LexlngLon's Aordable Pouslng Challenge and oLenual SLraLegy

lebruary 2014
czb for Lhe ClLy of LexlngLon, k?
czb
Lxecunve Summary
8ecause of a greaL deal of hard work, LexlngLon, kenLucky ls ln Lhe mldsL of a prosperous economlc
expanslon. Plgh wage [obs are belng creaLed. 8uslnesses are locaung Lo LexlngLon. CuallLy of llfe ln
LexlngLon ls hlgh. Moreover, LexlngLon remalns a very aordable place Lo llve wlLh greaL houslng
cholces aL excepuonally good prlces across mosL of Lhe houslng specLrum.
Slnce 2000, however, as LexlngLon has shled Lo a more hlgh-Lech, servlce-orlenLed, new economy, Lhe
demand for hlgh skllled workers has grown. WlLh LhaL, Lhe cohorL of LexlngLon workers wlLh hlgher
lncomes has also grown.
Cne |mportant resu|t of r|s|ng |ncomes |s r|s|ng hous|ng
costs.
As more households have more Lo spend on houslng,
prlces rlse. And lf overall demand rlses as well - whlch
has been Lhe case - houslng prlce escalauon becomes
even sharper. lor LexlngLon, Lhls means a Lwo-parL
narrauve has been Laklng shape Lhe lasL decade.
Ior househo|ds mak|ng 540,000 or more a year,
Lex|ngton oers great va|ue: exLraordlnarlly hlgh
quallLy of llfe, amenlues, and houslng opporLunlues. lor
low wage earners (maklng less Lhan $30,000), Lhe opposlLe
ls Lrue: fewer and fewer aordable houslng opporLunlues and oen subsLandard condluons ln whaL
remalns aordable.
Indeed, |n the |ast two
decades, |oca| rents have
r|sen to such a degree that
more than 28,000 apartment
un|ts |n Lex|ngton that were
aordab|e to |ow-wage
workers are no |onger w|th|n
reach.
So long as LexlngLon conunues
Lo grow economlcally, Lhese
houslng Lrends - speclcally a
decreaslng supply of
aordable renLal houslng - wlll conunue.
1he magnlLude of Lhls problem ls slgnlcanL, and LhaL ls ofet dlscounung for sLudenLs. 8oughly 13,000
low-lncome households need houslng asslsLance ln LexlngLon Loday. Cf Lhem, abouL 9,000 now recelve
asslsLance or are accommodaLed by Lhe prlvaLe markeL. 1hls leaves abouL 6,000 households, mosL of
whom lnclude aL leasL one worker, LhaL cannoL nd decenL houslng on Lhe open markeL ln LexlngLon aL
raLes consldered aordable (equal or less Lhan 30 of Lhelr gross lncome). ConsequenLly, Lhese 6,000
worklng households elLher overpay or llve ln subsLandard or overcrowded condluons. When households
overpay, Lhe LexlngLon economy ls deprlved spendlng, cosung LexlngLon valuable revenue. When
households - wheLher overpaylng or noL - have no cholce buL Lo llve ln subsLandard or overcrowded
condluons, LexlngLon's Lax base suers, and nelghborhoods become less sLable.
age 2 of 23
czb for 1he ClLy of LexlngLon, k?
Wh||e |n the years ahead, Lex|ngton
w||| need to pay more auennon to the
cha||enges of aordab|e home
ownersh|p, today's rea| hous|ng
cha||enge |s that there are too few
apartments aordab|e to |ow |ncome
fam|||es, and that Lex|ngton has a |ot
of |ow and very |ow |ncome workers.
Also, Lhls problem ls llkely Lo become more slgnlcanL golng forward. lL ls probably Lhe case LhaL Lhe
LexlngLon markeL wlll shed an addluonal 400 aordable renLal unlLs (on average) ln each of Lhe comlng
years.
lf Lhe Mayor and ClLy Councll wanL Lo do someLhlng abouL Lhls problem, lL ls lmporLanL Lo sLarL wlLh an
undersLandlng of Lhe rooLs of Lhls problem, of whlch Lhere are Lwo.
