This home on Kings Highway in Kennebunkport sold for $8.4 million last year and was one of the most expensive homes sold in Maine in 2024. Gregory Rec/Portland Press Herald file

A record number of Maine homes sold for over $1 million last year, and with 2025 shaping up to be equally lucrative, lawmakers are weighing whether to cash in on some of those sales to fund a slew of affordable housing programs.

A bill proposed by Maine House Speaker Ryan Fecteau, D-Biddeford, would increase the real estate transfer tax – a tax when a property changes hands – from $2.20 to $5 per every $500 over $1,000,000. That cost is usually split between the buyer and seller. Currently, a $1.5 million home would carry a tax of $6,600. If the bill becomes law, the tax would be roughly $9,400 or an additional $1,400 for each party.

“This is an infinitely small difference for such a significant transaction,” Fecteau said when presenting the bill Thursday to the Committee on Taxation.

Before the pandemic, Maine was producing about 250 units of affordable housing annually, just one-quarter of the 1,000-unit target. But during the pandemic, thanks to an infusion of federal dollars, the state invested in affordable housing production and began to eclipse that target, Fecteau said.

“Now, as those federal dollars phase out, we need to find a way to maintain our momentum so that housing production does not fall back to a rate that will fail to meet our state’s housing needs,” he said.

By adjusting the real estate transfer tax for properties selling for over $1 million, “it was clear that this could be a way to unlock a sustainable funding source for the creation of new multi-family and single-family housing,” he added.

This bill also seeks to give first-time homebuyers a leg up in the competitive market by exempting from the tax those homebuyers (and therefore sellers) who use the Maine State Housing Authority’s first-time homebuyer mortgage loan programs. 

“If approved, it would be the biggest tax relief for first-time homebuyers in the history of our state,” Fecteau said.

The bill directs “the amount necessary and sufficient” to meet the bond obligations under the Maine Energy, Housing and Economic Recovery Program, which is designed to help MaineHousing build or rehabilitate energy-efficient affordable rental housing.

The bill divvies up the bulk of the remaining balance between the Housing First Fund and the Housing Opportunities for Maine Fund — both of which the tax already supports — as well as the state’s affordable housing income tax credit program and MaineHousing’s rural affordable rental program and affordable homeownership program. Any leftover money would go to the General Fund, which already receives a portion of the tax.

MORE SELLING FOR MILLIONS 

Maine’s real estate transfer tax has been stagnant since 1993, when the state’s median home sale price was under $100,000, according to Greg Payne, senior adviser on housing policy in the Governor’s Office of Policy Innovation and the Future.

Legislators have proposed an increase several times in the intervening 30 years, but the measures have consistently been defeated.

Fecteau believes that the state finally has the right conditions — a booming luxury market, a dire affordability crisis and a vice-like inventory squeeze — to make the case.

Maine’s luxury real estate market had a record year in 2024, with more than 1,100 properties selling for more than $1 million and 21 properties for more than $5 million, according to data from Elise Kiely, a real estate agent at Legacy Properties Sotheby’s International Realty.

Not only were the 1,146 high-end properties sold last year a record, the number was roughly quadruple the 307 sold in 2019.

The trend held for homes over $2 million — increasing from 59 to 237 over five years — and $5 million, going from just five homes to 21.

Luxury properties are taking up a larger share of the market, jumping from about 1.5% of annual sales to 7% in just five years.

Meanwhile, Maine’s traditional single-family home market also saw a substantial jump, going from a median sale price of $225,000 in 2019 to $390,000 last year, a 73% increase. In some southern and coastal counties, the median is over $500,000.

“We are concerned that high-end home purchases are distorting Maine’s housing markets in unprecedented ways, making it that much more difficult for first-time homebuyers and others of modest means to gain access to the ladder of economic opportunity and wealth-building that homeownership can represent,” Payne said. “It is important that we get this reform right, and that we be forward-looking in an environment of rapidly escalating home prices.”

Fecteau noted that last year, MaineHousing’s first-time homebuyer program financed 925 loans, meaning the population receiving tax relief would be almost equal to the population being taxed more.

‘EVERY DOLLAR COUNTS’ 

Brian Eng, a real estate investor who has helped build units through the rural affordable rental program, said the tax change is a “no brainer,” given that the cost to meet the state’s affordable housing needs is “in the billions.”

The additional tax on luxury properties is unlikely to affect fluidity in the market or whether transactions will close, he said, while the tax relief for middle-income Mainers would be impactful.

“At the lower end, every dollar counts,” he said.

Eric Burmeister, a retired Saco resident with a background in real estate development, said a stable source of funding for some of the state’s affordable housing programs is key to builder and developer confidence.

“As we take a look at a sustainable and permanent source of funding for these programs year after year, we can in good faith ask our developers and our builders to continue to put time and effort into projects … knowing that when it comes time to close, the funds that the state provides for affordable housing (will) be available,” he said.

But while the bill was broadly supported by affordable housing advocates and agencies, others were not on board.

Aaron Bolster, a real estate agent testifying on behalf of the Maine Association of Realtors, said the tax would only compound housing availability and affordability challenges.

“This tax unfairly shifts the cost of addressing Maine’s housing needs disproportionately on those purchasing and selling real estate and creates distortions in the market that have ripple effects on properties,” he said.

While the legislation largely appears to be a “millionaires tax” or a “mansion tax,” he noted that it does not distinguish between residential and commercial property.

“An impact will be felt much more broadly than intended,” Bolster said.

Because many multi-family building purchases are over $1 million, “the increased costs would not only impact the buyers and sellers, but would be passed down to tenants as rental properties become more expensive to purchase,” he said.

Sen. Bruce Bickford, R-Auburn, meanwhile, said that if Maine wants economic growth and for people with money to move into the state, “I’m really trying to understand why you want to attack the people that we want to attract.”