Housing

Maine's problem is that personal assistance relies heavily on direct aid through grants and discounted loans.  Other states place a strong emphasis on matched-savings programs (Individual Development Accounts or IDAs).

 

States like Indiana and Oregon are examples of a more savings-based approach, which would have enormous positive implications for Maine people.  The choice is, should we support Maine's grant-based model, where citizens are dependent on government decisions on eligibility and other aspects?  Or, should we adopt Indiana's IDA program that actually incentivizes savings as a means of qualification?  Let's explore the difference below.

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Maine primarily uses the Maine State Housing Authority (MaineHousing) to issue low-rate mortgages, grants, capital gap financing and direct assistance.  Maine's programs are designed to reduce the financial burden of homeownership through direct subsidies that do not require a prior savings period or matching contribution from the individual.  So the penalty is, if you have been a good saver and have bought a home of your own, you now are paying taxes to buy someone else's home.  Maine incentives reward dependency over principles of self-sufficiency.  While we all care about Maine's youth and we want to help veterans, low-income individuals and others, teaching people about the personal rewards that come from savings can come by setting up qualifications for grants that measure a track record of saving.  That is what states like Indiana and Oregon have done. 

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By way of example, the Maine Advantage Down Payment and Closing Cost Assistance program has offered a $5,000 grant in the past, while the First Generation Program provides a $10,000 grant. These programs give away direct aid that helps fill the "funding gap" without the participant needing to build up any more than a 1% savings-match beforehand.  While elements of this plan are good, we simply must model savings opportunities at a very early age by partnering with private employers and establishing account-based models.  These are the principles that we used when we built our country.  Our nation already offers savings programs to a limited extent.  These include Health Savings Accounts and 529 Education Savings Accounts.  Setting up new and innovative housing programs that integrate savings is the healthy approach to governing. There will still be room for low-interest loan support.

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The savings-based model in Indiana requires participants to engage in a structured savings plan, often for 12-36 months, combined with financial education. For every dollar saved by the participant, the program adds a matching amount (e.g., a 3:1 match is common in Indiana).  The program offers up to $4,500 in state match funds toward a home purchase goal. If we combine parts of Maine's current "give-away" programs, we could offer more.  This creates the strong incentive to save.  The focus is on building financial management skills, establishing strong saving habits, and fostering long-term asset building and self-sufficiency, in addition to the goal of homeownership.

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The key difference in my plan, then, is that unlike Maine's direct, up-front grants, my model makes the assistance contingent on the individual's consistent savings effort and commitment to financial education. The participant's own savings are the foundation, which are then amplified by the state match. The education of young people about this program would take place in the personal finance courses taught in high schools (offering these courses need emphasis as well). 

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Housing supply is important.  Using principles of supply-side economics, Maine can join states like Florida and drive down prices by building more units. Incentivizing the private sector to build does not require massive taxpayer dollars. Let's help our private builders build.   

 

There is plenty of room for our federal delegation and state leaders to join in supporting Housing and Urban Development (HUD) and other programs in Maine. What limited data that is available indicates that public housing should be expanded.  Maine can and should pursue increases in "fair share" allocations from the federal level, as a high-need state. We can also seek special purpose vouchers for our veterans and youth who are aging out of foster care. We should also make the case based on our homeless populations and domestic violence survivors  Another federal program to pursue is project-based rental assistance (PBRA).  "Subsidized" housing can also be expanded, but as mentioned earlier, there needs to be a savings component.  As any economist worth their salt will tell you, "savings equals investment."    

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Finally, we need to rebalance current request for proposals (RFP's) to give some private contractors a better shot at building in order to lower artificially high bids.  Current RFP scoring awards heavy points for non-profit mission experience, low income building experience, and previous MaineHousing awards.  Those practices will not be tolerated in the Libby Administration because practices like this shield competition and drive up the costs of contracts.  At the very least, point rewards should include incentives for new market entrants, small contractor participation and for the level of private capital leverage. 

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Right now, many private builders specialize in duplexes, quadplexes, and modern, innovative modular buildings.  We need to think differently about how we disadvantage some excellent small builders from participating in public projects.