Municipalities across Maine are inflating home prices by thousands of dollars by employing restrictions including minimum lot sizes, according to a new report from an economist and a conservative group.
The report is the first of its kind in pinpointing the cost of common zoning policies across different cities and towns here. Its main finding was that a 10,000-square-foot increase in a Maine municipality’s minimum lot size is associated with a 4 percent increase in home prices. The typical buyer would save $16,000 if communities reduced minimum lot sizes by that much.
“Those kinds of restrictions essentially are forcing people to consume a certain amount of land that they may or may not want to,” Colby College economics professor Jim Siodla, who co-authored the study with the Maine Policy Institute, said. “It’s a restriction on the amount of housing that can be built, and therefore reducing supply and increasing prices.”
The Maine findings are in line with the national literature on how heavy-handed land use policies affect home pricing. A 2017 Cato Institute study found that rising land-use regulation is associated with rising real average home prices in 44 U.S. states including Maine. It declared our state as having the 4th most restrictive land use policies in the nation.
The Maine report, which also has sections that decry rent control, inclusionary zoning and restrictions on height, density, parking and setbacks, found towns with zoning had roughly 7 percent higher home prices than unzoned towns in 2023. Towns with minimum lot sizes had 35 percent higher home prices than towns without them.
Most Maine municipalities use zoning, and zoned towns tend to be larger and more urban than unzoned towns. But even factors like location, population size and housing demand didn’t account for the differences they found between zoned and unzoned towns when it came to home prices, Siodla said.
“These are all things we took into account, and essentially we’re unable to explain away the differences simply through those kinds of other variables,” he said.
The report doesn’t urge towns to do away with their land-use policies or minimum lot sizes entirely. Rather, it calls for the state to streamline the development process and cautions municipal officials to revisit their ordinances or zoning to ensure they’re not constricting home availability and affordability.
Siodla’s analysis mentions unzoned towns like Lebanon and Bowdoin, in which the minimum lot size requirement for all dwelling units is two acres. In Bowdoin, that’s the product of a 1979 ordinance that hasn’t been updated since the 1980s.
That requirement is unlikely to budge as the town of about 3,000 residents can’t accommodate an influx of newcomers, Michaeline Mulvey, the chair of Bowdoin’s planning board, said. Home prices in Bowdoin increased 58 percent from March 2020 to November 2024, with the average sale price sitting just below the state average at $407,000, according to Redfin.
“What fuels the tax rate [is schools], but when you start reducing the lot size, you start bringing more kids into town, and you start increasing taxes again,” Mulvey said. “We have no services, so really it’s a poor place to have growth.”