- Real Estate
Vacationland. Lobsters and lighthouses. The most forested state east of the Mississippi. Regularly in the lead for the oldest population in the nation, and the least diverse. But these rural markers have not spared this New England state of 1.4 million people from America’s housing crisis. Here is the story behind Maine’s battle in the housing war.
A State Steps into Local Land Use
In a land where Home Rule (local control) reigns supreme, the State Legislature in Maine rarely wades into local land use. Even when it does so, small towns are usually exempted from any laws it might pass. But in 2021, after the Legislature’s Commission to Increase Housing Opportunities in Maine released its recommendations, the Speaker of the House took up a slate of housing laws requiring changes to local zoning.
It was a hard-fought political battle, but the resulting bill (LD2003) passed 68-43 (with 36 absent!) and was signed by the Governor in April 2022. Departmental rule making and grace periods (and a failed effort to rescind it) means the law goes into effect in 2024 in most places.
Since then, the law has been the talk of every local board and council, planning office, and town manager’s office. Most municipalities have been working diligently since 2022 to get in compliance ahead of the 2024 deadline.
So, What is in the Law?
ADUs by Right: An ADU is an “accessory dwelling unit” (sometimes referred to as an in-law apartment) that is subordinate to the primary residence in both size and setting. LD2003 allows property owners to add up to two ADUs to all existing single-family residences, either within the existing structure (such as a suite of rooms), in an ancillary building like a garage, or attached to the primary house. A municipality cannot set any additional requirements for setbacks, minimum lot size, or parking that do not already apply to the existing residence.
No More Single-Family-Only Zoning: While homebuilders may still construct single-family houses, a municipality may no longer outlaw duplexes (or two-units) in its zoning. A town may require a larger lot size for a duplex, but the most it can be is in multiples of the first unit (for example, one acre for the first unit, two acres for a two-unit, and so on). This might seem non-controversial, but some municipalities’ zoning (even in the larger cities) prohibited the construction of any additional housing units no matter how many acres were owned.
New Density Bonuses: On any property with access to water and sewer utility (or otherwise in a Growth Area identified in a town’s comprehensive plan), builders may construct up to four units as long as they meet the existing lot’s setback and height restrictions. If those units are made affordable for residents earning 80% of the Area Median Income, the builder may construct 2 ½ times the zoning allowance (within existing setbacks and height limits) – equaling 10 units! The law also prevents onerous parking requirements for these density bonuses.
Technical Assistance and Housing Studies: LD2003 includes funding for towns to get technical assistance to comply with the zoning changes, and commissioned a statewide housing production needs report.
That report found that Maine was lacking the 80,000 housing units needed to meet demand in the next 10 years. It repeated the story we hear everywhere in America: retirements are up and so is hiring, with demand growing faster than housing can be built for new workers; this means more competition for existing housing, dramatically driving up prices.
With adoption deadlines still ahead, it’s too early to tell what impact the new zoning laws will have on housing production. However, we’ve come across some anecdotal evidence among early adopters of the ADU component: Construction costs are still too high to make new ADUs cost-effective as rentals (some standalone backyard modular ADUs cost $300,000).
However, some parents of adult kids are building ADUs as a means of providing an affordable place for their children to live (even if subsidized). When the kids eventually move out, that ADU may be available to the private rental market.
New Missing Middle Housing Grants
Using American Rescue Plan Act (ARPA) funds, MaineHousing (an independent housing agency founded by the Legislature in 1969) launched two grant programs for building new “missing middle” housing and rentals.
- The first fund, the Affordable Homeownership Program, provided a $60,000-$70,000 per unit grant toward direct construction costs for a housing subdivision with at least five new units priced for buyers making 120% of Area Median Income.
- The second fund, the Rural Affordable Rental Housing Program, offered up to $200,000 in a zero-interest, deferred-payment loan per unit for new apartments between five and 18 units that are rented affordably at or below 80% of Area Median Income. This program is especially targeted to development projects that aren’t big enough to avail themselves of Low-Income Housing Tax Credits (LIHTC), often located in rural areas.
Portland, ME: A City Wrestles with Housing Scarcity
The City of Portland, ME, is a small metropolis by most measures, with some 70,000 residents nestled in a US Census Metro Region of approximately 250,000. A historic seaside city, it boasts a cross-Atlantic freight port, a jetport, two interstates, three university campuses, and an internationally renowned foodie scene.
Situated on the East Coast, this charming Victorian city was “discovered” starting in the 1980s by Bostonians and New Yorkers who found its low cost of living irresistible. When the remote-work trend arrived with the pandemic in 2020, New Yorkers soon found they could take their Manhattan salaries and raise their families in quaint Portland neighborhoods with ocean views. Housing and rents skyrocketed. In response, a number of housing reforms have been enacted over the last decade.
