There are very few homes for sale in Portland and in many other Maine communities. Credit: Troy R. Bennett / BDN

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Markets work.  

Take housing. By most accounts, there is a huge shortage of housing in Maine. During COVID, Maine saw significant in-migration from people fleeing more densely populated areas.

It’s Economics 101. With limited supply and growing demand, prices increase. And increase they have. Last November, the median house price in Maine was up 11 percent compared with the previous year. The same dynamic is at play with rents.    

For those selling housing, either by deed or lease, the market is in their favor. For many older Mainers, big increases in house prices means a more comfortable nest egg as they approach retirement. So trying to advance a policy that takes money out of their pocket is a challenge.

To lower prices, you have to do one of two things; decrease demand, or increase supply. That’s it. All the government assistance in the world — housing vouchers, rural loans or anything else — doesn’t change this. Those programs just make high prices more palatable for would-be buyers.

Decreasing demand for Maine housing seems like a bad idea. We are the oldest state in the union and we have a workforce shortage already. If we want prosperity, it won’t come from a shrinking population.

Which leads us to door number two: Increase supply.  

That was one of the big debates in Augusta this past week. Democratic House Speaker Ryan Fecteau presented his bill that would make significant changes in Maine for housing development. It isn’t partisan; he has Democrats as opponents and Republican co-sponsors.

The proposal would do a number of things, like create a state-level appeal board for certain municipal permitting decisions. It requires that “accessory dwelling units” — in-law apartments — be allowed in every single-family home. It gives property owners the right to build four dwelling units on any lot in the state where housing is permitted, provided water and sewer requirements are met.

Fecteau’s effort has come under attack from Maine’s municipalities’ lobbying organization. They cast it as upending our state’s tradition of “local control.” And it absolutely does.

That’s where we get back to markets.  

Local decisions can upend economics. Portland is a prime case study. Former Mayor Ethan Strimling and his Democratic Socialist allies helped pass an “inclusionary zoning” ordinance that requires 25 percent of units in new housing projects be “affordable” under a government formula. One caveat; it only applied to developments with 10 or more units.

Portland saw new housing permit applications fall off a cliff, with multifamily proposals clustering around a 9-unit maximum. Thus, with less supply coming online, prices will remain high until demand drops.  

The pending proposal in Augusta works around some of these constraints in Maine’s larger cities. While opponents oppose it on “home rule” grounds, those of a more libertarian stripe support it through the lens of property rights. If someone owns land, they should be allowed to do with it what they will.

And if they can make some good money by building four units on a piece of property? More power to them. Will that decrease housing costs in Maine? Probably, eventually. Will those relying on the appreciation of their homes to fund their retirement suffer somewhat? Maybe.

But that is the market. Some will do better than others, be it because of talent, capital, hard work, or just luck. But over the past several decades, our standard of living has increased. Global poverty has dropped precipitously.  

Speaker Fecteau’s bill is a good step towards market-based housing reform. It isn’t perfect, and there are some things that can be changed, particularly to not override smaller municipalities that are not facing the same housing challenges as other parts of the state.  

But if we want housing prices to go down, we should build more houses. Let the market work.

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Michael Cianchette, Opinion columnist

Michael Cianchette is a Navy reservist who served in Afghanistan. He is in-house counsel to a number of businesses in southern Maine and was a chief counsel to former Gov. Paul LePage.