- kICL CI SUCCLSS. llrsL, recenL changes ln Lhe LexlngLon economy Lo one requlrlng more skllls and
educauon ls aL Lhe cenLer of Loday's aordablllLy challenges. 1hlnk of Lhls as a cosL of becomlng an
lncreaslngly compeuuve and prosperous clLy. Pad LexlngLon gone more ln Lhe dlrecuon of SL. Louls
and Clnclnnau (becomlng weaker) lnsLead of Lracklng wlLh 8alelgh and Chauanooga and Cakland and
Albuquerque (becomlng sLronger), resulung and perslsLenL so markeL condluons would have meanL
cheaper houslng. 8ualo and ueLrolL and 1renLon remaln cheap because Loo few buslnesses wanL Lo
locaLe Lhere and Loo few workers wanL Lo llve Lhere, and, consequenLly, demand ls low, and prlces
reecL LhaL. 8y conLrasL, LexlngLon ls becomlng more expenslve - Lhough sull aordable Lo mosL -
because Lhe exacL opposlLe ls Lrue. 1hls ls a problem resulung from prosperlLy. As 8oulder and Seaule
and Ausun have dlscovered, addresslng rlslng houslng cosLs ls a prlce of success.
- S1AGNA1ING WAGLS ICk SCML. Second, low-skllled workers' wages are noL keeplng pace. ln
LexlngLon Lhere are Lhousands of poor resldenLs ln households who for generauons have noL been parL
of Lhe malnsLream economy. 1he ma[orlLy of Lhese households have been helped by federal programs,
buL Lhe underlylng slLuauon has noL changed much. 1hls ls a legacy problem. ln Lhls respecL, LexlngLon
resembles uurham, 8lchmond, nashvllle, and lndlanapolls - clues on Lhe move ln Lhe rlghL dlrecuon,
buL wlLh large poruons of Lhelr worklng buL low-lncome populauon unable Lo keep up.
1he recommended way Lo Lhlnk abouL LexlngLon's currenL aordablllLy gap - arlslng boLh from legacy on
Lhe one hand and as a prosperlLy consequence on Lhe oLher - ls as a problem LhaL requlres LexlngLon Lo
catch up. 1haL ls, Lo close a gap LhaL now (already) exlsLs, a gap we esumaLe Lo conslsL of 6,000
households.
What about go|ng forward?
ln addluon Lo Lhe work of catch|ng up (closlng Lhe currenL gap), Lhe LexlngLon markeL wlll llkely conunue
Lo become ever more expenslve. 1haL wlll llkely resulL ln an addluonal annual loss of anoLher 400
aordable unlLs. We pro[ecL LhaL by 2023, Loday's gap of 6,000 could become much larger. 1he way Lo
Lhlnk abouL Lhe fuLure aordablllLy gap - arlslng from conunued lncreases ln prosperlLy and resulung
houslng prlce escalauon - ls as a problem LhaL wlll requlre LhaL LexlngLon keep up (l.e. noL leL Lhe gap
geL any blgger Lhan lL already ls).
8egardless of Lhe pace LhaL local houslng prlces have rlsen and wlll rlse, Lhe key underlylng lssue for Lhe
Mayor and ClLy Councll Lo come Lo Lerms wlLh ls LhaL wages for low-skllled workers have noL and wlll noL
keep pace wlLh rlslng houslng cosLs, and so Lhere wlll be an aordablllLy gap unul Lhey do. lurLhermore,
lf Lhls aordablllLy gap for low-wage workers ls noL closed - for whaLever reason - Lhe problem ls noL one
whose cosLs wlll slmply go away. 8aLher, Lhe cosLs wlll emerge ln alLernauve form as decllnlng
nelghborhood healLh, reduced Lax base, hlgher crlme and crlme-ghung cosLs, hlgher demand for
servlces and Lhelr cosLs, or commuung pressures and Lhe cosLs of congesuon, as well as alr and waLer
polluuon. Pouslng aordablllLy gaps are a when" and ln whaL form" challenge, noL an lf" problem.
age 3 of 23
czb for 1he ClLy of LexlngLon, k?
WnA1 IS 1nL SCLU1ICN? AordablllLy gaps can be closed ln Lwo baslc ways: by reduclng houslng cosLs,
or by lncreaslng lncomes. And Lhey can be addressed Lhrough lncome subsldles on Lhe demand slde, or
producuon eorLs on Lhe supply slde. And, of course, all such approaches can be comblned.
MosL crlucal of all as regards a response - no mauer how Lhe gap ls closed - ls LhaL Lhe unlL cosL of
addresslng Lhls problem wlll be roughly $6,000 per year per household. WheLher as a renLal subsldy of
$300 per monLh (on average) per low-lncome worklng household, or as repaymenL of amoruzed debL
Laken on Lo consLrucL new unlLs, Lhe per unlL/per year scalable varlable ls $6,000.
