HOUSING NEEDS ASSESSMENT

• The current renter population is the focus of this assessment. These are the households that do not already own a piece of the island. They are the households subject to the greatest housing uncertainty. That is pretty self-evident. Still, it is important to recognize that about 80 homeowners as well as roughly 150 renter households leave the island each year. Who replaces them as they leave tells a great deal about what the island communities will look like in the years to come.

• Renter incomes are surprisingly low in part because wages are low. The Maine Department of Labor reports 1^st quarter wages in 2003 average $21,400/ year for jobs on MDI. This is 27 percent below the average for all jobs in Maine. The 2000 U.S. Census reports the median renter household income at $23,800, or less than half of the island’s $49,800 median homeowner income. Only about 500 of the island’s 1,500 or so renter households fall into the $25,000 to $55,000 income group targeted by the MDI Community Housing Initiative. Roughly half of the island’s renters actually earn less than $25,000, and only 16 percent earn more than $55,000.

• Jobs are growing faster than housing. From 1996 to 2003, the island’s employers added 1,283 new jobs. Growth at Jackson Laboratories contributed nearly half of these new positions. During the same period, the island added only about 450 new year-round housing units. The larger Ellsworth-Bar Harbor labor area saw a similar imbalance between high job growth and slower year-round housing growth throughout the 1990s. Until recently, it appears that tight housing market conditions owe more to local economic growth than to seasonal or retirement market demand. But that situation is changing as housing prices exceed the capacity of the local market to buy.

• Housing and land prices have appreciated dramatically in last three years. The median price for homes sold through the Multiple Listing Service (MLS) in 2003 is up 83 percent from 2000 and now stands at $265,000. Land has appreciated even faster at more than 45 percent per year for the past three years to a median cost of $95,000 per building lot. More significantly to first time buyers is the cost of the least expensive homes sold. In 2000, a quarter of homes sold for $110,000 or less. In 2003, the bottom quarter sold largely between $165,000 and $198,000, with only seven MLS transactions under $150,000. In 2000, it took a minimum household income of roughly $35,000 to buy into the MDI housing market. Today, it takes an income of at least $55,000 to cover a 90 percent mortgage on a home at the 25^th percentile of all homes sold. In 2000, about 35 percent of local renters could hope to purchase a starter home. Today, the number has dwindled to about 15 to 20 percent. An affordability gap that was just over $30,000 in 2000 between what a median-income renter could afford and what a starter home cost is now at least $85,000. In all, the average MDI worker currently faces a situation where median home prices are 77 percent higher than for the state as a whole and average wages are 27 percent lower. This imbalance between high housing and land costs and low wages lies at the heart of the island’s housing dilemma.

• The market has shifted. With home and land prices no longer affordable to a majority of local workers, the market is accelerating the shift of the island to a seasonal and retirement community. From 1990 to 2000, seasonal homes accounted for slightly less than half of the net growth of homes on-island. By 2000, 28 percent of all housing served the seasonal population. The potential exists for that segment of the market to snowball. Realtors report that in the past two years, 60-70 percent of all purchases have gone to seasonal and retired buyers moving here from off-island [with some more research we can measure this trend statistically]. More importantly, the size of the wealthy, aging baby-boom population is huge; it is one of the fastest growing population segments nationwide. With "first-tier" regional resort areas now approaching and surpassing the $1 million median price level, Mount Desert Island could easily be on the next frontier. The pressure from the segment of the population interested in and able to buy into resort communities offering a high quality of life is only just beginning. The oldest baby-boomers are 55 and the youngest are in their early 40s. The wealthiest 10 percent of this age cohort will be driving the ownership housing markets in resort communities like MDI for the next twenty years.

• Remaining a renter grows more challenging as well. From 1990 to 2000, the number of MDI renters paying at least 35 percent of their income for rent grew by 82 percent compared to just a three percent increase for the state as a whole. In 2000, 36 percent of all island renters paid this high a portion of their income for rent. The struggle for stable year-round housing affects even the relatively well-paid post-doctorate positions at the Jackson Laboratory. Over the next three years, the lab plans to double the number of these post-docs to 120 workers. As a growing population of young adults raised on MDI start new households and as existing renters find few homes available to purchase, the stress on the current rental market will grow.

