Urban County Council to receive affordable housing needs update amid surging rents

Lexington, Ky. — On Tuesday, the Lexington-Fayette Urban County Council will hear a crucial update on the city’s affordable housing needs, as rising rent prices and a growing housing shortage continue to impact low- and middle-income residents. The analysis, conducted by EHI Consultants at a contract cost of $188,000, outlines several pressing concerns and offers recommendations aimed at alleviating the housing crisis.

2024.1009 – LFUCG AHNA Presentation

According to the Affordable Housing Needs Analysis (AHNA), Lexington has seen a 47% surge in rent prices from 2019 to 2024, with the median rent now ranging between $1,200 and $1,250. In the last year alone, rents rose by 8.7%, exacerbating the financial strain on many residents. The report also highlights a critical shortage of housing units, estimating that an additional 22,549 units of all types are needed to meet the current demand.

The Affordable Housing Fund (AHF), established to combat the shortage, has made significant investments but faces limitations in closing the housing gap. Since 2014, the AHF has invested $47.5 million, facilitating the construction of 1,750 new units and preserving 1,754 existing units. However, the report notes that Lexington still falls short of providing enough affordable housing for those earning below the Area Median Income (AMI) of $62,908.

Worsening Housing Affordability

More than half of Lexington’s renters are cost-burdened, with 54.3% spending over 30% of their income on housing. Particularly alarming is the fact that 28% of renters are considered “extremely cost-burdened,” spending more than half of their income on rent. These figures underscore the ongoing struggle for affordable housing in the city.

For homeowners, the situation is not much better. While homeownership rates have remained stable, 21.5% of homeowners are cost-burdened, and 6.8% are extremely cost-burdened. The report also notes that student housing costs have risen by 33% since 2015, compounding the overall affordability crisis.

Public Support and Development Challenges

A public survey conducted between February and June 2024 as part of the AHNA collected over 1,200 responses from residents across Lexington. Key findings reveal that high housing costs are driving many current and former residents to relocate to more affordable surrounding communities. Additionally, there is broad public support for repurposing vacant commercial properties into residential units and requiring developers to include affordable units in new housing developments.

Despite this support, the report outlines several challenges in expanding affordable housing, including securing sufficient funding, overcoming community resistance to new developments, and rising construction and management costs. Moreover, zoning regulations and lengthy permitting processes continue to hinder the development of affordable units.

Addressing the Housing Gap

The report emphasizes that to close the 22,549-unit housing gap, Fayette County would need to expand its housing stock by 16%. Even excluding student households, the city still faces a shortfall of 17,789 units. The financial projections for closing this gap highlight the need for increased investment, noting that simply maintaining the current level of funding will not suffice.

The AHNA outlines several potential solutions, including expanding multi-family zoning, allowing accessory dwelling units (ADUs), and providing density bonuses to incentivize developers. Additionally, the report advocates for streamlining the approval process and reducing fees to lower development costs.

Government and Private Sector Involvement

Lexington’s Affordable Housing Fund remains a key tool in addressing the housing crisis, but the analysis suggests that greater collaboration with state, federal, and private entities is necessary to maximize resources. Programs like the Kentucky Housing Corporation’s Low-Income Housing Tax Credit (LIHTC) and the federal New Markets Tax Credits (NMTC) are highlighted as vital mechanisms for attracting private investment and reducing development costs.

Nonprofit organizations such as Habitat for Humanity and the Lexington Community Land Trust also play an essential role in building and renovating affordable housing. The AHNA stresses the importance of public-private partnerships to effectively address the affordable housing shortage.

Looking Ahead

As the Council prepares to review the findings on Tuesday, the pressure to act on Lexington’s housing crisis is mounting. The city’s future efforts must not only address the immediate need for affordable housing but also focus on long-term sustainability. Without significant policy changes and increased funding, the growing affordability gap threatens to push more residents into financial hardship, homelessness, or out of the city altogether.