Maine needs 84,000 new homes in the next 7 years, report finds

A new house under construction at 27 Dylan Drive in Scarborough. A report by state housing agencies says Maine needs to nearly double its homebuilding rate to meet current and future demand through 2030. Derek Davis/Staff Photographer

The state needs to build up to 84,000 new homes in the next seven years to accommodate its existing population and the people expected to move to Maine, according to a report from the state and MaineHousing.

Maine’s housing market has been plagued by historic underproduction of homes, some of the oldest housing stock in the country, an influx of in-migration, a changing labor force and a steep climb in home prices.

These contributing factors have snowballed and now, policymakers are scrambling to figure out how to nearly double the annual number of building permits issued in Maine each year and rehab existing but deteriorating homes to house current and future Mainers.

“There just literally aren’t enough homes for people to move into if they need to,” Christiana Whitcomb, a director for HR&A Advisors, which provided the research for the report, said in a call Tuesday with reporters.

The report, a collaboration between MaineHousing, the Governor’s Office of Policy Innovation and the Future, and the Department of Economic and Community Development, does not present possible solutions to the state’s housing crisis but rather examines the current state of housing production and stock, the economic landscape and shifting state demographics to determine how many units are needed for people of all income levels.

The short answer: a lot.

The total number of homes in Maine – not just the number of new homes being built – needs to increase by about 11%.

Officials estimate Maine needs approximately 38,500 homes to remedy historic underproduction and will need an additional 37,900 to 45,800 homes to meet expected population growth and household change by 2030.

The report, based on a study by HR&A Advisors, a New York City-based real estate and economic development consulting firm, stresses the need for inter-governmental collaboration and statewide efforts to address the development and capacity of the construction industry and environmental challenges, as well as state and federal funding. Officials said the study is the first to examine the need for housing both currently and in the future, and across all income levels statewide.

“The historic hyper-local response to what is ultimately a regional problem has been one of the primary barriers in Maine and nationwide to building enough homes,” the agencies wrote in the report.

The study was initiated in response to L.D. 2003, a new law that requires municipalities to increase housing density and allows additional units on lots zoned for single-family homes, including at least one accessory dwelling unit. The law went into effect in July but the bill’s requirements won’t take effect until January or July 2024, depending on the town.

While the report focuses more on identifying the scope of the problem than how to solve it, there’s also an emphasis on the roles that individual municipalities will play in the next steps.

State officials are working on an online database of baseline housing conditions at the state, county and municipal level to help municipalities and developers track progress and make decisions. Improved collection of building permits, demolition data and vacancy trends also will be important, as well as more data to understand the specific housing needs of the state’s aging population, asylum seekers and people experiencing homelessness or housing quality issues, the report states.

Towns and cities will set housing production and reinvestment targets and consider what housing types will best serve their populations.

“To move from the regional level to the local level will involve consideration of local obstacles such as available infrastructure, development capacity and other factors,” the report said.

NOT ENOUGH HOMES

The study estimates that Maine needs an additional 16,500 homes right now (9,300 of those in coastal communities) just to create a healthy rate of availability for existing residents. It would need another 22,000 homes to support the roughly 24,000 workers that the state needs to fill the number of currently open positions.

That’s 38,500 additional homes just to accommodate the people the state currently has or needs for the economy to operate as it should.

But Maine’s population is increasing. Last year, the population grew at more than twice the national rate despite the number of deaths outpacing the number of births.

Maine’s population increased by just over 13,000 people from 2021 to 2022, almost 1%. The national growth rate was about 0.4%. The previous year showed a roughly 9,900-person increase.

By 2030, the state is expected to add another 35,000 people, or 3%, to the population. The report estimated these residents will need 37,000 to 45,000 new households to accommodate not only the people but also a healthy vacancy rate and an allowance for seasonal home use, the report said.

The report found that the consistently high demand for seasonal homes means that Maine has historically required a higher number of homes relative to the number of year-round residents and available jobs than states with lower seasonal demand.

A healthy housing market has a roughly 5% vacancy rate, meaning the number of homes that are empty and available for use at any time. Maine’s share of vacant and available homes has fallen to an average of 2.3%.

These recent and projected increases are driven by in-migration and not by any kind of baby boom. The trend of deaths outnumbering births has been going on for the last decade and the gap is expected to widen in the years ahead because Maine already is a relatively old state and because fewer people are having babies.

NOT ENOUGH MONEY

The number of people moving into Maine, a trend driven partly by the pandemic, has increased the demand for housing in a market with already limited inventory, driving up prices to levels that most existing Mainers cannot afford.

In 2020, the average Maine income was $78,000, while the average income of people moving to Maine was $88,000. But even the “in-migrants” are struggling to afford a house.

Maine families now need to have an annual household income above $100,000 to afford a home. In August, the median home sold for $372,000.

The shortage of affordable housing has long been documented in Maine. The National Low Income Housing Coalition estimates a shortage of 22,300 affordable and available rental homes for households making at or below 50% of the area median income.

But the lack of inventory is putting a squeeze on people of all income levels, across all types of housing.

“There just literally aren’t enough homes for people to move into if they need to,” Whitcomb, the director for HR&A Advisors, said during a call with reporters.

The state’s rapidly aging population means that thousands of people will retire in the coming years and Maine will need to draw workers from out of state to fill their positions, as well as the many positions that are currently vacant. Those workers will also need houses to live in.

“Many of these jobs skew somewhat lower income, reflecting a growing mismatch between what many new workers could afford and the price of Maine’s available homes,” the report said.

State officials have been working to boost the amount of available affordable housing.

Between 2000 and 2018, the state invested about $65 million into affordable housing production. In the last five years, that number increased to $285 million.

It’s a huge boost, but that $285 million can’t go as far as officials would like because the cost of building has increased so drastically, said Greg Payne, senior adviser of housing policy for the Governor’s Office of Policy Innovation and the Future.

More needs to be done at all levels.

“Clearly, we have a challenge in front of us that’s greater than anything that we’ve experienced before,” Payne said, stressing the need for collaboration at the state and local level to help spur development from the private sector.

State and local officials need to continue to support successful programs that build affordable housing, but “that’s never going to be enough when we’re talking about need this high.”

The study will be discussed Wednesday during the Maine Affordable Housing Conference in Portland.