Everybody wants a piece of the Maine coast. That demand, coupled with a frenzied national real estate market, has led to skyrocketing property values.
Coping with this tremendous increase is a challenge for islanders and coastal residents working to sustain year-round communities. And the issue is more complicated than it may seem. Rising property values have hit some parts of the coast harder than other sections. The loss of affordable housing for year-round residents is a major concern for many islanders. But the real estate market also benefits long-term owners, who now find their homes can provide a nest egg for their retirement.
“How can you tell an elderly couple that they can’t sell their home for as much as they can get when one has just been diagnosed with Alzheimer’s?” said David Thomas, a lobsterman on Little Cranberry Island. “On the other hand, it’s a way of life that will be sold to the highest bidder unless something is done.”
For many islanders, the entire concept of land as investment is foreign and goes against island traditions of passing land from one generation to the next. “I grew up not thinking of land as an investment,” said Donna Damon, a Chebeague Island resident and member of the Cumberland Town Council. “I thought of it as a place you lived, a place you took care of and a place you left to your family and to your children.”
Double-digit increases
Home prices in Maine have increased every year since 2001. But property values on the coast are outstripping the state’s double-digit increases. Between 2000 and 2004, there has been a 58 percent increase in property valuation in 25 coastal and island communities, according to a report released by Coastal Enterprises Inc. The report, “Tracking Commercial Fishing Access: A Survey of Harbormasters in 25 Maine Coastal Communities,” looked at the development pressures on working waterfronts along the coast.
That report also looked at the change in total town property valuation between 2000 and 2004. It reveals starling jumps over a short period of time: an increase of 49 percent for Jonesport; a 51 percent increase for Swan’s Island; a 54 percent increase on Vinalhaven; a 58 percent increase for Boothbay Harbor; a 67 percent increase on Islesboro; a 69 percent increase for Southwest Harbor; and a 103 percent increase in Harpswell. Property values in a few communities were not as dramatic: an increase of 28 percent in Addison; a hike of 34 percent in Friendship; and an increase of 37 percent in Rockland.
“Changes in property valuation have led to both a push and a pull for waterfront property sales to increase,” wrote Hugh Cowperthwaite and Elizabeth Sheehan, the authors of the report. “The pull is to take advantage of high market value; the push is to sell because of the tax burden.”
Island communities in Casco Bay have experienced property value increases so extreme that there have been tax hikes even when the mill rate is lowered. Several of the Casco Bay islands are not independent, but tied to mainland municipalities. Rapid property hikes in island property compared to smaller increases on the mainland mean that even a lower mill rate still results in tax increases for these islanders.
When Portland did its first revaluation of property since the early 1990s, the city islands were hit hardest. Total property values increased an average of 244 percent on Little Diamond Island, 207 percent on Peaks Island, 151 percent on Cliff Island and 143 percent on Great Diamond Island. The city of Portland lowered the mill rate in April, 2005 from $26.53 per thousand of assessed valuation to $20.13 per $1,000 in April, 2004, but that was not enough to help islanders. “It’s difficult for me to watch what’s going on with them,” said City Councilor Will Gorham, who represents Portland’s islands. Many islanders “are facing the very real possibility of being forced out of their homes because of the real estate taxes.”
According to City Councilor Jim Cloutier, Portland is hamstrung by a state tax policy which relies too heavily on property taxes for communities to provide essential services. “I don’t want to suggest that the islands are not bearing the brunt of a bad policy to a disproportionate degree – they are,” he said. “But they are not the only people who have experienced a disproportionate impact. The working class and poor are also struggling with affordable housing and high tax issues.”
For islands that are their own municipalities, rising land values can lead to higher property tax revenues, which gives these islands the ability to fund public improvement projects, according to Jim Connors, a senior planner at the Maine Coastal Program in the State Planning Office.
Can’t afford to live here
Property values have increased so dramatically in Casco Bay that even Long Island, which is its own municipality and has not raised taxes, is having problems with affordable housing.
“High property values are going to kill us,” said Nancy Jordan, the town’s treasurer. “It’s going to kill the year-round community.” She added that she doesn’t think it makes philosophical sense for Working Waterfront to accept real estate advertisements, but she also said the problem is not with the real estate industry. “It’s not the advertising, it’s not the real estate agents, it’s the demand,” she said.
“We can control our taxes, that means we’re not pushing anybody off who say they can’t afford the taxes,” she said. “What we have no control over is the rising real estate values.”
This summer, a Long Island family with three children moved off the island to West Falmouth because they could not afford to buy a house on the island, according to Mark Greene, who has been the island’s Town Moderator since it first became independent in 1993. The man worked on the smack off Little Chebeague and his family had been on the island for generations. “It’s bad enough that you’re not getting new people in, you’re losing the people who are already here as well,” Greene said.
Long Island officials have started discussions about town-sponsored affordable housing. On Chebeague Island, a town committee is working on a market study about the demand for affordable housing on the island. On Peaks Island, a nonprofit group, HomeStart, was formed in 2004 to look into creating more affordable housing on that island.
Over a decade ago, an affordable housing nonprofit agency was created for the Cranberry Isles, which has been successful. But Thomas, of Little Cranberry, said the problem is that island land is a finite resource. “It’s all availability of land,” he said. “I don’t think we’re much more than a square mile. The pieces just keep getting cut up and the pieces get smaller and smaller and more expensive. It’s the same thing in the little coastal communities.” Thomas said that larger islands have an advantage over Little Cranberry when it comes to this problem.