Typical Low-Income Wage Earner HH in Lexington
(based on a range of income earning possibilities and range of market rents)
Typical Low-Income Wage Earner HH in Lexington
(based on a range of income earning possibilities and range of market rents)
Typical Low-Income Wage Earner HH in Lexington
(based on a range of income earning possibilities and range of market rents)
Typical Low-Income Wage Earner HH in Lexington
(based on a range of income earning possibilities and range of market rents)
Typical Low-Income Wage Earner HH in Lexington
(based on a range of income earning possibilities and range of market rents)
Annual Hours Worked (Range) (Average) 1,807 1,807 1,955 1,955
Hourly Wage (Average) $7.25 $7.25 $7.25 $7.25
Monthly Gross Income (Average) $1,092 $1,092 $1,181 $1,181
Affordable Rent (Average) $328 $328 $354 $354
Market Rent 2+ BR Range (Average) $723 $807 $807 $860
Est. Annual Gap Range (Average) $4,428 $5,436 $5,436 $6,072
Est. Annual Mortgage Payment to Retire $75,000/unit Development Costs $5,988 $5,988 $5,988 $5,988
lor Lhe sake of cralng pollcy, Lhls $6,000 per year per household gure ls Lhe rounded mulupller LhaL
Lhe communlLy needs Lo undersLand. lL ls Lhe mulupller LhaL LranslaLes Lhe problem of caLchlng up
compleLely Lo abouL $36M per year, (lL ls also Lhe average annual cosL Lo LPA ln subsldles Lo a secuon 8
household. ln addluon, we pro[ecL Lhe cosL of keeplng up Lo be an amounL LhaL wlll grow by $2.4M
annually Lhereaer unul wages keep pace wlLh houslng prlces.
1hls ls a loL of money. 1he aggregaLe amounL LhaL LexlngLon employers pay ln wages each year ls
roughly $3.78, whlch works ouL Lo 6/10Lh of one percenL of whaL's pald annually. Whlle $36M a year ls
o lot of mooey, lL ls also a uny fracuon of Lhe overall amounL of wages pald, and ls a form of employer
cosL shllng whereby employers pay a low wage, and Lhe lmpacLs of LhaL low wage are pald for by
everybody else ln Lhe form of hlgher Laxes. LexlngLon's wage-houslng cosL gap ls $36M a year of prlvaLe
galn aL publlc expense, and Lhls ls growlng by an addluonal $2.4 annually.
8eyond Lhe scale of Lhe problem ls a capaclLy lssue. veo lf tbe clty foooJ 5J6M- o yeot to close tbese
o[otJoblllty qops (teqotJless of wbete tbe mooey mlqbt come ftom), tbe lexloqtoo boosloq system
toJoy ls loso[cleot to tbe tosk, lt Joes oot bove tbe copoclty to lmplemeot o 6,000-oolt ptoqtom. Not
toJoy.
age 4 of 23
czb for 1he ClLy of LexlngLon, k?
1o adequaLely address exlsung - and fuLure - aordablllLy gaps, LexlngLon needs boLh Lhe nanclal
resources Lo do so, and a sysLem capable of lmplemenung Lhe sLraLegles selecLed. Pavlng nelLher aL Lhe
presenL ume, whaL ls recommended ls a scaled, Lwo uered approach.
I|rst, It |s recommended that the Mayor and Counc|| set a goa| of catch|ng up w|th|n 11 years, LhaL ls
compleLely closlng Loday's gap of 6,000 unlLs by sLeadlly and perslsLenLly provldlng more renLal subsldy
Lo worklng famllles prlced ouL of Lhe markeL, and, when posslble, Lhrough Lhe developmenL of new
aordable unlLs. Semng measurable, aggresslve, and aualnable goals of Lhls klnd ls Lhe hallmark of
eecuve publlc pollcy. Second, |t |s recommended that the Mayor and C|ty Counc|| a|m to keep up
thereaher, LhaL ls, Lo add Lo Lhe markeL Lhe number of new aordable unlLs each year needed Lo keep
pace wlLh conunued prlce escalauon.
1o summarlze, Lhls work should be undersLood and descrlbed locally as havlng Lwo vlLal parLs: caLchlng
up (reduclng Lhe currenL 6,000 unlL gap Lo 0) and keeplng up. lL should be based on our
recommendauon LhaL Lhe Mayor, urban CounLy Councll and lannlng Commlsslon formally endorse a
sLaLed communlLy ob[ecuve LhaL by 2023 any employee worklng ln LexlngLon wlll be able Lo aord Lo
llve ln LexlngLon.
