Growing Pains Companies consider housing affordability when pondering expansion

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For all of its 3,500 miles, it’s hard to imagine a real-estate shortage along Maine’s coast. But a shortage, driven largely by buyers arriving from more mature, mostly urban markets, is just what many experts agree has propelled the state’s vaulting home prices.

That shortage has made property sales and financing a bright spot through several years of an otherwise glum economy. It also has driven up home prices, rents and property taxes, forcing the effects of the housing drought up through new ranks of Maine’s work force.

Those effects include more workers sacrificing added drive time and child care costs for a home they can afford. For many employers along the Route 1 corridor, it means watching their labor base migrate farther from the coast.

As they do, the familiar issue of affordable housing, once seen as a consequence of low income or unemployment, could be developing into a much broader concern.

“This is not happening across the board, but very slowly, there are pockets of businesses here and there recognizing that affordable housing is a business problem,” said Valerie Lamont, director of the University of Southern Maine’s Real Estate Education Center.

“Work force housing” is the term increasingly applied to what once were low-income or affordable housing projects. Planning theory generally holds that bolstering the low-income end of a community’s housing supply will ease availability and pricing in other tiers of its market.

But many areas with limited need for low-income housing have watched home prices outstrip salaries in critical job categories including teachers, police, municipal workers and firefighters. Now the pinch has moved up the pay scale, affecting medical professionals, lab researchers and university professors.

“The answer is yes, it’s a significant issue,” said Michael Miles, human resources director at the University of New England, a medical school and research institute with campuses in Portland and Biddeford. “Once people get here and do a tour around and see what housing prices are like in southern Maine, it’s sticker shock. It causes some folks not to come.”

Many new hires who do arrive join the search for affordable homes, and help to drive the effects of the coastal shortage deeper into the state.

State Housing Authority figures released last month show a 15 percent increase last year in the number of communities where the households with median pay could no longer afford the median price of a home. Of the 21 communities new to the list, 16 were more than an hour north of Portland.

To residents along the coast, housing and labor shortages are nothing new. Past problems, however, have generally been limited to a seasonal mad scramble during high-traffic summer months.

The recent price run-up has matured that scramble into a perpetual concern for communities such as Camden and Belfast and on Mount Desert Island. In Hancock County alone, housing needs assessment studies are under way or recently completed in Ellsworth, Bucksport, Castine and Blue Hill.

A growing number of businesses say the housing issue has made its way to their balance sheet. The problem appears to be most acute in coastal hospitals, colleges and research firms, which compete nationwide to attract professional staff.

At Northeast Health in Rockport, recruitment specialist Mary Sargent said housing costs continue to weaken the “way of life” magnet traditionally so effective in attracting outside health care workers.

Northeast employs a 1,200-person staff at a half-dozen midcoast health care operations, including Penobscot Bay Medical Center in Rockport and Quarry Hill Retirement Community in Camden.

Sargent said the lack of available rentals discouraged so many job candidates that Northeast resorted to shelling out $24,000 for annual leases on two apartments to ease incoming employees into the rental market.

“And very rarely are those places empty,” Sargent said. “I’m booking just as tightly as I can.”

Health care jobs are among Maine’s fastest-growing employment categories, generating 17 percent of total payroll in the state. Projections say growth will continue as hospitals and nursing homes expand to care for an aging population.

“How you house those [additional workers] is going to be critical to accommodate the growth in that sector,” said State Housing Authority director Michael Finnegan.

As the economy improves, the crunch could grow worse. Gov. John E. Baldacci announced last month that Maine could see as many as 5,000 new jobs this year. A planner’s general rule says an area should add 700 new units of housing for every 1,000 new jobs created.

According to that rule, 3,500 additional housing units are needed to support incoming jobs this year. Finnegan said a $159 million pipeline of pending, multiunit construction projects promises to add more than 1,600 units to the state’s affordable housing inventory over the next 24 months. Projects are slated for the coast in Waldoboro, Damariscotta, Rockland and Perry.