Key conditions are in place for these escalating price trends to continue. Given high land costs and zoning limitations, year-round housing will likely continue to grow at less than one percent annually. Jobs, however, are likely to grow at more than twice that rate, as Jackson Labs expands and as more wealthy residents require service workers for longer periods of the year. Given the types of jobs created, wages will continue to rise much more slowly than housing prices. Right now, a family with two average-earning workers makes about $42,800/ year and can afford the carrying costs on a home of about $153,800. Today, they experience roughly a $45,000 gap between what they can afford to buy and the cost of a home at the lowest quartile of all sales. Following these trends to 2010, the "affordability gap" for that average two-worker family will be in the $120,000 range. By 2010, 75 percent or more of all housing units could be sold to seasonal and retired residents.

If market forces alone prevail, the stage is set for a gradual "hollowing out" of the island community. Historically, about five percent of the year-round population leaves the island annually, most of these being renters. That rate of exodus could rise as long time renters give up hope of buying and as the established "50-something" residents become 60-somethings and cash out on their housing investment. At the projected cost of housing, local working households will not be able to afford to buy the homes of those who leave. A growing market of seasonal and retired buyers does exist to buy these homes at prices unaffordable to the working community. Following current trends to 2010, seasonal homes may account for 35 percent of all housing on the island, up from 28 percent in 2000. Retired residents may occupy another 20 percent of the stock compared to 18 percent in 2000. Off-island commuters would make up 50 percent of the workforce compared to 35 percent in 2000. At this rate, MDI will be a noticeably different place by the end of the decade.

Those displaced by the continuation of current trends will essentially be anyone who does not already own a home. This includes an estimated 250 to 350 moderate-income, long-term renter households who feel they "missed their chance" for homeownership when prices escalated so quickly. It includes the roughly 800 current teenagers who will be looking start their own households in the next decade.

This picture may look pretty bleak. Stepping back and comparing what’s happening on MDI to other resort areas, though, the story may seem more hopeful. From a second home and retirement perspective, MDI is not a "first tier" destination. Those communities have seen much more rapid rises in population (3 to 5 percent annually compared to 0.8 percent for MDI), much more rapid land development (200 to 300 units/ year compared to 80-100 for the island) and much more prolonged periods of price appreciation. MDI’s current affordability gap of $45,000 for the two-worker family is much bigger than it is in most of Maine, but it is significantly smaller than the gap that exists throughout most of southern New England. Moreover, the island’s largest employers including Jackson Labs, the College of the Atlantic, Hinckley Boat, the hospital, and the area schools are not seasonally based. Their desire to develop long-term career employees is consistent with the MDI Tomorrow’s goal of insuring housing opportunity for a core community workforce. Reaching a consensus on the need for housing that does not compete in the open marketplace may be easier to reach with this commonality of interests.

In the consultant’s view, the current condition of the MDI housing calls for the development of between 25 and 35 new homeownership opportunities annually aimed at the core workforce. This housing may be new or existing. This housing needs to sell at prices in the $125,000 to $175,000 price range currently. It would provide a new bottom quarter to the existing market. The key features of this community housing should include provisions that:

1. It be sold to core members of the community workforce however that may be defined
2. Those households be in the $35,000 to $55,000 range currently
3. That these homes have covenants to insure that they appreciate in value no faster than the average rate of island wage growth.

This level of affordable homeownership opportunity provides options for long term renters and key new employees; it addresses positively the sense of despair that may speed the exodus of many valued members of the community; and it builds up, over time, a core of housing that is buffered from the powerful market forces driving up home prices generally.

