I have long argued that Maine’s economic future depends on attracting more workers. As long as the number of people who die in Maine each year continues to exceed the number born here, we will need immigrants (both domestic and international) just to maintain our current income level.

If Maine employers can’t fill open jobs, our prosperity will inevitably shrink. For this reason, I have focused a great deal of attention on the labor market: What can we do to attract and train the workers we need?

This question leads me increasingly to the housing market.

If we are to attract new workers, we’ll need places for them to live – and that leads to housing affordability.

Each year, the Maine State Housing Authority (MaineHousing) compiles a Housing Affordability Index. Affordable homeownership (there is a separate rental affordability index) is the ability of someone earning the area’s median income to cover the payments on the median-priced home there (including taxes and insurance on a 30-year mortgage) while spending no more than 28 percent of gross income.

In 2016 (the most recent year for which data are compiled), Knox County offers the closest example of an affordable housing market in Maine. In 2016, the median household income in the county was $56,280. Someone earning the median income could afford a home priced at $202,848. The actual median home price in Knox County in 2016 was $205,000, yielding an affordability index of 0.99 (the home price affordable at the median income divided by the actual median home price).

A very slight drop in housing prices or a very slight increase in income would make Knox County a “perfectly” affordable housing market.

Index values over 1.00 indicate increasingly “affordable” housing prices, and index values below 1.00 indicate increasingly “unaffordable” prices. By this standard, 11 of Maine’s 16 counties had affordable housing, with index values ranging from 1.72 in Piscataquis County to 1.04 in Lincoln and Waldo counties.

Five counties had “unaffordable” housing prices, ranging from 0.99 in Knox and Sagadahoc counties to 0.95 in Hancock County, 0.93 in York County and 0.81 in Cumberland County.

The average of the median home prices in the 11 affordable counties was $125,400, ranging from $80,000 in Aroostook County to $198,250 in Lincoln County. The average of the median home prices in the five unaffordable counties was $213,780, ranging from $189,000 in Hancock County to $256,000 in Cumberland County.

Two main conclusions emerge from this analysis. First, housing affordability is associated with lower levels of economic growth.

The affordable counties are, by and large, central and northern counties with substantial levels of out-migration. The unaffordable counties are southern and midcoast counties with faster-growing economies.

The second, and more important point, to be drawn from these data is that housing unaffordability is driven more by housing prices than by income. That is, unaffordability is not about slow income growth but about the cost of housing outpacing income growth.

In the five counties where housing is unaffordable, the average of the median incomes was $55,537. This is 25 percent above the average of the median incomes in the 11 counties where housing is affordable. However, the average of the median home prices in the five unaffordable counties ($213,780) was 71 percent above the average of the median home prices in the 11 affordable counties ($123,368).

This imbalance between the relative impacts on affordability of the home price side of the index and the income side is seen clearly when comparing the correlation of each with the index.

The 2016 affordability index is inversely related to both median county income and median county home price. In other words, homes are less affordable in counties where median incomes and median home prices are higher.

If housing price growth in economically dynamic southern Maine continues to outpace income growth, we run the risk of diminishing inflow of labor to the region, which is the only difference between continued economic revival in Maine and further spread of the economic stagnation and outmigration that plague rural and upcountry areas of the state.

Just as the need to increase our labor force presents a policy challenge to our employers and educational institutions, the need to attract talent must bring state, regional and local policymakers to rethink the regulations and financial mechanisms that make housing increasingly unaffordable.

Charles Lawton, Ph.D., is a consulting economist. He can be contacted at:

[email protected]