Housing shortage stunting Maine’s economy

ROCKPORT – The message Monday at a statewide gathering of housing experts was as sharp as a carpenter’s nail: All the new jobs in the world won’t help Maine’s economy if workers have no place to call home.

Using charts, graphs and plenty of numbers, speakers at the Governor’s Affordable Housing Conference made the simple – but critical – point that a housing shortage has choked the state’s economy and threatens to stunt it for the long term.

Maine has the seventh-oldest housing stock in the nation, Maine State Housing Authority director Michael Finnegan said. A $12 million bond issue that voters will face in November would assist in building 750 more housing units, he said.

A household earning the state’s median income of $36,400 would have only 82 percent of the amount needed to afford the median home price in Maine, Finnegan said.

“Demography is destiny,” consultant Frank O’Hara told the 400 people attending the conference as he presented charts showing the population and housing trends of the past three decades. O’Hara, of the consulting firm Planning Decisions, outlined problems with the state’s housing stock and some strategies for closing the gap between the low supply and high demand

In the 1970s, 25,818 rental units and 62,915 owner units were built in the state, O’Hara said. In the 1980s, 26,445 rental units and 48,672 owner units were built.

In the 1990s, the number of new rental units dropped sharply, to just 8,356, while 43,421 new owner units were built. Housing – especially rental housing – has not kept pace with the demand, particularly in southern Maine and in coastal areas, he said.

Having apartments with affordable rents is key to bringing young people into the state for jobs, and for retaining the young adults who have grown up in Maine, O’Hara said. In Portland, which he said has been an engine for new jobs, the average two-bedroom apartment rent was $525 a month in 1991, but climbed to more than $700 by 1997. It is $835 per month this year.

“Maine’s economy depends on attracting young people,” O’Hara said, making the lack of moderately priced apartments critical.

In the 1990s, the Portland area saw 23,300 new jobs, but only enough housing to support 15,000 new households. “Of these, only 3,000 were rental units,” O’Hara noted in the report.

“You’re going to choke off your own growth,” he warned.

That comment was echoed by state Economic and Community Development Commissioner Steven Levesque.

The state saw the lowest unemployment in its history in 2000, but the economy began to falter in part because “we simply ran out of people in Maine,” he said.

Housing by itself does not create economic development, O’Hara noted. The parts of the state that have the most available and affordable housing – Franklin, Piscataquis, Aroostook and Washington counties – did not see the economic boom of the past several years.

O’Hara offered five strategies to ease the housing shortage:

. Create more apartments. The Maine State Housing Authority has offered grants to convert older houses into apartments, and O’Hara and Finnegan suggested more money should be devoted to this program.

. Upgrade neighborhoods. In Augusta, for example, the city saw $16 million in new commercial and industrial valuation between 1994 and 1999, and $60 million in new residential valuation in the same period.

“Building up residential neighborhoods can be the biggest mother lode of property taxes,” O’Hara said, something most municipal officials would find attractive.

. Support retirement housing. The boom was born of market forces, he said, but public policy should help sustain it. According to O’Hara’s analysis, 3,000 retirement apartments and cottages generate $75 million in rent and maintenance fees each year, and sustain directly or indirectly 3,400 jobs. He noted that the retirement housing sector is virtually recessionproof.

. Work to boost the construction industry by encouraging construction of apartments and retirement housing, increasing repairs to existing homes, and developing manufactured housing that could be exported to the rest of New England.

. “Build neighborhoods and communities instead of units,” O’Hara said. He related a tour he took of a retirement complex in South Carolina in which the housing was barely mentioned in the course of a two-hour tour. The focus was on lifestyle, which is also what Maine policy-makers and those in housing, real estate and banking businesses should emphasize.

Reiterating the theme of the conference in his keynote address, Gov. Angus King said housing may not be the most important factor in economic development, but the state is “perilously close” to seeing growth stall due to a lack of housing.

“We are 50th in the nation in developing multifamily housing,” he said. “We’ve got to do better.”

King said houses are still built in much the same manner as they were 150 years ago, “except with nail guns.” He called for the construction industry to look for technological advances to make construction cheaper.

The governor also said building codes should be modified to encourage renovation of the older multistory buildings found in most Maine towns and cities. Current codes may call for a 5-foot minimum hall width, King said, and the buildings may have 4-foot-wide halls, so the upper floors remain vacant.