In addition, the consultant sees the need for additional rental units to serve several overlapping needs:

1. To reduce the number of very low income residents who are paying an excessive portion of their income for rent
2. To provide additional year-round housing to ease the burden of families who must annually vacate rental housing that converts to seasonal vacation rentals
3. To accommodate more of the island’s growing number of lower paid workers who now commute from 15 to 30 miles away
4. To provide opportunities for new household formation to those young residents raised on MDI, and
5. To adjust to the reality that given the island’s cost of ownership renters will remain renters for longer periods of time.

In the consultant’s view, the island needs at least 200 additional rental opportunities by 2010 to meet the needs of those households earning under $35,000 per year.

The next stage in the process is to consider strategies for the creation of these community-housing opportunities over the next decade.

I. Introduction

The Mount Desert Community Trust engaged consultant John Ryan of Amherst, Massachusetts to assist in the development of an island-wide Housing Action Plan as part of the MDI Tomorrow Community Housing Initiative. The goal of this plan is to create a consensus in all four island-towns to take positive steps to preserve and create housing to serve the core community workforce on Mount Desert Island (MDI).

As a first step in developing this Housing Action Plan, the consultant prepared a preliminary assessment of the need for such housing. This assessment evaluates a number of demographic and economic trends affecting MDI and recommends targets for the development of rental and ownership housing in each of the island communities over the next ten years.

The Nature of the Problem

The concern over housing affordability has increased on MDI over the past two or three years. Many island-residents report a disturbing trend in the cost and availability of housing for lower and middle-income residents, a trend that affects the character of the island as a whole. The perceived problem may be characterized as follows.

In the past decade, MDI has become increasingly attractive to a growing workforce, to seasonal residents, and to retirees relocating to the area. Demand from these groups is driving housing and land prices up at an unprecedented rate. The overall pool of relatively wealthy seasonal residents and retirees that drives this pressure on housing will continue to grow for the foreseeable future. This external pressure on MDI’s land and housing may well become a permanent feature of the community. Already high housing costs are driving valued residents and employees off the island. Essential service employers such as the hospital, schools and municipal offices are beginning to have a harder time filling jobs. The increased dependence on off-island commuters has resulted in increased traffic and a decreased sense of neighborliness that comes from people living and working together. There is a growing sense that even those residents who already own a home on the island may not be able to insure that their children will have homes for themselves here as adults. The lack of continuity and connection caused by this competition for housing has begun to diminish those small town characteristics that add to the value of the real estate on the island. These trends help make life seem more pressured, less personal, and more like the places people come to MDI to escape from.

Part of what the consultant has asked is whether the data bears out these impressions.

The first section of the preliminary Needs Assessment provides information on the questions inherent in this perception of a housing problem. The second section attempts to identify the level of need for housing to serve the needs of the MDI community over the next decade.

The consultant utilized a variety of resources to assess current housing need on MDI. Key sources included the U.S. Census for 1990 and 2000; population projections from the Maine State Planning Department; housing and land sales data from the Maine State Housing Authority, the Maine Real Estate Information Systems, Inc., and local Realtors; employment information from the Maine Department of Labor and from local employers; building permit information from town government offices; and build out projections from the College of the Atlantic’s Land Use Planning/ GIS Department. In addition, the consultant drew upon efforts previously prepared for the MDI Tomorrow process, including the 2002 State-of-the-Island Housing Report prepared by MDI Tomorrow working group; employer and landlord interviews and resident surveys performed by the Bar Harbor Housing Authority; the Summary Report of Conditions in Hancock County prepared by the Hancock County Planning Commission; and a Year-Round Transit Plan for Mount Desert Island prepared by Tom Crikelair Associates.

The following section looks at a number of demographic and economic factors effecting the cost of land and housing on MDI. The consultant has organized the data in terms of the key premises that shape how many residents look at the housing problem on the island.

The island’s 2000 population of 10,424 represents an 8.2 percent growth over ten years. This represents a growth slightly slower than for Hancock County but more than twice as fast as the state as whole. The State Planning Agency projects MDI’s population to grow slightly slower in this decade with a 7.1 percent increase to 11,163 by 2010. Tremont appears to be the area where the island’s growth will be most pronounced, with little growth occurring in Southwest Harbor. The high cost of housing on the island will likely keep year-round population growth down. It will also shift the income, age and family character of who does live in the four communities.