1. Most of the catch|ng up shou|d be done through the prov|s|on of renta| subs|d|es auached to
|nspecnon requ|rements. Worklng households ln LexlngLon who are prlced ouL of decenL houslng ote
losteoJ ptocotloq sobstooJotJ boosloq ot poyloq too mocb fot lt, ot someumes botb. CaLchlng up
should be done by provldlng Lhese households wlLh renLal vouchers. 1hese vouchers - worLh an
average of $6,000 per year per household - would only be redeemable lf Lhe houslng unlL meeLs
cerLaln LexlngLon sLandards. 1hls wlll have Lhe lmmedlaLe eecL of Lrlggerlng upgrades LhaL wlll brlng
unlLs lnLo llne wlLh mlnlmum sLandards, a dlrecL resulL of whlch wlll be more sLable properLy values
and sLronger nelghborhoods. MosL of Lhe gap could be closed Lhls way, glven exlsung capaclLy LhaL
exlsLs now and could be expanded aL Lhe Pouslng AuLhorlLy (or oLher approprlaLe parLners) Lo
manage vouchers and properLy lnspecuons. 1he balance could be closed Lhrough lnll
redevelopmenL.
2. keep|ng up (address|ng the annua| add|nona| pro[ected shorua|| of 400 un|ts) |s best done through
proacnve p|ann|ng measures that tap |nto and |everage the market. ollcles such as denslLy
bonuses, Lransfers of developmenL rlghLs, Lax lncremenL nanclng, and land banklng all are proven
Lools for ralslng developmenL revenue. lor such Lools Lo work, Lhey need Lo be deeply embedded
lnLo LexlngLon's Comprehenslve lan, lLs Zonlng and uevelopmenL Codes, lLs ueslgn Culdellnes, lLs
Small Area or nelghborhood lans, lLs LransporLauon pollcy, and lLs economlc developmenL sLraLegy.
Such expllclL emphasls on aordable houslng does noL now exlsL ln LexlngLon's guldlng plannlng Lools.
1he ClLy of LexlngLon's Comprehenslve lan - new and exclung and vlslonary ln many respecLs - should
be revlsed Lo sLaLe LhaL ooy employee wotkloq lo tbe clty of lexloqtoo wlll be oble to o[otJ to llve lo
lexloqtoo.
AL lLs mosL baslc, Lhls ls a $36M a year problem Lo solve. LexlngLon can geL Lhere ln numerous ways -
pollcy Lools, developmenL, renLal subsldy - buL lL ls a $36M a year problem, and, as noLed qtowloq.
age 3 of 23
czb for 1he ClLy of LexlngLon, k?
czb recommends a !"!#$%&'()$ response.
- CCCkDINA1ICN: Coord|nanon of a|| hous|ng-re|ated mauers by the Department of
|ann|ng, reservanon and Deve|opment.
- ln llne wlLh recommendauons from Lhe recenL Pomelessness Commlsslon, an
Cmce of Pomelessness lnLervenuon and revenuon should be esLabllshed and
reslde ln uu
- Whlle access Lo an aordable home ls dlrecLly parL of addresslng
homelessness, houslng aordablllLy as a llne of preservauon and
developmenL work ls dlsuncL from Lhe essence of whaL Lhls omce would be
Lasked wlLh, whlch ls servlce coordlnauon.
- An Cmce of Pomelessness lnLervenuon and revenuon's prlnclple funcuon
would be Lo focus on plannlng, coordlnauon, advocacy, and awareness
abouL Lhe changlng needs and gaps of servlces wlLhln LexlngLon.
- ln Lhe recenL Pomeless Commlsslon reporL, lL ls recommended LhaL Lhls
omce serve as an admlnlsLrauve agenL of a houslng LrusL fund (lf creaLed),
czb does noL endorse Lhls speclc recommendauon. czb recommends LhaL
each year Lhe Cmce of Pomelessness lnLervenuon and revenuon apply
for resources from any fuLure LrusL fund.
- Pouslng-relaLed programs now under Lhe Cmce of CranLs and Speclal rograms
should be moved Lo uu
- AdmlnlsLrauon of LSC and oLher homeless-relaLed granL programs should
be shled Lo a new Cmce of Pomelessness lnLervenuon and revenuon.
- CurrenL emphasls on aordable home ownershlp should shl Lo
preservauon and producuon of aordable renLal houslng.