The additions would create a 6 percent increase in affordable housing stock. The state meanwhile has seen a 250 percent increase in requests for rent subsidy vouchers since 2001. On Feb. 7, Maine Revenue Services confirmed that the state’s $23.3 million annual housing subsidy allocation was scraping bottom, leaving payment uncertain for as many as 3,000 families through the remainder of the fiscal year.

Bruce Starrett, vice president and co-owner of Penobscot Frozen Foods in Belfast, can’t say whether housing is the cause. But he can say keeping more than 200 factory floor jobs filled has grown tough.

“Years ago, it was never a problem to find a warm body. Now it’s a challenge,” Starrett said.

Starrett said any further tightening of the labor pool would force the company to invest in more automation equipment. The change would be costly but effective, he said, and an option clearly not available to all businesses.

The Hinckley Co. in Northeast Harbor moved its manufacturing facilities off Mount Desert Island to Trenton during a 1998 expansion. Hinckley marketing director Nancy Austin said housing costs for the company’s 400 workers did not figure directly into the decision to relocate. Austin said the move did provide access to a broader labor pool and shorter commutes for workers coming from Bucksport, Bangor, Brewer and Machias – all less expensive housing markets.

Mount Desert Island Hospital spokesman Jeff Nichols said his organization has had few problems filling vacant positions. But the cost of filling those jobs has grown. Salary and benefits are about 60 percent of overall revenue and increasing.

When asked if there is a connection between that increase and housing costs on MDI, Nichols said, “Yes, there is absolutely. We struggle to remain competitive in terms of our salaries, given the lack of available and affordable housing.”

In spite of rising home costs and a redistributing work force, many businesses say they have not yet been touched.

Hannaford Bros., which operates 20 grocery stores along the coast, reports no problem in filling vacant job slots. Credit card lender MBNA employs 2,000 workers at its Belfast campus and about 2,500 others in offices across the state. Spokesman Carolyn Marsh said the company has seen no direct effect from housing costs or a lack of qualified applicants.

Robert Hastings, director of the Rockland-Thomaston Chamber of Commerce, said businesses there have reported no difficulty in hiring, even after a spate of national retailers opened there last year.

At the other end of the scale is the fast-growing Jackson Laboratory, which reports a significant impact on its ability to compete for and house employees. After doubling in size in the past decade to 1,300 workers, the company has established a commuter bus to shuttle employees from as far afield as Bangor.

Human resources manager Hook Wheeler said balancing salary offers to the island’s cost of living has become a losing battle.

“We’re talking dramatic increases of 50 to 70 percent in towns around here in the last five years,” Wheeler said. “Clearly our salaries haven’t elevated by the same amount.”

Does this, in turn, reduce the state’s ability to attract new research and development businesses? Department of Economic & Community Development director Jack Cashman concedes spiraling property prices have raised barriers to economic development along the coast. But regions farther north and inland, Cashman said, continue to undercut the competition among states vying for new business.

“In probably 90 percent of the state, I think housing prices are an advantage to us,” he said.

Observers like Lamont suggest a growing number of existing businesses along the Route 1 corridor could be forced to follow the example of Northeast Health and enter the real estate management trade in order to stabilize their work force.

Greg Dugal, executive director of the Maine Innkeepers Association, said the state’s increasingly year-round hospitality industry is an early example of that trend. Hotels like the Asticou Inn at Northeast Harbor and the Colony Hotel in Kennebunkport built staff dormitories to support the seasonal staffing binge. The Samoset Resort purchased a home in Rockland to house summer staff. Portsmouth, N.H.-based Ocean Properties, which owns three hotels in Bar Harbor, dedicates its Days Inn Hotel in Tremont to employee housing during the summer.

Once largely a seasonal sector, 60 percent of Maine hotels and motels are now open year round. As more inns remain open, Dugal said the need for staff housing could push the problem onto more operators and beyond the summer months.

“The issue has been sort of lurking out there – always seemingly just below the radar screen,” Dugal said. “But to me, it is a crisis waiting it happen.”