The island’s rate of new housing growth seems to be on the upswing. According to local building permit data, the island averaged 88.5 new dwelling permits annually during the 1990s. About 63 percent of those new dwellings were built in Bar Harbor. Since 2000, the new dwelling permits have increased to just over 100 new homes per year island-wide. Since 2000, as many as two-thirds of these new dwellings have provided seasonal, rather than year-round, homes.

From 1990 to 2010, MDI will see substantial shifts in the age of the island’s population, consistent with state and national trends. Based on Census and State Planning data, the island will actually have seven percent fewer residents under 45 years old living on MDI in 2010 than were there in 1990. At the same time, the number 45 to 64 years old will have more than doubled in 20 years. The State Planning Agency sees a much smaller growth in younger seniors 65 to 79 years, with a 6.2 percent increase between 2000 and 2010. They project residents 80 and over will actually drop slightly over the next 10 years. Between 1990 and 2010, the island’s 45 and under population will drop from 62 to 50 percent of the population.

SOURCE: U.S. Census STF-1 1990 & SF-1 2000; 2010 Projections, Maine State Planning, 2003.

Neither the Census data nor the state’s projections suggest that retirement aged residents are adding substantially to the demand for year-round housing at this time. This is in stark contrast to more established resort areas where older seasonal residents are converting to year-round residency in relatively large numbers. MDI’s geographic isolation, long winters, and limited services for an aging population may all serve to limit demand from this sector of the population. However, the consultant expects the pressure to provide housing and services for a wealthier population of new residents 65 and over will develop over the next decade in significantly greater numbers than suggested by the State’s projections.

Are housing prices rising at an unprecedented rate?

The cost of owning a home on MDI has indeed exploded in the past three years. According to MLS data provided to the Maine State Housing Authority, the median home sold on MDI in 2003 (through September 30^th) cost $265,000. This is up 83 percent from 2000 when the median sale price for a home on the island was $146,000.

The cost of the median priced home on MDI is now $115,000 higher than the median for Maine as a whole. At these prices, the first time homebuyer on MDI needs to have either $115,000 more in savings or earn roughly $30,000/ year more income in order to buy a median priced home than does his or her counterpart statewide. The gap between the cost of housing on MDI and the cost off-island has grown dramatically. The median 2003 home sale price for Hancock County (which includes MDI sales) is $164,050. Excluding MDI sales, Hancock County’s median price is little more than half that of the island.

Given the household income of current renters, fewer than five percent of MDI’s first time buyers could afford to purchase a median priced home today. But the median price is in some ways is less troubling to these first time buyers than the loss of lower cost starter homes. In 2000, 51 percent of all MDI sales occurred at prices below $150,000 and 25 percent were below $110,000. By 2003, homes below $150,000 dropped to just 8 percent of sales. On the whole island, just eight such moderately priced homes sold through MLS in the first nine months on 2003. Based on 2000 Census data, only about 23 percent of all island renters could afford to carry a 90 percent mortgage on a home costing more than $150,000.

In some ways, the rapid rise in MDI home prices is not surprising. Resort communities have offered especially good housing investments over the past decade. The following compares the change in median home value in a number of well-known resort communities with their respective states.

From 1990 to 2000, the median home value in all but one of these seven examples appreciated dramatically faster than their corresponding states. Since 2000, their values have continued to escalate, in many cases, just as rapidly as MDI’s. By comparison with these other resorts, MDI’s home values are a bargain. There is currently nothing for sale in Nantucket, Martha’s Vineyard or Block Island at the $265,000 median price of a home on MDI. Ironically, as seasonal buyers and retirees look for resort locations, it may be MDI’s relatively low cost that serves as a primary attraction.

The Maine Real Estate Information System (MREIS) tracks MLS land sales over time. The following shows the dramatic rise in land costs since 2000.