- IUNDING: Creanon and fund|ng of a trust fund for aordab|e hous|ng admlnlsLraLed by
Lhe ueparLmenL of lannlng, reservauon, and uevelopmenL.
- re-arranged resources Lo address homelessness would ow Lo Lhe Cmce of
Pomelessness lnLervenuon and revenuon.
- Annual renLal subsldles would be dlsLrlbuLed Lo Lhe Pouslng AuLhorlLy (or oLher
approprlaLe parLners) acung as a subconLracLor Lo uu
- CrlenLed Lo address boLh households' cosL burdens and houslng unlLs'
physlcal condluon. 1hls wlll llkely requlre collaborauon beLween clLy code
enforcemenL sLa and rehablllLauon speclallsLs, and LPA sLa currenLly
overseelng Lhe Secuon 8 program.
- uu would recelve and evaluaLe aordable houslng developmenL proposals (from
Lhe prlvaLe as well as nonproL secLors) seeklng LrusL funds
- LANNING: Changes shou|d be made to current p|ann|ng gu|de||nes.
- Changes should be made Lo currenL lannlng and zonlng regulauons.
- 1he Comprehenslve lan should lnclude a sLaLed communlLy ob[ecuve LhaL
by 2023 any employee worklng ln Lhe ClLy of LexlngLon wlll able Lo aord
Lo llve ln LexlngLon as Lhe embodlmenL of Lhe Comprehenslve lan's vlslon
for aordable houslng ln LexlngLon. 1hls ob[ecuve shall be used Lo polnL all
pollcles ln Lhe same general dlrecuon of achlevlng Lop prlorlues.
- Zonlng and developmenL regulauons should be revlsed as necessary Lo
achleve Lhe communlLy ob[ecuve and drlve resource generauon.
AllgnmenL of Lhe land use and developmenL regulauons Lowards Lhe
aordablllLy challenge wlll resulL ln resulL ln reduced gaps and lncreased
long Lerm economlc compeuuveness.
age 6 of 23
czb for 1he ClLy of LexlngLon, k?
1
2
3
Cne closlng polnL musL be made ln Lhls summary, and LhaL ls Lhe lssue of leverage.
Leverage should be LhoughL of as Lhe mulupller eecL - Lhe amounL of addluonal resources broughL Lo
bear on a problem by an lnlual lnvesLmenL, resources LhaL would oLherwlse noL exlsL and whlch Lhus
would have have been Lrlggered, or levetoqeJ. When a developer of aordable houslng uullzes a
federal Lax credlL Lo help nance a pro[ecL, aL some polnL Lhey have Lo puL Lhelr own money ln Lhe deal.
1helr own money ls whaL leverages Lhe Lax credlL, Lhelr own money ls whaL leverages debL nanclng.
8lghL now, 13,000 non-sLudenL, low-lncome households need asslsLance ln LexlngLon. 1hey elLher don'L
have [obs or Lhe [obs Lhey have pay Loo llule.
resenLly, Lhe unlLed SLaLes federal governmenL and Lhe governmenL of Lhe CommonwealLh of
kenLucky are paylng Lo help house 9,000 of Lhese households. ln facL, Lhe federal and sLaLe share of Lhls
help ls very nearly 100.
ln eecL, LexlngLon now beneLs from a near lnnlLe leverage rauo, havlng puL ln close Lo zero dollars
Lowards lLs aordable houslng problem, and havlng Lhe federal and sLaLe governmenL pay nearly all of
Lhe Lens of mllllons of dollars a year LhaL ls spenL on currenL and legacy houslng cosLs (all Puu cosLs for
publlc houslng, vouchers, and oLher asslsLance dlrecL and lndlrecL, averaged, slnce Lhe 1937 consLrucuon
of 8luegrass-Aspendale).
1haL leaves abouL 6,000 households wlLhouL asslsLance, 6,000 prlmarlly worklng households.
We esumaLe LhaL fuLure federal and sLaLe asslsLance for Lhese 6,000 households wlll be nearly zero.
1h|s means that |f any ass|stance for these 6,000 househo|ds |s to mater|a||ze, |t w||| have to come
from |oca| sources a|most exc|us|ve|y. Cn balance, over ume, Lhls probably works ouL Lo a leverage
rauo of 1:1, or for every LexlngLon dollar commlued Lo houslng (provlded all 13,000 households are
asslsLed) lL wlll have been maLched by one non-LexlngLon dollar.
age 7 of 23
czb for 1he ClLy of LexlngLon, k?
