When Mainers shoot down a proposed housing development as unaffordable, they could actually be hurting their cause.
“I appreciate genuine concern over affordability,” Jason Bird, housing development director at Penquis, Bangor’s community action agency, said. “But any new unit of housing helps overall supply, and we are tens of thousands of units short.”
Historic housing underproduction means that Maine is short up to 40,000 homes right now, a landmark housing study found last year. Nearly 18,000 of those units are needed for extremely low-income households, defined as those making less than 30 percent of a given area’s median income, the National Low Income Housing Coalition estimates.
While the need to build more affordable housing often garners the most attention, experts say options at all income levels are needed to ease Maine’s housing crisis, as the problem is fundamentally one of too much demand amid low housing inventory. Still, there is disagreement within the development community over the extent to which creating luxury housing helps affordability.
“We know where the greatest need is, but we need housing for all people in Maine,” Laura Mitchell, the director of Maine’s Affordable Housing Coalition, said. “If there were more homes available, it might bring some costs down.”
Around 4,000 homes are on the Maine market this month, according to Redfin. That’s a far cry from even five years ago, when inventory hovered around 10,000 homes. A lack of options for homebuyers means that higher income earners will take whatever is available and “squeeze out” low- to middle-income households, Tyler Norod, development director at Westbrook Development Corporation, said.
“Even building luxury housing, if you build it dense enough and provide enough of it, will have positive impacts down the food chain on the rest of the housing market,” Norod said.
But not all developers agree.
“A lot of the luxury housing is targeted to people who aren’t here now. If that’s the case, then it’s not trickling down and not emptying out a unit,” Kevin Bunker, founder and principal of Portland-based Developers Collaborative, said.
Bunker is building higher end condominium units in Portland for which about half the buyers are from out of state. The benefit to affordability of building market rate or higher end housing is less about that “trickle down” effect, he said, and more about curtailing developers’ pricing power.
“If there’s 100 people looking for 10 units, I’m going to find people who are going to pay the most,” he said. “But if there are 100 people in the market, and 150 units, all of a sudden that consumer has power and [developers] are going to have to cut prices and offer amenities.”
Creating more market rate housing is not only proven to cut rents, these developers said, but it is also easier to finance. There’s only so much public funding available for affordable housing projects, Norod said, and inflated interest rates and costs for supplies like lumber and concrete are hiking up project price tags. Building market rate represents an easier pathway to meet the state’s lofty overall goal of at least 76,000 new homes by 2030.
“Market rate units are much easier to pencil out,” Bird said. “There are few if no restrictions on rent increases, if needed.”
Building and financing new housing for middle-income earners — who make too much for subsidized units but too little to finance the average Maine home price — is even more difficult to justify, but that’s the demographic that stands to benefit most from alleviating pressure in Maine’s inflated housing market with added supply, Norod and Bunker said.
“I don’t know of any [income level] that’s over-supplied right now. We may get to that point at some point, but we certainly don’t have to worry about it right now,” Bunker said. “People get all upset about certain kinds of housing. We kind of need it all.”