SOURCE: MREIS, Inc. from 1/1/2000 to 11/3/2003 (excludes land sales of over 20 acres).

The median priced building lot island-wide rose by more than 45 percent per year from 2000 to 2003. During the last three years, the median cost of land on MDI went from $8,500 higher than for Hancock County to $57,000 higher. In other words, it now takes $15,000 more household income just to buy a median priced lot than it did three years ago.

According to the most recent MREIS sales, the lowest cost "interior" building lot now sells for roughly $70,000- $75,000. At these costs, even relatively modest modular construction puts the starting cost of a new home in the $200,000 price range. For many lower paid local residents over the past two decades, a popular means to reaching homeownership has been to purchase a relatively inexpensive piece of land and build a modest home with sweat equity or modular construction. Land prices today have basically ended that practice for households earning less than $55,000/ year. The lowest cost way to reach homeownership on MDI today is to purchase an existing home and few of those are available for sale.

According to the Maine Department of Labor, MDI employers added 1,286 local jobs between the first quarter of 1996 and the same period in 2003.

For the past seven years, the island has seen an average of 184 new year-round jobs and has added only about 60 year-round housing units per year. According to the State of Island Housing report, the region’s housing growth is not keeping pace with job growth either. From 1990-2000, employment in the Ellsworth-Bar Harbor Labor Market Area increased by 3,400 employees. During the same period, new housing units in that area have increased by roughly 1,900, with as many as 25 percent of these added units serving seasonal and retired residents. A market that adds jobs significantly faster than housing units will invariably increase housing costs and commuting levels.

According to the Department of Labor data, the average wage paid for all jobs on MDI now equals just $21,400 per year. Average wages on the island have been rising by just over two percent a year while median home prices have been increasing by close to 15 percent annually. Even with lower interest rates, the buying power of the average household with two working residents has diminished rapidly in the past several years. There is now very little housing for sale on MDI that can be purchased by a household with two average earning workers.

In all, the average MDI worker currently faces a situation where median home prices are 77 percent higher than for the State and average wages are 27 percent lower than for the state. This imbalance between high housing and land costs and low wages lies at the heart of the island’s housing dilemma. One indicator of how residents combat high housing costs and relatively low wages is the number of workers per family. Statewide 48 percent of all families in 2000 had at least two people working. On MDI, 61 percent of all families include two working adults.

According to the U.S. Census, 28 percent of the island’s 6,468 housing units serve seasonal residents. From 1990 to 2000, the island saw an increase of 239 seasonal housing units, representing an 11.8 percent change. Interestingly, Maine as a whole saw a 15.3 percent increase in seasonal homes during the same time period. During the 1990s, the proportion of seasonal homes and year-round homes rose slowly, from 27 to 28 percent of all housing units, despite the fact that nearly half of the net growth in all housing was seasonal units.

By comparison to a number of resort communities nationwide, MDI’s recent change in seasonal households is relatively modest. On Martha’s Vineyard, the 1990s saw seasonal homes increase by 50 percent or 2,700 homes. Seasonal homes there account for 54 percent of all housing. On Nantucket, 59 percent of the island’s 9,200 housing units are seasonal. The 1990s saw seasonal growth in that community rise by 1,200 units or 28 percent. MDI’s slower growth and smaller seasonal population provides hope that the communities will have more time to address housing issues with less impact from seasonal pressures than these more centrally located resorts.

In all, it is the consultant’s view that, to date at least, year-round growth based on increases in employment is contributing more to the affordable housing shortage than is seasonal housing demand. However, Realtors report that, in the last two years, out-of-area buyers are purchasing a much larger proportion of homes and land island-wide as prices exceed the price local workers can afford. Given the dramatic growth in the incomes of the wealthiest ten percent of the baby boomer population, seasonal housing demand could be much more pronounced by the next Census. MDI’s housing may be just beginning to feel the real impact from the convergence of two of the country’s fastest growing populations: the wealthy and the aging baby boomer population.

