Restrictive Policies Driving Maine’s Housing Crisis: Here’s What We Can We Do About It — 2025 Report

Maine is currently facing a significant housing crisis, and researchers at a state-based think tank have written a report illustrating how the situation has been exacerbated by some of the policies being pursued at the state and local level, and suggesting what can be done to remedy it.

In their report — titled Under Construction: Fixing Maine’s Self-Imposed Housing Crisis — James Siodla, Ph.D. of Colby College and Harris Van Pate, J.D of the Maine Policy Institute take a look at the impact of various housing policies that have been implemented throughout the state.

The researchers then go on to propose a handful of solutions that they believe could help to promote housing availability and affordability in Maine.

“Maine’s housing crisis is significantly influenced by restrictive land use policies at the local level,” the report states. “By adopting pro-market reforms, Maine municipalities can increase housing availability, improve affordability, and foster economic growth.”

“State-level policies that reduce regulatory burdens and incentivize development can further support these efforts,” argues the report. “It is crucial to recognize that market forces play a vital role in housing supply and that government intervention should aim to support rather than hinder these forces.”

According to the report, evidence shows “a strong correlation between housing costs and regulations,” as there is a “clear decline” in housing availability when strict local zoning or minimum lot size ordinances are in place.

“In a period when much of the country and Maine faces a severe housing crisis, Maine localities must employ land use policies that synergize with and understand market forces rather than work against them,” the report contended.

“Not only do housing market restrictions negatively impact housing market health in the abstract, but they have also been shown to place unnecessary burdens on home buyers and developers here in Maine,” the researchers argued.

In 2023, homes in towns with land use zoning were found to be about seven percent more expensive than homes in un-zoned towns.

Despite the demand for housing continuing to rise statewide, towns with land use zoning have permitted an average of nine fewer units than their unzoned counterparts.

Data also shows a correlation between minimum lot size requirements and housing costs, as a 10,000 square-foot increase in the minimum lot size was associated with a four percent increase in home prices.

Furthermore, homes in towns with minimum lot size requirements were found to be 35 percent more expensive than those in localities without such requirements.

While policies that restrict the flexibility of housing development, such as zoning and lot size requirements, are relatively widespread in Maine, policies that negatively impact the profitability of development have primarily only been enacted in metropolitan areas like Portland. It is recommended in this report, however, that other jurisdiction not follow their lead.

The study goes on to suggest that direct housing policy leadership ought to be primarily concentrated within local governments, as these elected officials are more likely to be responsive to local needs.

Municipalities also have a track record of circumventing state policies when they aren’t on board with them, meaning that “without local government buy-in, state government action will be largely ineffective.”

It is also recommended that municipalities take the lead on housing policy because it would allow for “more diversity and experimentation” to find what is most effective.

This is not to say, however, that the researchers believe the state government has no role to play in addressing Maine’s housing crisis.

Instead of advancing particular housing policies, the report argues that the state government should focus its energy on “reducing the regulatory burden on developers and streamlining the permitting process.”

For example, the report recommends they exempt construction materials from the statewide sales tax, as well as increase access to manufactured homes and accessory dwelling units (ADUs).

The report also advocates for state embracing by-right development and experimenting with third-party permitting in order to reduce administrative friction and improve competition.

According to this report, by-right development is said to allow for “more stability in the construction process” by converting the approval process from a “bureaucratic normative debate” to a “simple administrative procedure.”

Third-party permitting is said to create a competitive system where private parties are given the right to license developers, instead of restricting this ability to only members of the local bureaucracy.

It is also recommended in this report that the state establish a statewide housing or land use appeals board to streamline the appeals process where “cases can be swiftly resolved and either approved or rejected.”

On the local level, the Maine Policy Institute’s report suggests a variety of ways that municipalities can improve the state’s housing landscape, including by reducing zoning and land use restrictions, such as minimum lot size requirements, parking requirements, setback requirements, and height restrictions.

The researchers also recommend eliminating policies such as rent control, inclusionary zoning, and short-term rental restrictions.

Inclusionary zoning — said in the report “to function as a tax on housing development” — refers to the practice of requiring that developers price a certain percentage of units be offered at below-market prices, as either “affordable” or “workforce” housing.

Eliminating local-level energy efficiency mandates was also suggested as a means by which to improve the affordability and availability of housing throughout the state.

“High investment costs, long payback time, and investment risks have all been found to be significant barriers to energy-efficient construction projects,” the report states. “Mandating this sort of construction won’t remove the barriers but simply remove the option for the industry to avoid them, thereby increasing the cost of construction.”

Although the long-term cost savings of energy efficient upgrades are frequently emphasized, the costs must be front-loaded, leading to higher home prices and, consequently, more expensive monthly mortgage payments.

“The long-term savings are likely canceled out by upfront costs, which harm both construction companies and potential homeowners,” the researchers wrote.

According to the report, residential construction permits in Portland went down by 82 percent after the city adopted what was dubbed as a “Green New Deal,” which included both energy efficiency mandates and inclusionary zoning requirements.

The report also highlights how “complex regulations” at the local level can negatively impact housing development.

“By making local regulations complex and difficult to navigate and understand, some cities discourage development, especially by nonlocal and nonprofessional developers,” the researchers said.

For example, they cite Portland’s housing code, which recently underwent revisions to reduce its length from over 1,000 pages to a “comparatively small” 371.

“If one thinks from the perspective of a developer deciding where and when to build, the ease at which one can learn and access the local land use rules is the very first issue that they will have to face,” they argued.

“This is a massively underestimated category of local housing regulations, as developers who are either new to the industry or new to the area are going to face major challenges when trying to make sense of more complex city codes,” the report concluded.

Click Here to Read the Full Report

“Maine faces a significant housing crisis, and it’s time for elected officials to get real about solutions,” Maine Policy Institute CEO Matthew Gagnon said in a press release Tuesday morning.

“Instead of following in the footsteps of Portland, which has some of the most harmful local policies in Maine like rent control and inclusionary zoning, towns should chart their own path and begin by reducing rules like minimum lot size requirements, parking requirements, setbacks, height restrictions, and more to open their borders to real development,” said Gagnon.

“This report makes clear that the combination of unnecessary local regulations in zoned towns versus unzoned towns, as well as towns with large minimum lot requirements, significantly impact home prices and limit new construction,” Gagnon said. “The easiest way to combat these challenges is to deregulate at the local level.”

Disclaimer: The Maine Wire is a project of the Maine Policy Institute.