1he Cha||enge
LexlngLon has a serlous aordable houslng problem. lor Lens of Lhousands of LexlngLon famllles, decenL
houslng cosLs more Lhan Lhey can aord Lo pay. WhaL's more, Lhe LexlngLon markeL has all Lhe slgns of
becomlng even sLronger ln Lhe years ahead. 1herefore, Lhe ClLy musL nd ways Lo sLrlke a balance
Lhrough redevelopmenL: Lo preserve aordablllLy and also manage and enhance nelghborhood quallLy
of llfe.
Whlle ln Lhe years ahead, LexlngLon wlll need Lo pay more auenuon Lo Lhe challenges of aordable
home ownershlp, Loday's real houslng challenge ls LhaL Lhere are Loo few aparLmenLs aordable Lo low
lncome famllles, and LhaL LexlngLon has a loL of low and very low lncome workers.
WhaL pollcymakers ln LexlngLon need Lo be aware of ls LhaL Lhe magnlLude of Lhe aordable renLal
houslng problem ls so acuLe LhaL, aL currenL producuon raLes for low and moderaLe lncome worklng
households, lL would Lake an esumaLed 100 years Lo close exlsung declLs (Lo caLch up). lf Lhe LexlngLon
communlLy ls Lruly commlued Lo addresslng Lhls problem - Lhe cosLs of whlch Lhe whole of LexlngLon
already pays ln Lhe form of nelghborhood dlsLress, reduced Lax recelpLs, and cosLly publlc servlces - lL
wlll have Lo come Lo Lerms wlLh Lhe facL LhaL lL ls Lruly a blg problem.
Pouslng advocaLes ln LexlngLon have long known Lhe problem ls serlous. 8ecenL sLudles have conrmed
LhaL. AuempLs have been made Lo creaLe fundlng sLreams Lo address Lhe problem, buL so far ma[or
changes ln Lhe way LexlngLon handles Lhls lssue have noL emerged. And, ln Lhe comblnauon of
LexlngLon's posL-recesslon economlc sLrengLh (boosung renLs fasLer Lhan wages for poor households
could keep up) and Lhe neL loss of publlc houslng unlLs owlng Lo Pope vl redevelopmenL, lL ls clear LhaL
Lhls ls a serlous problem requlrlng a serlous response
WhaL are Lhe rooL causes of LexlngLon's aordable houslng challenge?
1here are prlnclpally Lwo: 1) kCSLkI1, or a sLrong markeL LhaL ls resulung ln hlgher cosL houslng,
and 2) LLGAC, a large unskllled labor force noL earnlng llvable wages owlng malnly Lo lack of skllls and
educauon sulLed for Lhe new economy LexlngLon has now moved fully lnLo.
1o e|aborate, the reason that many Lex|ngton househo|ds are not ab|e to keep up w|th hous|ng costs
|s that the Lex|ngton hous|ng market - and the Lex|ngton economy overa|| - |s becom|ng stronger.
As LexlngLon has become sLronger economlcally -wlLh Lhe lnux of employers, recovery from Lhe
recesslon, sllghL changes ln Lhe naLure of Lhe economy, and uk growLh - Lhe demand for renLal houslng
age 8 of 23
czb for 1he ClLy of LexlngLon, k?
Rising Demand
in Middle and Top
Large Unskilled Labor Force
Strong and Changing
Lexington Market
Increased Value of
Owner Occupied Homes
Rising Rents
Low Wages (Not Livable)
Cost of Housing
Ability to Pay
Gap
Loss of Manufacturing
Trading Down of Jobs
has lncreased, and as demand has lncreased, exlsung supplles have become more expenslve. ln
addluon, new developmenL of renLal properues has pushed renLs hlgher.
Second, whlle Lhe renLal markeL has been growlng ln value, wages pa|d for the [obs performed by
Lex|ngton's |ow-|ncome earners have not kept pace e|ther w|th r|s|ng hous|ng costs or w|th wage ga|ns
made by others.
1hls ln Lurn has Lwo elemenLs.