According to local property tax records, the substantial majority of seasonal residents on MDI reside in the northeastern United States. The 2000 Census reports that the Northeast Region has the highest concentration of wealthy residents in the country. As shown below, the 2000 Census indicates that there are 1.2 million households in the Northeast with annual incomes over $150,000. Of these, one in three are over 55 years old and as many as 250,000 earn this income without holding a job. The number of high earning households has grown much faster than any other income group over the past decade. From 1990 to 2000, the number of households earning more than $150,000 grew by 221 percent and those over 55 more than quadrupled in number. This came during a decade when total households in the northeast grew by less than ten percent.

SOURCE: 2000 U.S. Census, STF-3

The Census Bureau also provides a long-range projection of retirement age population. Between 2000 and 2025, the number of Americans 65 and over will double from 34.4 to 70.3 million. Most of that growth is expected to occur in the south and west. All the same, the Northeast will see an increase in retirement age population of more than three million over the next twenty or so years.

There is clearly a growing gap between the wages paid locally and the cost of owning a home. The Maine Department of Labor reports 1^st quarter wages in 2003 average $21,400/ year for jobs on MDI. This is 27 percent below the average for all jobs in Maine. The current MDI housing cost is 77 percent about the statewide median. Since 1996, average wages have grown by roughly two percent annually, while housing prices have increased at more than 15 percent per year. In 2000, about 35 percent of local renters could hope to purchase a starter home. Today, the number has dwindled to about 15 percent. An affordability gap that was just over $30,000 in 2000 between what a median-income renter could afford and what a starter home costs is now at least $85,000. Even households with two-average earning workers will find it nearly impossible to buy a home on the island. Their $42,800 household income purchases about $153,800 worth of housing. The bottom of the current market is in the $165,000 to $200,000 range.

The island is home to roughly 1,500 year-round rental households. This number rose by 237 households over the past decade as a result of 120 new rental units and the absorption of 117 vacant or seasonal units. The median gross rent on the island is $520/ month. The median rent went up just over 2.5 percent annually over ten years, or slightly higher than changes in average wage. All the same, from 1990 to 2000, the number of MDI renters paying at least 35 percent of their income for rent grew by 82 percent compared to just a three percent increase for the state as a whole. In 2000, 36 percent of all island renters paid this high a portion of their income for rent. The struggle for stable year-round housing affects even the relatively well-paid post-doctorate positions at the Jackson Laboratory. Over the next three years, the lab plans to double the number of these post-docs to 120 workers. As a growing population of young adults raised on MDI start new households and as existing renters find few homes available to purchase, the stress on the current rental market will grow.

There are no direct measure of number of MDI residents leaving the island to live in less expensive Hancock County communities. The 2000 Census does tell us that more than 27 percent of those living in MDI communities in 1995, no longer lived there in 2000. This compares to Hancock County where less than 15 percent of residents changed their town of residency in those five years. MDI residents were also more likely to stay within Maine after they move: 51 percent compared to 44 percent from the county as a whole. The data is consistent with anecdotal evidence suggested households are leaving MDI to live in nearby mainland communities, but the reasons for the island’s much higher transience remains harder to define. Based on Census data, the consultant estimates that about 80 homeowners and 150 renters leave the island annually.

Generally, the capacity of workers to commute from less expensive mainland communities has allowed the local job base to grow without severe restriction. The larger employers surveyed note that a growing percentage of their workforce commutes longer to jobs but that there is no severe labor shortage currently.

Jackson Laboratories, the island’s largest employer, has hired more than 400 new workers in the past three years and expects to add 250 to 300 more in the next three years. According to the their Human Resources Director, homeownership costs have discouraged a few applicants, but more have "settled' for finding a purchase off-island. Many, who are content to rent, find rentals, often seasonally, on MDI. Animal technicians began to commute a number of years ago (the lab runs four commuter busses daily). Now post-doctoral scientists and senior technicians find themselves without adequate housing options locally. Fifty-three percent of post-doctoral employees report that finding stable year-round housing in Bar Harbor was "very difficult. " They currently pay an average rent of $747/ month or more than 40 percent higher than the median rent for the island. Jackson Laboratories plans to double the number of these post-doctoral employees to 125 over the next three years. Long term, the employer’s chief recruiter sees that their difficulty in offering affordable local housing opportunities at all levels of workforce will erode the "quality of life" advantage that distinguishes them from competitive research laboratories.

