MaineHousing Incentivizes Private-Sector Developers to Expand Homeownership Opportunities

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MaineHousing Incentivizes Private-Sector Developers to Expand Homeownership Opportunities

 

Since 2021, the average cost of a single-family home in Maine has risen by approximately 42 percent to approximately $425,000. Between 2015 and 2024, the income needed to buy a single-family house increased by 187 percent, while the state's median income increased by only 44 percent. An influx of new residents and increased demand from remote workers are among the challenges confronting the state's housing market. High prices, limited inventory, and continued strong demand now define the housing market, pricing many buyers out of homeownership.

To increase housing options for the state's residents, MaineHousing (Maine's state housing agency) created the Affordable Homeownership Program (AHOP). AHOP incentivizes private-sector construction of attainable single-family homes. Initially supported through $10 million in federal funds dedicated through Maine Jobs & Recovery Plan grants, the second and third rounds of funding came from direct appropriations from the state legislature, with no federal money involved. AHOP won the 2025 National Council of State Housing Agencies Award in the Homeownership: Encouraging New Construction category.

How AHOP Works

According to Scott Thistle, MaineHousing's communications director, the most persistent unmet needs include building enough homes to close a significant housing supply gap; addressing the growing share of cost-burdened households; and expanding long-term rental opportunities and housing stability for vulnerable populations, particularly low-income households, in Maine's high-cost housing market.

AHOP addresses these needs by facilitating housing production targeted to households earning no more than 120 percent of the area median income. Developers building houses for eligible buyers can apply for forgivable loans with zero-percent interest and can use the loans for land acquisition, site development, soft costs, construction loan interest, onsite infrastructure, and the construction of units that meet program requirements. The program also can provide subsidies to developers of multifamily rental units in developments that include both ownership and rental properties.

Developers can receive forgivable loans of $80,000 to $90,000 per unit, with the higher amount available for units in higher-cost market areas. The minimum funding amount is $400,000, with a maximum amount of $1.8 million per development. MaineHousing awards AHOP loans through a competitive process that scores applications on project readiness, developer capacity, additional space beyond the required minimums, and the ratio of funds requested to the maximum subsidy per unit. The developer must provide at least five units priced at or below $350,000 ($378,000 in the higher-cost counties of Cumberland, Sagadahoc, and York). Units must have a permanent foundation, at least two bedrooms, and a minimum of 500 square feet of living space. AHOP permits units smaller than the area's typical market-rate home to encourage affordability. Eligible developers, contractors, engineers, and architects must have successful experience with a MaineHousing development program or demonstrate sufficient experience in developing single-family housing projects.

Loan recipients must execute a forgivable promissory note, mortgage, and security agreement in favor of MaineHousing. The mortgage must cover the entire development, and MaineHousing will release parcels from the mortgage when they are sold.

Qualified homebuyers can obtain below-market mortgages through MaineHousing's First Home Loan Program. Purchasers of single-family homes must execute and record a Declaration of Covenants and Restrictions assuring that the property will continue to meet AHOP affordability requirements for at least 15 years. Developers are released from the promissory note once they have sold the required number of units. The entire loan amount becomes due and payable, with default-rate interest, if the developer fails to sell the required number of units within 3 years of the loan's execution.

In addition to single-family detached homes, townhouses and condominiums are eligible for AHOP. Modular homes also are allowed under the program. At least one development, Dougherty Commons, was built using modular construction techniques.

Results

Since its inception in 2023, AHOP has generated more than 300 new units in 21 locations throughout the state. The program also has helped diversify the state's housing supply. AHOP has not only expanded ownership opportunities for first-time buyers but also allowed senior households to downsize to smaller, less costly units, freeing up their former residences for new buyers.

Some of the developments that have used AHOP loans include the following:

• Stearns Farm, Hampden. Completed 23 affordable units at $240,000 per unit; each 1,400-square-foot unit has 2 bedrooms, 1 bathroom, and a garage.
• High Pines Village, Wells. Developed 20 affordable units priced between $250,000 and $265,000 as part of a 120-unit mixed-income subdivision. The affordable units have 3 bedrooms and 1.5 baths and range from 1,000 to 1,050 square feet.
• Wilbur's Woods, Brunswick. Built 21 houses on a campus with an 18-unit apartment building. The homes are priced at $325,000, significantly less than the town's median selling price of $600,000. Each house includes 3 bedrooms, 1.5 baths, cathedral ceilings, and a basement.
• Clark's Bridge Crossing, Waterboro. Developed 9 houses priced at $284,000.
• Dougherty Commons, Portland. Consists of 20 affordable units.

Significance and Transferability

According to MaineHousing director Dan Brennan, "AHOP is a strong example of how flexible funding can effectively target a specific segment of the housing market, particularly the need for new starter homes and housing that works well for downsizing older Mainers who wish to remain in their communities and are not interested in renting." Through flexible, forgivable AHOP loans, MaineHousing has incentivized private-sector developers to help fill a critical gap in the housing market. Part of MaineHousing's larger portfolio of programs, AHOP has helped hundreds of housing-challenged families achieve homeownership. The relative simplicity of the program and its popularity with developers make AHOP a possible template for other innovative, supply-side housing funding programs.