- Cne ls LhaL LexlngLon has a large number of poor famllles wlLhouL Lhe skllls Lo compeLe for
hlgher wages. ln oLher words, whlle many poor LexlngLon famllles sLruggle Lo make a houslng
paymenL, Lhe real underlylng problem ls noL a houslng problem buL a sLrucLural workforce
quallLy problem. As long as LexlngLon has a large underclass, lL wlll have a large number of
households wlLh houslng cosL burdens, as long as Lhls can ls klcked down Lhe road, Lhese legacy
cosLs wlll conunue. 8egardlng workers ln reLall, arLs and enLerLalnmenL, educauonal servlces,
and Lhe food lndusLry, wages from 1998-2011 rose [usL 36. uurlng LhaL same perlod, wages
for healLh care workers, nance, managemenL, lnsurance, and oLher secLors rose beLween 60
and 80. As workers ln oLher elds have more purchaslng power, Lhey push renLs up beyond
whaL earners ln [obs wlLh more sLagnanL wages can aord. Addlng Lo Lhls ls Lhe loss of
manufacLurlng [obs - a 34 decllne from 1998-2011 - whlch means many Lrade down and obLaln
lower wages as Lhey seek replacemenL employmenL.
!ob CaLegory
Average
Pourly
Wage
Average
Annual lncome
(lf lull-ume)
Maxlmum
Aordable
8enL
number of
Lmployees
Accommodauons and lood Servlces $7.23 $13,080 $377 16,367
Lducauonal Servlces $11.42 $23,744 $394 2,762
8eLall, ArLs, LnLerLalnmenL and 8ecreauon $11.39 $24,109 $603 21,627
CLher Servlces $13.33 $27,733 $693 13,443
All !obs $19.76 $41,104 $1,028 139,249
5ootces. coooty 8osloess louetos, czbllc.
- 1he resulL: Lyplcal wages ln several lower-paylng secLors are no longer llvable," l.e. noL hlgh
enough Lo aord houslng ln LexlngLon's prlvaLe houslng markeL. 1hls ls a structura| problem
LhaL sLems from how Lhe economy funcuons. lrom 2000-2004, Lhe average wage ln Lhese low-
wage secLors was conslsLenLly hlgh enough Lo aord a 1-bedroom aparLmenL ln LexlngLon prlced
aL lalr MarkeL 8enL. ln 2003, however, a gap began Lo develop beLween Lhe renL level
aordable Lo Lhe average wage for low wage work and Lhe falr markeL renL for a 1-bedroom
aparLmenL. Slnce Lhen, Lhls gap has only grown: by 2011, households aL Lhe average wage ln
Lhese secLors were abouL $130 shorL of aordlng Lhls renL each monLh.
age 9 of 23
czb for 1he ClLy of LexlngLon, k?
5ootces. coooty 8osloess louetos, uepottmeot of noosloq ooJ utboo uevelopmeot, czbllc.
lor a sense of scale: Lhere are roughly 13,000 low-lncome, non-sLudenL households and now [usL 8,943
low-cosL renLals Lo accommodaLe Lhem - nearly Lwlce as many households as renLals.
ln 2000, nearly half (44) Lhe aparLmenLs wlLh cash renLs had gross renLs below $300 per monLh - and
were Lherefore aordable Lo households wlLh lncomes up Lo $20,000 (30 of Lhe Area Medlan lncome).
8y 2012, [usL 17 of aparLmenLs had renLs below $300, and Lhe number of aparLmenLs aL Lhls prlce
range had fallen by more Lhan half - from 20,238 ln 2000 Lo 8,943 ln 2012. 1hat year, near|y a|| (90)
of the c|ty's renter househo|ds w|th |ncomes be|ow 520,000 (the equ|va|ent of a fu|| nme [ob at 510]
hr) had unaordab|e rents - pay|ng more than 30 of the|r househo|d |ncome on rent.
A slgnlcanL number of Lhese low-cosL renLal unlLs (6,103 ln all) are publlc or publlcly subsldlzed unlLs.
LexlngLon has 1,363 publlc houslng unlLs and 2,046 Pouslng Cholce vouchers operaLed and overseen by
LPA, and 2,694 prlvaLely-owned buL publlcly subsldlzed unlLs, developed uslng monles from Puu's
pro[ecL based Secuon 8, Secuon 811, Secuon 202, Secuon 221 (u) (4), Secuon 236, and Secuon 221 (u)
(3) 8Ml8 programs, and Lhe Low-lncome Pouslng 1ax CredlL rogram and Lhe PCML lnvesLmenL
arLnershlps rogram.
8ounded numbers Lo laclllLaLe ulscusslon and undersLandlng 8ounded numbers Lo laclllLaLe ulscusslon and undersLandlng
1oLal # of oor (nCn S1uuLn1) Pouseholds 13,000
Lxlsung Aordable (ubllc and rlvaLe) Pouslng unlLs 9,000
8emalnlng Cap 6,000
age 10 of 23
czb for 1he ClLy of LexlngLon, k?