The MDI Hospital averages about 78 hires per year and expects that pace to continue. According to the hospitals Human Resource director, employees in higher paying jobs (>$100k), tend to adjust their expectations in terms of acreage and amenities as long as they have a desire to be in the area. Employees in the lower paying jobs ($15k to $25k) tend to be local or have strong local connections so their housing decisions do not usually occur after accepting a job. Employees in the middle range are most likely to be relocating for the work and not fully aware of the housing market. These are the people who sometimes make or change a decision because of housing costs.

MDIH currently leases a couple of apartments year-round. They also make use of "travelers" or "temporaries" to fill short-term staffing needs. Generally, the agency provides housing, but the hospital also relies on an informal network of employees and neighbors. To some extent, MDIH adjusts its compensation package to account for rising housing costs. However, the same factors that drive up the cost of housing also lure prospective employees to MDI in the first place. That argument gets progressively weaker as you go down the pay scale. For lower paying jobs, they simply have to pay more.

The MDI regional schools fill fewer than 20 positions per year. According to the Superintendent’s Office, applications for teaching positions are down significantly over the past decade, but remain sufficient to fill vacancies with qualified people. New lower paid workers including starting teachers tend to live off-island. Losing teachers because they have been unable to find suitable housing has not been a problem as it is in more established resort areas. A significant number of established teachers and staff are in its 50s and live locally. As they retire, their replacements will be less likely to live in their work community.

Commuter traffic is clearly rising as more island workers live in the Greater Ellsworth area. A comparison of average weekday traffic from June 1997 to June 2001, shows an increase of 18 percent or 2,898 additional vehicles per day. Expansion of the Jackson Laboratory’s workforce is a primary factor. A recent traffic assessment by Tom Crikelair Associates reports an estimated 550 Jackson Lab workers commuting from off island daily.

The following indicates the flow of workers to MDI employers based on the 2000 Census:

Residence

At this point, more than one in three MDI workers commute to the island for work. By comparison, less than one in six island residents work off-island.

III. Conclusions/ Overall Level of Need

Key conditions are in place for current housing trends to continue. Given high land costs and zoning limitations, year-round housing will likely continue to grow at less than one percent annually. Jobs, however, are likely to grow at more than twice that rate, as Jackson Labs expands and as more wealthy residents require service workers for longer periods of the year. Given the types of jobs created, wages will continue to rise much more slowly than housing prices. Right now, a family with two average-earning workers makes about $42,800/ year and can afford the carrying costs on a home of about $153,800. Today, they experience roughly a $45,000 gap between what they can afford to buy and the cost of a home at the lowest quartile of all sales. Following these trends to 2010, the "affordability gap" for that average two-worker family will be in the $120,000 range. By 2010, 75 percent or more of all housing units could be sold to seasonal and retired residents.

If market forces alone prevail, the stage is set for a gradual "hollowing out" of the island community. Historically, about five percent of the year-round population leaves the island annually, most of these being renters. That rate of exodus could rise as long time renters give up hope of buying and as the established "50-something" residents become 60-somethings and cash out on their housing investment. At the projected cost of housing, local working households will not be able to afford to buy the homes of those who leave. A growing market of seasonal and retired buyers does exist to buy these homes at prices unaffordable to the working community. Following current trends to 2010, seasonal homes may account for 35 percent of all housing on the island, up from 28 percent in 2000. Retired residents may occupy another 20 percent of the stock compared to 18 percent in 2000. Off-island commuters would make up 50 percent of the workforce compared to 35 percent in 2000. At this rate, MDI will be a noticeably different place by the end of the decade.

