shared responsibility.

“Scale matters. What folks want to see is development that nestles into the look and feel of a city or town,” said Egan, the council’s director. “It’s important to design housing well, but it’s also important to remind people the cost of doing nothing.”

Jonathan Culley, who with his wife, Catherine, runs Redfern Properties, is responsible for Portland’s tallest building, the new 18-story Casco tower near Monument Square. It’s a mix of studio and one-bedroom apartments, marketed to young professionals and older folks looking to downsize. It’s not a luxury building, but the units are clean, modern and energy-efficient. Rents range from $1,700 to $2,200 a month, though some units cost more.

Culley said the project is a good example of where density should be built, in a pedestrian-friendly, commercial urban district.

The building was approved when a city ordinance required that 10% of units be affordable. Now the requirement is 25% of units in all new housing developments with 10 units or more, a standard Culley finds prohibitive.

“We’d build 10 of these if we could. But that’s no longer feasible,” he said.

Culley is among those who think you need to build high-end homes, too, to prevent wealthy buyers from swooping into middle-class neighborhoods and displacing more people.

“The crisis is more acute than ever, in my mind. It’s a humanitarian crisis,” he said.

Nancy Smith, CEO of GrowSmart Maine, a nonprofit that helps communities grow in sustainable ways that suit them, said those communities that have the infrastructure and are ready to go should be aggressive in courting developers.

But she said increasing housing doesn’t have to mean approving a tall building – or even a new structure.

“I would love to see a focus on the value of redeveloping historic buildings,” she said.

She said that might soften the impact of development on communities.

Tara Kelly, the executive director of Maine Preservation, who came to Maine in 2021 from New York City, said Maine’s history of preservation is a part of its identity and finding ways to preserve its old housing stock is anoverlooked key to fixing the housing crisis.

One easy solution, she said, would be a historic tax credit for homeowners to make improvements, something 28 other states have. That would make it easier for buyers to take risks on investing in older properties.

A historic credit that already exists for developers has been used to create more than 1,300 units of affordable housing since it was established in 2009, she said.

Kelly said some communities, like Biddeford and Westbrook, have found success converting old mills. But that’s just a start.

“Why not office buildings?” she said. “We have this tremendous need, but we also have a ton of underutilized buildings – old grange halls, churches, schools that need a new life.”

Kara Wilbur is a developer who focuses on smaller projects away from metro areas. She recently brought a 55-unit housing project to the former mill town of Madison. She’s also built projects in Sanford, Rumford and Newcastle. She focuses on infill development, which is the opposite of sprawl. She sites projects on underused or vacant land in built-up urban areas or villages.

One example of the kind of project she does, Wilbur said, is a pilot program to build starter homes without the need for subsidies. These would be small, efficient, and perfect for a couple or small family just starting out – an antidote to the hundreds of McMansions that sprang up prior to the 2008 recession.

“Everything has been easy for me because I work in the towns that make it easy,” she said. “I want to work where the community wants housing and knows where they want it. Unfortunately, the places that have the most need are in southern Maine, and that tends to be where zoning is more restrictive.”

Two other recent trends have complicated the housing picture: The proliferation of short-term rentals, which are not widely regulated, and investor-owned properties, which are hard to track but could account for as many as 1 in 5 sales, according to CoreLogic, a California firm that tracks real estate trends. Maine also has the nation’s highest percentage of vacant homes, mostly seasonal or second homes, which means that amid an unprecedented housing crisis and record homelessness, thousands of homes sit mostly empty.

Nick Mascetta, the tax professional who moved back to Maine in 2022, hoping to put down roots in his home state with his partner and young child, said he isn’t a housing policy expert.But on some level, he said, the crisis seems more complicated than it should be.

“I think of the game Monopoly,” he explained. “In general, there’s a fair amount of luck involved. If you roll first and roll well, you get the good properties and have a good chance of winning.

“But at the end of the game, all the pieces go back in the box.”

In the end, Mascetta’s long-view patience seems to have paid off. He and his partner finally found a home after two years of looking. They closed this summer.