LEXINGTON, Ky. (LEX 18) — Lexington is one of many cities nationwide experiencing the national housing crisis, so why aren't people creating more?
In short, space and money.
"You just can't build just because you want to," said Johan Graham, president and CEO of AU Associates.
Graham says for his company, in addition to helping an underserved population that develops affordable housing, there are three big components: financing, longevity and finding a location that scores competitively for federal tax credits. They can offer those credits to banks in exchange for loans.
"To make a project work, to make it make business sense, and to serve the poor and to look nice for the next 30 years, because you guys also have to make money as well. We have to survive and we have to have staff that we employ to service our residents, to manage the apartments, to keep them clean, to do the grounds. So can this be a real business to operate to make sense in our communities and serve these individuals," said Graham.
Even though they can utilize federal and local government incentives, that cost analysis has gotten more expensive with increased supply costs for construction and interest on loans.
"As the federal government's raised the interest rates, it's got gotten extremely difficult to build affordable housing and the city's helped fill our gap, but when the city helps do that, and that means every time I need help, it takes more of their money than it used to," said Graham. "When interest rates were three percent, now they're eight and a half percent, so it takes more of their money per unit to be helpful. So that means it spreads thinner than it used to."
Affordable housing developers can rely on both public and private funding for creating housing units, but the whole process takes time.
Graham says it took three years to finish the Oasis at Kearney Creek for older adults that make at or below 60% of the area's median income. It opened in 2021.
Their new complex across the street will take about four years once completed.
"You have to find the land that's affordable or decently affordable and then you have to, I have to compete for the money and make a bank loan work," he said.
Kearney Ridge Apartments will add 252 units to the city's affordable housing list. It's set to move its first tenants in July. They are taking names for those interested in applying once it opens.
"We serve people making between $20 and $37,000 for a family of one, so we are part of the solution in Lexington and nationwide and companies like ours to provide this level of housing to this population that doesn't have other options besides market-rate housing," said Graham.
It sits in an area with single-family homes and multi-family homes. While their projects will add more housing, experts say the rate of housing growth with population still lags behind.
Lexington has been trying out solutions for affordable housing since at least 2014 when the Affordable Housing Fund was created.
Affordable housing is housing that's affordable to those with a housing income at or below a certain percentage of the median. That number is determined by federal and local governments.
To date, the city of Lexington has loaned money to affordable housing developers for the new construction and preservation of 3,082 affordable housing units.
952 are currently under construction.
Rick McQuady with the Office of Affordable Housing says over 90% are occupied and once a new development opens, the units lease immediately.
Housing affordability is different and has decreased, making housing less affordable for many in the city.
"It's been an issue for years, but it's only becoming more of a prominent issue because it's affecting you know, those that could afford a $200,000 house because those don't really exist all that much anymore. The lowest, you know, socioeconomic, the poorest people, have been experiencing this for years," said Blake Hall, urbanist and creator of the blog "Build a Better Lex."
Hall advocates for housing and safer streets for walking and biking.
"The more I looked into it, the more I found out that it was because we essentially made it illegal or all but illegal due to single-family zoning," said Hall. "Single-family detached housing is also the single most expensive type of housing. So, when you zone an area for single-family detached housing only, you are in essence saying, we don't want anyone here that can't afford a full house and yard and land, and because of that, and there's a lot of stigma associated with multifamily and that is often times wrong."
He says the push for single-family housing stems from racism and came about the same time as civil rights changes like the Supreme Court ruling restrictive racial deed covenants unenforceable in 1948.
"So previously, it was completely legal to say— have a restriction on a covenant on your deed that says no Black people can own or live here? And it was Polish, Irish. That was completely legal until the 50s. And then so once that was kicked out, and was like, okay, those are no longer enforceable (and a lot of them are still on the books that are just not enforceable). Then you had things like the rise of HOA, more single-family zoning. Essentially it was — they were like, if I can't outright say I don't want Black or poor people to live here, I'll just make it to where the only buildings that can be built here are the ones they can't afford," said Hall.
There are also rising construction costs and rising interest rates making bank loans harder to get and more expensive.
Where government incentives limit the rent and profit affordable housing developers can collect, for-profit developers need to make a profit.
"Oftentimes, that's too difficult for market rate developers to do when they want to build scale and they have to finance the whole property with conventional bank loans," said Graham.
According to the 2022 PVA Real Property Assessment, most residential zoned areas do not allow multi-family buildings like apartments.
Of the 99,889 residential parcels of land in 2022, only 1,695 parcels of property were multifamily. That's about 1.67 % of the residential space.
That number has decreased since 2018.
A zone change can take months and takes input from the community.
"Which is why you see more of the larger apartment buildings that have to buy all of the smaller parcels and assemble a massive structure because to jump through all those hoops you have to have the return on investment," said Hall.
Expansion Views
For context, Hall is against it.
"I'm not a forever hold-the-line-never-expand. But I certainly don't think we need to expand now. And also, with the lack of mechanisms that we have dealing in regard to exposure. The choice by the council to expand now is nothing short of short-sighted and at best naive because the city has no mechanisms to enforce affordable housing gets built there. And there are all the other negative aspects of urban sprawl, in which case is like first off, somebody who's displaced from North Lime is not going to be able to afford new construction at the outskirts of town. Also one-third of Lexingtonians do not drive, whether that's for medical reasons, financial reasons, whatever. So by pushing, even if you did get affordable housing out there, you're still at least isolating people," said Hall.
Graham is for it.
"I'm a huge proponent of the urban service boundary. I think it's really important. It's what makes our city special. But it's been 20 years and land is getting harder and harder to find — market rate or affordable. So, I think, if they take a really smart approach about how to look at admitting new land into the boundary and the purposes it serves to the comprehensive plan and to imagine Lexington and the type of developments, we want to come into the urban service boundary. It has to happen eventually," said Graham.
He believes there is an avenue for affordable housing there.
"It's incumbent upon me and my staff and the local officials to work hand in hand with the state to advocate for what parcels we want to be in the boundary. And for me and LLC leaders to work with for-profit housing developers to carve out a piece of land for me, for my competitors for my affordable housing providers," said Graham.
For-profit developers would have to be open to that.
