Portland housing, a crisis of our own making

New Portland Mayor Ethan Strimling isn’t even sworn into office yet, and is already setting up a task force to try to solve the Portland housing crisis.

Nothing in the world is more dangerous than a committee or a blue ribbon commission tasked with “solving” a big problem. Invariably the “solution” will involve some major government program or policy, which almost certainly will make the problem worse. In fact, the problem in question is almost certainly due to poor government policymaking in the first place.

That is certainly true in Maine’s largest city. For those who are not aware, Portland is currently experiencing a tremendous housing problem. Non-existent vacancies, skyrocketing rents, and over-inflated property values have priced out not only the poor, but increasingly also the middle class from living in the city.

The problem is a long brewing one, but it is quite easy to identify the culprit. A city council and a citizenry hostile to development has created a sprawling, flat, decentralized municipal footprint that eschews density and population.

What Portland is dealing with is a classic, government created misalignment of housing supply, and housing demand. People want to live in Portland, but there is not enough housing stock (or rents) to satisfy that demand, so prices dramatically increase as tenants and homeowners fight over the limited supply.

Housing is and always has been one of the most classic examples of fundamental economics, and it also happens to be the most obvious example of what happens when policymakers attempt to interfere in what should be a relatively simple marketplace.

Municipal policymakers in Portland have set up an unmanageable set of local regulations that disincentivize building volume, height, number of units, or type of units, and channeled the limited building that does occur into smaller and spread out developments that hardly make a dent in housing demand.

On top of that, local citizen groups have turned extremely hostile to development, and regularly bully not only developers into shrinking proposed projects, but the city council into making building difficult. They’ve helped create a broken system where potential legal costs and endless waiting, all for the eventual hacking of any development into pieces, are the norm. That makes building not worth it for too many.

Keep Portland Livable, for instance, is responsible for blocking 775 new apartments in Bayside. Save the Soul of Portland, is adamantly opposed to the development of new multi-story apartment buildings along Fore Street. The list is endless.

It has gotten so absurd in Portland that a local ballot measure this fall sought to give veto power over city planning to local citizens, which would have shut down any chance of building new housing on the hillside. Happily, the larger community of Portland voters said no to this idea.

There is one thing that would help Portland’s housing crisis. More places to live.

Increasing the supply of housing would lessen demand and give leverage to rent seekers and potential homeowners. As the system approaches balance (or even better, oversupply of housing) price will come down, and come down dramatically.

But that isn’t what homeowners and landlords in Portland want. The current housing shortage is good for them, particularly the most wealthy among them. Low supply and high demand means their property values continue to increase, particularly those ultra-wealthy denizens of the city’s most desirable neighborhoods.

Which is why despite their professed love for the common man and caring for “The Soul of Portland,” they are really interested in stopping development and restricting housing.

Indeed, the wealthy are the ones empowered by a lack of development. They have the freedom to afford the insane real estate and rental prices that the city has. They are then guaranteed inflated, bubble-ridden growth to their property after they do buy. And the little guy — who is now increasingly the “still pretty well off but still can’t afford Portland guy” — is squeezed out.

Unfortunately, no matter how obvious this is, the policy direction that is likely to come out of City Hall is more government rulemaking, tighter restrictions, additional regulations, and ultimately more of the same things that created the mess they are currently living through. Typical of government.

So what will you probably see? Rent control. Subsidies to pay the inflated rents for low income families. Mandated building of low-income housing. Additional city ordinances dictating how a developer builds. All of which will simply make the problem worse, and do nothing to deflate cost.

There is only one real solution to this problem. Build. Build now. Anything else is just a waste of time.

Matthew Gagnon

About Matthew Gagnon

Matthew Gagnon, of Yarmouth, is the Chief Executive Officer of the Maine Heritage Policy Center, a free market policy think tank based in Portland. Prior to Maine Heritage, he served as a senior strategist for the Republican Governors Association in Washington, D.C. Originally from Hampden, he has been involved with Maine politics for more than a decade.