Chris Swan, one of the two developers of Hamilton Hill, stands by a new house under construction  on the upper side with views of Frenchman Bay and Bar Harbor. Swan said the lots have sold faster than expected, Jan. 19, 2023. Credit: Linda Coan O'Kresik / BDN

A new residential neighborhood is being built in Bar Harbor in one of the last remaining undeveloped parts of the picturesque downtown village. But it is not affordable housing.

Instead, Hamilton Hill has been subdivided into 30 lots highly visible from downtown and developed for high-end and luxury homes, with lots valued about $500,000 on average and homes valued from $750,000 to more than $2 million.

The new hilltop development is being built as town officials and local employers grapple with a severe shortage in affordable and workforce housing, which more and more people agree is badly needed in the coastal town where millions of tourists show up every summer and employers struggle to find places for their workers to live.

In a separate development, a proposed new employee dormitory would be built by Witham Family Hotels on a site in the shadow of Hamilton Hill at the intersection of Kebo and Mount Desert streets. It’s the first since voters agreed in 2020 to allow such development in town.

Elsewhere in town, Bar Harbor is looking to collaborate with Acadia National Park to develop workforce housing on a 50-acre parcel on Crooked Road, and Island Housing Trust is building 10 housing units that would be reserved for people who live and work year-round on Mount Desert Island. But these represent only a fraction of the 616 new rental and owner-occupied housing units that will be needed in Bar Harbor by 2033 due to demand, according to a recent housing analysis commissioned by the town.

Chris Swan, one of the developers of Hamilton Hill, agrees that Bar Harbor is in dire need of affordable and worker housing, but said it wasn’t high on the town’s radar when he and his partner, Scott Henngeler, set out 10 years ago to build house lots on the hill.

They paid $1.4 million for 35 acres on the south side of the hill in 2013 and expected it would take them a few years to get a full return on their investment, Swan said.

“We had a five-year plan to sell those lots and they sold in 18 months,” Swan said. “There are so many buyers who want to own Bar Harbor property. The interest has been crazy.”

After the quick turnaround on the 14 lots they put in on Kebo Ridge Road, Swan and Henngeler sought to buy the additional 35 acres on the hill’s upper half. The top of Hamilton Hill is where a late 1800s mansion called Thirlstane burned down in the huge wildfire of 1947. A mansion built in 1984 by the Juliano family, who previously owned the land, still stands there.

Swan and Henggeler purchased the upper 35 acres on Hamilton Hill, including the Juliano mansion, in 2018 for $3.55 million, bringing the total purchase amount for all 70 acres to $5 million. They subdivided 16 additional house lots out of the upper parcel, including two that are accessed from Eagle Lake Road. Most of the 30 total lots are around one or two acres.

“That’s where all the water views are,” Swan said of the hilltop lots that look out over the downtown village and Frenchman Bay. “They are not building any more hills in Bar Harbor.”

Swan said that before he and Henggeler bought any land on Hamilton Hill, the overall assessed value of all 70 acres was about $2 million. After spending another couple million dollars on subdividing the land, building private roads and installing utilities, more than 20 of the 30 total lots have been sold, generating more than $12 million in sales.

Now, with homes built or under construction on 16 of the lots, he estimated that the overall development is currently worth roughly $30 million.

“We didn’t anticipate that at all,” he said of how quickly the value of the house lots have soared. “It was a feeding frenzy.”

The new Hamilton Hill development is highly visible from the streets of downtown Bar Harbor. A new home under construction is seen from Mt Desert Street, Jan. 19. 2023. Credit: Linda Coan O'Kresik / BDN

Swan added that most of the lots have been sold to people who already lived in Bar Harbor, which he said was “surprising.” He also said none of the houses on the hill can be rented out by the week because he and Henngeler put covenants on all the deeds that set a minimum rental period of one month.

Michele Gagnon, the town’s planning director, said the housing crunch in Bar Harbor has affected not just local workers, but has also limited options for buyers who have a lot of money.

As a result, some buyers have paid more than the asking price for some houses, only to tear them down and replace them with fancier homes, she said — which reduces the number of homes that may be more affordable to people with lower incomes.

The construction so far of more than 20 new homes on Hamilton Hill could help alleviate the pressure on all levels of the local housing market, she said, by making more homes available to high-end buyers who otherwise might “buy down” in the market by purchasing a home that might be within reach for a lower-income buyer.

The tax revenue generated by the new expensive homes will help the town pay for capital improvement projects, including a new K-8 school that could cost as much as $70 million, she said.

Gagnon said that even with the development on Hamilton Hill, dormitory-style housing for local workers, and new limits on weekly vacation rentals, more needs to be done to alleviate Bar Harbor’s housing crunch. Some parts of Bar Harbor have a minimum size of five acres for a single-house lot, but housing developers need incentives to build enough units on a given parcel of land to make them affordable.

“You’re eating up land [with those restrictions],” Gagnon said. “In Bar Harbor, if you get four lots in a subdivision, you’re lucky. I think the zoning ordinance is a big part of the problem”

View of Frenchman Bay and Schoodic Mountain from the upper part of the Hamilton Hill in Bar Harbor, which has been subdivided and developed for high-end and luxury homes, Jan. 19, 2023 Credit: Linda Coan O'Kresik / BDN

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Bill Trotter

A news reporter in coastal Maine for more than 20 years, Bill Trotter writes about how the Atlantic Ocean and the state's iconic coastline help to shape the lives of coastal Maine residents and visitors....