Executive Summary

Maine faces a significant housing crisis, characterized by a shortage of housing stock and rapidly increasing costs. These problems have been growing worse over time, and public policy at the state and local level has played a significant role in exacerbating the problems. This report analyzes the impact of local housing policies and proposes solutions to promote housing availability and affordability. It is our hope that a more complete understanding of the impact that certain policies have on both housing supply and cost will lead to more effective state and local decisions that will incentivize building. 

Key Findings

  • Policies such as inclusionary zoning, rent control, and short-term rental restrictions often hinder rather than help the housing market. These regulations can reduce housing supply and increase prices.
  • Towns with land use zoning tend to have higher average house prices compared to unzoned towns. This price difference has persisted since at least 2010 and appears to be widening recently. In 2023, towns with land use zoning had roughly 7% higher home prices than unzoned towns. 
  • Stricter minimum lot size requirements correlate with significantly higher housing costs. A 10,000 square foot increase in minimum lot size is associated with a 4% increase in average house price.
  • With the average home price in Maine over $400,000 in 2024, zoned Maine towns could reduce their minimum lot sizes by 10,000 square-feet and save the average homebuyer approximately $16,000. 
  • In 2023, towns with minimum lot sizes had almost 35% higher average home prices than towns without these requirements.
  • Local governments are best positioned to address housing issues due to their responsiveness to local conditions. However, state policies can significantly impact local markets, and the state should use incentives rather than mandates to achieve local deregulation.
  • Cities with pro-housing policies have successfully increased housing supply and stabilized or reduced housing costs. These cities often employ policies like reduced zoning regulations, elimination of rent control, and improved transparency in local regulations.

Policy Recommendations

Local Level:
  • Streamline zoning codes, allow for mixed-use development, and empower private agreements to manage externalities.
  • Repeal rent control, short-term rental restrictions, and inclusionary zoning policies, as they discourage development and harm market efficiency.
  • Simplify land use codes, make them more objective, and enhance online databases to make regulations easier for developers to navigate.
  • Repeal Energy Efficiency Mandates and avoid policies like the Green New Deal that frontload costs and discourage housing development.
State Level:
  • Reduce upfront costs for developers and incentivize new construction.
  • Streamline the approval process for housing projects and reduce discretionary approvals.
  • Explore third-party permitting options to increase permitting efficiency and reduce government burden.
  • Create a statewide board to swiftly resolve housing-related appeals.
  • Avoid top-down mandates, which towns can easily circumvent, and find ways to incentivize voluntary local deregulation. 

Conclusion

Maine’s housing crisis is significantly influenced by restrictive land use policies at the local level. By adopting pro-market reforms, Maine municipalities can increase housing availability, improve affordability, and foster economic growth. State-level policies that reduce regulatory burdens and incentivize development can further support these efforts. It is crucial to recognize that market forces play a vital role in housing supply and that government intervention should aim to support rather than hinder these forces.