Lydia Horn has always wanted to buy a home. Making that happen meant moving out of southern Maine, so she reoriented her life to return to the Bangor area.
“I was never going to be able to afford to buy a house in southern Maine,” she said. “It just felt like it was getting more and more challenging and more and more expensive.”
Horn, a 33-year-old Holden native who is now a postdoc at the University of Maine, has rented all over the country as a student in Orono and as a professional in New Jersey, Colorado and Gray. Even in the Bangor area, she found little inventory in her price range and had to live with her parents to save up for a year before going under contract on a home in Old Town at the end of May.
First-time buyers have few options in today’s tight real estate market. Maine needs to double housing production through 2030 to remedy historic underproduction and meet projected growth, but new construction in the state’s biggest cities is overwhelmingly favoring rentals over homes that prospective homebuyers could snap up.
It is particularly stark in Portland, where only eight of the 690 units of housing approved this year were homes for sale. It was 17 out of 120 in Lewiston. Bangor did not provide data. That will make it harder for prospective buyers like Horn to gain a foothold, and could create a class of Maine residents unable to build equity and fully invest in the cities they’d like to live in.
Experts have different ideas as to why Maine cities are approving far more rental housing than homes for sale. The main reason could be they don’t have a lot of land available, which incentivizes developers to propose dense projects, said Brit Vitalius, principal of Vitalius Real Estate Group and president of the Rental Housing Alliance of Southern Maine.
In addition to land unavailability, today’s high interest rates and high construction costs might just make rental units more favorable for developers to build than homes, said Jeff Levine, a former Portland city planner and professor at the Massachusetts Institute of Technology.
“Given the very low vacancy rates in rentals right now, that’s not that surprising,” Levine wrote in an email of Portland’s housing data. “Developers may also construct units and hold them as rentals thinking that sales prices will be more lucrative at a future date. That may be because they expect mortgage rates to go down, or inventory to change, or some other factors.”
It’s not just developers who see rentals as a better bet, for now at least. Many renters are waiting to buy a home, hoping that interest rates that are currently at just under 7 percent will fall, or inventory will increase, said Horn’s realtor, Renee Hudgens with the Chez Renee Team at Realty of Maine.
While there can be pros to renting over owning, like flexibility and not being responsible for maintenance, there are tangible benefits to homeownership for the property owner who builds equity and for the community in which they purchase. Cities need to create pathways for both.
The current skew towards rentals could have social implications for Maine, too. Research from Harvard University’s housing center has shown that positive homeownership experiences result in greater participation in social and political activities, improved psychological health and higher rates of school completion.
That sense of social belonging is something exciting to Horn about homeownership, now that she’s under contract on a 2-bedroom home that stretched her budget to its limit, but accepted her offer of $227,500.
“Being integrated into a community, it’s very hard to do that when you’re moving a lot,” Horn said. “That’s one of the things that I’m looking forward to, is really being place bound, and the opportunities that that offers to become part of the community and give back to the community.”