Brokers helping fishermen
On Vinalhaven, one of the coast’s largest islands, Wesley Reed, of The Island Group of Jaret & Cohn Real Estate, said that it is a misconception that islanders can’t compete with out-of-state buyers. Several years ago, he remembers a young fisherman who bid against a Wall Street broker from New York for a property. The New Yorker made a lowball offer compared to a more reasonable price from the fishermen, who got the property, Reed said. And the owner, a retired math teacher who knew the fisherman’s grandfather, helped finance the deal.
On Vinalhaven, Reed said, there is still affordable housing for year-round residents. There are housing lots which start at $32,500 and he has one home that is priced at $99,000.
Reed helped the current owner of the $99,000 home, a fisherman, purchase it in the first place. The fisherman was 20 years old when he bought it and Reed helped him through the complicated paperwork involved in buying a home and getting a mortgage. “It was so much fun working with this guy when he bought his house,” Reed said. “This is part of what a good real estate broker would do,” he said.
In August, Reed sold a summer home to two new teachers. This summer he sold another summer home to a local, single woman. Reed, who lives on the island, is also a member of the island’s Planning Commission. He noted that the commission recommended a new ordinance for the island to allow new lots of just one quarter of an acre to be created anywhere on the shoreline, as a means to preserve access for fishermen to waterfront land.
On Peaks Island, Kirk Goodhue, who owns Port Island Realty, set up a fund dedicated to helping the islands with which he works. The company has offices on Peaks Island and in Portland and serves the Casco Bay islands as well as the mainland.
Created in 2004 with the help of the Maine Community Foundation, the Port Island Realty Fund will give grants to any island reached by Casco Bay Lines. And $100 of every closing made by his company, including mainland transactions, goes into this fund.
Goodhue, who lives on Peaks, said in the past he donated money to the island baseball teams and the Peaks Island Children’s Workshop. “I wanted something that was a little more focused and constant,” he said. “I would like to give back to the islands we do work on.”
Peaks Island, because of its proximity to Portland and easy access by ferry, draws interest from buyers all over the country, he said. “Any successful community that you’d like to bring your family to, their values will increase. The prettier the area, the more recreation activities, it will attract people who have the money to enjoy that.”
“It is absolutely difficult when people feel forced, or are forced to abandon, a community they have grown up in, because they can’t pay the increased expenses,” Goodhue said. But he also said that living on an island is expensive in general, and is not restricted to property costs.
Newcomers are also quick to pick up on the strong sense of community that exists on islands. “I am concerned that there seems to be an assumption that as prices go up, the people who can afford it – there is an assumption that they aren’t good people,” he said. “I’ve seen a lot of community involvement from people who have just moved here.”
Attracting investors
With island and coastal values increasing so dramatically, it brings another type of buyer: someone looking at these properties strictly as an investment. Connors, of the Maine Coastal Program, said it’s hard to quantify the percentage of buyers doing that. “I know it’s substantial and noticeable,” he said.
Speculators in Washington County are buying up coastal lots that don’t even have roads or services, Connors said. People purchase an inaccessible lot “on the basis that it is part of a subdivision and with the expectation they might use it some day, or as part of an investment portfolio,” he said.
Goodhue said there he doesn’t see many buyers whose sole motivation is investment. But an element of his market includes buyers of island property who feel “it may not be a place where they will spend time forever, but they want to get a good value from it, and in a few years sell it,” he said. “In the meantime, they can enjoy it.”
Another factor is that buyers from out-of-state often come from markets with even higher real estate values than in Maine. “Somebody who lives in an urban setting that looks at their property values and taxes compared to what a piece of land in Maine would cost – they think it’s a steal,” said Connors. “Invest in something that’s gaining market value every year; that’s quite a good investment for something that doesn’t look very expensive to them.”
It’s these buyers who make it tough for local residents. “There’s no way even a skilled craftsman can compete with what a higher-level professional makes in Washington, D.C., or St. Louis or Seattle,” says Thomas, the Little Cranberry lobsterman. “There’s just no way.”
But it’s not just out-of-state residents who benefit from rising property values. It’s the flip side of the affordability problem, according to Connors, where many long-term residents will want to sell their property at the highest price they can get to provide for their retirement. “It’s the single biggest source of wealth most of us have,” he said.
But the use of land to generate wealth can create tensions on islands as many view high prices as destructive to the year-round community.
“There is a certain amount of resentment, and you can’t help but have it,” said Chebeague’s Damon. “Even though you can understand that people want to get a profit; when you know that it’s going to hurt your neighbors. So it sets up this them-against-us mentality that makes it really difficult when you do see people selling to the highest bidder.”
The belief that land is a legacy for future generations and the community as a whole, and not an investment, is increasingly challenged in the 21st century.
“People question it, they challenge it, they say everything is about money. Because it so out of the mainstream of American today,” Damon said.
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Maine’s Changing Coast
Real estate prices, taxes, troubles in the fisheries: Working Waterfront reports on all the factors that will determine the character of this region and its citizens’ ability to earn a living. We’re also asking what role we — the Island Institute, as publisher of Working Waterfront — should play. A clearinghouse for information? Or should we more intentionally take sides?
Tell us what you think.
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