Those displaced by the continuation of current trends will essentially be anyone who does not already own a home. This includes an estimated 250 to 350 moderate-income, long-term renter households who feel they "missed their chance" for homeownership when prices escalated so quickly. It includes the roughly 800 current teenagers who will be looking start their own households in the next decade.

This picture may look pretty bleak. Stepping back and comparing what’s happening on MDI to other resort areas, though, the story may seem more hopeful. From a second home and retirement perspective, MDI is not a "first tier" destination. Those communities have seen much more rapid rises in population (3 to 5 percent annually compared to 0.8 percent for MDI), much more rapid land development (200 to 300 units/ year compared to 80-100 for the island) and much more prolonged periods of price appreciation. MDI’s current affordability gap of $48,000 for the two-worker family is much bigger than it is in most of Maine, but it is significantly smaller than the gap that exists throughout most of southern New England. Moreover, the island’s largest employers including Jackson Labs, the College of the Atlantic, Hinckley Boat, the hospital, and the area schools are not seasonally based. Their desire to develop long-term career employees is consistent with the MDI Tomorrow’s goal of insuring housing opportunity for a core community workforce. Reaching a consensus on the need for housing that does not compete in the open marketplace may be easier to reach with this commonality of interests.

In the consultant’s view, the current condition of the MDI housing calls for the development of between 25 and 35 new homeownership opportunities annually aimed at the core workforce. This housing may be new or existing. This housing needs to sell at prices in the $125,000 to $175,000 price range currently. It would provide a new bottom quarter to the existing market. The key features of this community housing should include provisions that:

• It be sold to core members of the community workforce however that may be defined
• Those households be in the $35,000 to $55,000 range currently
• That these homes have covenants to insure that they appreciate in value no faster than the average rate of island wage growth.

This level of affordable homeownership opportunity provides options for long term renters and key new employees; it addresses positively the sense of despair that may speed the exodus of many valued members of the community; and it builds up, over time, a core of housing that is buffered from the powerful market forces driving up home prices generally.

In addition, the consultant sees the need for additional rental units to serve several overlapping needs:

• To reduce the number of very low income residents who are paying an excessive portion of their income for rent
• To provide additional year-round housing to ease the burden of families who must annually vacate rental housing that converts to seasonal vacation rentals
• To accommodate more of the island’s growing number of lower paid workers who now commute from 15 to 30 miles away
• To provide opportunities for new household formation to those young residents raised on MDI, and
• To adjust to the reality that given the island’s cost of ownership renters will remain renters for longer periods of time.

In the consultant’s view, the island needs at least 200 additional rental opportunities by 2010 to meet the needs of those households earning under $35,000 per year.

One key element of the Community Housing Action Plan is to set goals for each town to participate in addressing the need. If we look at the overall need for roughly 200 ownership and 200 rental units, what should each town contribute to this?

Numerous differences exist between each of the four island communities. Population, housing and rental costs, rental households, teenagers and young adults, jobs and wages, growth trends, developable land, zoning and infrastructure, all represent factors to consider when evaluating housing need at the local level. It would be possible to construct endless models for what each community’s share of need is. The potential exists for each individual town to use the data to maximize the responsibility of other towns and minimize its own share of the problem. Bar Harbor has most of the jobs so it should so more, but it has the least available land so it should do less. Southwest Harbor has the most affordable housing already so it should do less but has the highest percentage of lower paid workers so it should do more. Mount Desert benefits the most from seasonal housing and high costs so it should do more, but already has many more homes than jobs so it should do less. Tremont has so few jobs so it should do less, but the most developable land and fastest residential growth so it should do more. It will take a larger community vision for the island towns to avoid wrangling over how much of the housing burden each town creates.

The following lists some key factors showing each town’s share for MDI overall.

In the consultant’s view a key principal is that each community participate substantially in addressing the housing need. Beyond that, the most important variables would seem to be the number of employees working in the community and the community’s overall development capacity. As a starting point for discussion, the consultant recommends that each community take on a share of the overall need at least equal to its share of the island’s overall population.