After the murder of George Floyd in 2020, many Portlanders expressed their outrage at the injustice, followed by a renewed populist movement in city politics. That year, activists initiated six referendum questions on the local ballot, including one that focused on rent control.
The rent control referendum sought to restrict rent increases to an inflation benchmark, extend the amount of notice a landlord must provide to evict a tenant in good standing, increase the amount of notice a landlord must provide before a rent increase, and found a municipal rent board to mediate tenant/landlord issues.
What are the Results? Rent control has not prevented new apartments from coming online because new rental rates become the basis (starting point), and inflation-based increases are in keeping with most business model standards.
Where it hurts the rental market in the long run is with apartments that had under-market rent when the ordinance went into effect. That low starting point means the apartment cannot “catch up” to market rents when the apartment turns over. The landlord is forever obliged to offer sub-market rent and implement rent increases at every cycle (whereas before many landlords would wait for a turnover), culminating in steady rent increases while simultaneously disinvesting in the property as maintenance costs grow.
For most at-market rentals, there has been little noticeable change. The rate of rent increases has subsided modestly since the ordinance took effect. Voters have twice rejected referenda to amend the law.
In response to a tragic apartment fire that claimed the lives of six tenants in 2014, the city manager proposed a new rental registry that was ultimately adopted by the City Council. The registry’s annual fees pay for regular life-safety inspections of all apartments in the city.
What Are the Results? The rental registry has largely been a success once landlords became accustomed to registering apartments each year. Safety inspections are now conducted periodically and the entire rental stock has been inspected at least once since the ordinance was passed.
In 2015, the City of Portland adopted an Inclusionary Zoning policy that required developments of 10 housing units or more to reserve 10% of them as affordable to the local workforce, or pay an in-lieu-of fee into a housing trust fund in order to opt out. In 2020, a public referendum increased that number to 25%.
What Are the Results? While the original 10% mandate did not deter new development, the higher 25% threshold has dissuaded most mid-sized projects (over nine units). Large-scale projects are still advancing, but the required affordable units are being bundled together for Low Income Housing Tax Credits. The City Council cannot amend the law again (if so desired) until 2025 because of local referendum rules.
Short-Term Rental Registry
In 2017, the Portland City Council approved a short-term rental registry. The ordinance allowed short-term rentals of primary residences but prohibited them in non-owner-occupied single-family houses. The number of short-term rentals outside of owner-occupied units allowed in the city was also capped at 300 with a lottery for new licenses.
What Are the Results? The short-term rental registry has stabilized the number of short-term rentals available in the city and limited the number of houses purchased by investors for short-term rentals. Voters have rejected referendums to amend the law.
Portland now commissions an annual housing report to track trends.
Other Housing Crises
Since 2020, Maine’s homeless population has more than tripled, resulting in several encampments around Maine’s cities. Portland’s approach to encampments has been primarily to connect tenants with social workers. The State has also led several “sweeps” on State land, which temporarily disperses campsites before they reform elsewhere in the city. The City has cleared several parks as well with the same result. With an estimated 1,400[i] homeless individuals living in the city limits, it is the most critical public policy and humanitarian concern in the city right now.
After a long political fight, Portland held a ribbon cutting in April 2023 for a new Homeless Services Center on the outskirts of the city with 208 beds. Then, in November 2023, the City Council voted to add 50 bunkbeds to the shelter.
In 2019, Portland began receiving busloads of asylum seekers from the Texas border. Many were from Western African nations who first traveled to Brazil before making their way through Central America to Mexico and the southern US border. Their stories of odyssey were harrowing.
The City Manager dedicated a public gymnasium that summer as a temporary shelter for 450 refugees. By that fall, the regional planning agency launched a homestay program where city residents hosted families until more permanent housing could be acquired.
Then COVID-19 struck, and American Rescue Plan Act (ARPA) funds helped pay for temporary housing at motels and hotels with vacant rooms. But the chain migration continued. In 2023, Portland saw an estimated 1,900[ii] new refugees arrive. The City paid a developer to convert a warehouse into a shelter for new refugees with 180 beds, opening in December 2023.
In Conclusion …
The State of Maine and the City of Portland do not have all the answers to America’s housing crisis, but for such a small state, they are implementing a remarkable number of advanced policies.
Maine’s and Portland’s experiences, policies, and results make for excellent case studies as all Americans navigate this impossible housing market.
[i] Author’s estimate based on various press reports.
[ii] Author aggregated several partial year counts reported in the media to arrive at 1,900.
As housing availability and affordability problems grow in severity across the country, Camoin Associates is helping public and private organizations of all sizes analyze and address their housing needs, and developing strategies and solutions tailored to each community. Learn more about our housing and real estate development services.