Is Southwest Harbor easy target for investors eager to exploit ADU laws?

SOUTHWEST HARBOR, July 14, 2025 - Most of the 30 neighbors of 72 Clark Point Road who attended the appeals board meeting July 2 to protest the construction of an “accessory dwelling unit” had one common characteristic.

They were either septuagenarians or octogenarians.

They likely determined long ago who would inherit their homes. Some of the homes will continue to stay in the family. But some descendants may want to reap the huge windfall and cash out, as Brian Lindquist did with 72 Clark Point Road last year.

In a few short years, Clark Point Road could be a mirror of Bar Harbor’s Pleasant and Schools streets - erstwhile neighborhoods which now board either vacationers or seasonal workers in every other house on a block.

Maine’s 2022 law to expand accessory dwelling units, LD 2003, did not limit a property owner’s choice of rentals, such as a short-term vacation rental (STR). They were once euphemistically called “mother-in-law apartments.”

It also did not limit other seasonal employers from using them as housing for workers and charge rent as a second source of income.

The state left it up to the towns to regulate such dwellings.

On MDI, Bar Harbor is the only town with STR regulations. Since 2021, the town has seen a decline of more than 100 STR permits - to 615 at the end of the 2025 fiscal year.

It would be the ultimate irony if laws intended to make housing more accessible and affordable end up benefitting mostly investors and vacationers.

The investor who now has intimate knowledge of Clark Point Road could take the same model and replicate it multiple times. Using an LLC, sellers wouldn’t know the name of the buyer.

The most likely ones are investors with deep knowledge about a market aided by tools like AirDNA or AirROI. This cohort no doubt has heard about Maine’s liberalization of laws which previously limited ADUs.

Or a business owner who realized that his success depended on having enough housing for staff.

Ralph Reed, who owned and ran the Quietside Cafe with his wife Frances, was an early adopter of the J1 visa program to run his business with foreign workers starting about 30 years ago.

They were pioneers. But they did not buy up year-round housing to achieve their goals. They built a dormitory above their garage.

Others were not so delicate. One hotelier bought up more than a half dozen homes.

As a result, Southwest Harbor has seen an astonishing 71.56 percent increase in property valuation since 2019. Bar Harbor’s was 70.8.

Those numbers contained the seeds of destruction of neighborhoods.

The following is the growth of valuation from the four towns on MDI plus Ellsworth from 2019 to 2025, as reported by the state. The seven-digit numbers are in the billions.

I asked ChatGPT to summarize what the downsides are to Maine legislature’s recent relaxing of its laws limiting ADUs. The usual caveats on AI-generated content applies, but I believe these are mostly on point:

• Investment Pressure: Looser rules may encourage investors to buy up single-family homes and build ADUs for STRs (short-term rentals) or mini-multifamily use.

• Affordability Mismatch: Not all ADUs will be affordable; some may target higher-income renters or tourists.

• Zoning Compliance: Municipalities may struggle to monitor setbacks, height, or use.

• Code Enforcement: Unpermitted or poorly built ADUs could proliferate.

• Occupancy & Usage: Owner-occupancy requirements can be hard to verify; without them, absentee landlords may increase.

• Loss of Year-Round Housing: Relaxed ADU rules without STR regulation may inadvertently create more Airbnb-style units.

• Community Pushback: Neighbors may object to transient renters, especially in quiet or seasonal communities.

Natasha Johnson, whose home abuts 72 Clark Point Road, is a Select Board member. She worried that the current Bar Harbor moratorium on hotel development will drive them to Southwest Harbor just as its cap on STRs spiked AirBNB rentals in neighboring towns. The data confirmed her fears.

Since 2022, when the Bar Harbor cap went into effect, STRs in Southwest Harbor has grown year after year hitting a record of 336 listings at the end of June, according to AirDNA.

Three years ago it had 260. Ten years ago it had no STRs, only weekly rentals booked through local real estate agents. The chart below showed the growth of STR listings.

Another tool, AirROI, which only tracks AirBNB and not VRBO, broke it down to actual bookings - a record high of 218 at the end of June. But the trajectory is similar.

Johnson admired neighboring Mount Desert, which has a standing committee, the Land Use Ordinance Advisory Committee, managed by land-use expert Noel Musson, who is based in Southwest Harbor.

Small-town select boards and town councils are volunteers asked to decide on mostly transactional issues. They are weak on big, macro challenges. As former Bar Harbor councilman Matt Hochman said once, “This is the nature of municipal governments. We are slow.”

Big unresolved questions remained - will there be a year-round community left to sustain enrollment in our schools, use of our medical clinic and pharmacy?

In 2019, the K-8 Pemetic School had 145 students. It completed 2025 with 127.