2000 2011
1o relLeraLe, kCSLkI1 (LexlngLon becomlng a stronger market wlLh rlslng renLs) and LLGAC
(LexlngLon belng home Lo a large number of |ow-|ncome househo|ds, for whom markeL-raLe renLals are
provlng lncreaslngly ouL of reach) have le Lhe clLy wlLh a 6,000 unlL gap.
I|nd|ngs
Pavlng recenLly draed a 10-?ear lan Lo Lnd Pomelessness and Lhrough Lhe work of Lhe Mayor's
Commlsslon on Pomelessness, LexlngLon publlc omclals and communlLy sLakeholders are well aware of
Lhe challenges Lhe clLy's low-lncome households face when lL comes Lo aordlng a place Lo llve. 8eyond
Lhe nearly 1,300 counLy resldenLs llvlng ln shelLers or on Lhe sLreeLs, Lhousands more llve aL rlsk of
becomlng homeless - paylng well ln excess of 30 percenL of household lncome on renL or morLgage
paymenLs. 1hls reallLy ls drlven by Lhe Lroublesome mlx of sLagnaung lncomes and rlslng houslng cosLs.
1he problem of houslng sLablllLy and aordablllLy ls parucularly acuLe for households aL Lhe bouom of
Lhe lncome specLrum or ln Lhe lowesL lncome qulnule - Lhose wlLh lncomes less Lhan roughly $20,000.
nearly all (94) of renLer households wlLh lncomes below $10,000 pay more Lhan 30 of lncome on
renL, as do Lhe vasL ma[orlLy (87) of Lhose wlLh lncomes beLween $10,000 and $19,999.
Source: u.S. Census, 2012 Amerlcan CommunlLy Survey 1-?ear LsumaLes, 1able 823074
lf LexlngLon pollcy makers and advocaLes are Lo fully undersLand Lhe naLure of Lhe local aordable
houslng challenge," lL ls necessary Lo know more abouL who Lhese low-lncome households - Lhose mosL
llkely Lo face such houslng cosLs burdens - are, as well as how many of Lhem Lhere are.
Cne challenge of looklng aL Lhe daLa on all households ls LhaL LexlngLon's large sLudenL populauon -
roughly 43,000 undergraduaLe and graduaLe sLudenLs - Lends Lo skew Lhe numbers. MosL college
sLudenLs elLher do noL work whlle enrolled ln school or work only parL ume, meanlng Lhelr lncomes for
% Lexington HHs Paying More Than 30% of Income on Rent (2012)
< $10,000 $10,000-$19,999 $20,000-$34,999 $35,000-$49,999 $50,000-$74,999 $75,000-$99,999 $100,000 +
0 0 0 19 60 87 94
age 11 of 23
czb for 1he ClLy of LexlngLon, k?
60 of LexlngLon WC8kL8S earnlng beLween
$10-$16/hr are paylng more Lhan 30 of Lhelr
monLhly lncome for houslng. 1hls cosLs Lhe
LexlngLon economy ln numerous ways.
LhaL perlod are very low. MosL of Lhese sLudenLs, Lhough, have noL [usL Lhelr own resources buL Lhose of
Lhelr famllles as well Lo aord houslng, and Lherefore do noL need Lo be consldered among Lhose Lo
LargeL wlLh houslng and houslng-relaLed lnluauves. 1hese sLudenLs largely llve ln whaL Lhe Census
denes as non-famlly households." (ln facL, Lhere are roughly 8,000 non-famlly households headed by
someone under 23 ln Lhe counLy.) As a resulL, Lhls analysls prlmarlly focused lnsLead on famlly
households" (as dened by Lhe Census). 8efore focuslng solely on famlly households," however, lL ls
worLh noung LhaL nearly 13,000 LexlngLon households relled on cash publlc asslsLance and/or lood
SLamps/SnA ln 2012. 1hese households had a medlan lncome of $17,676 LhaL year.
ubllc AsslsLance lncome or lood SLamps/SnA ln Lhe asL 12 MonLhs ubllc AsslsLance lncome or lood SLamps/SnA ln Lhe asL 12 MonLhs
layeue CounLy
Pouseholds wlLh Cash ubllc AsslsLance or lood SLamps/SnA 14,988
Medlan lncome of 8eclplenL Pouseholds $17,676
Source: 2012 Amerlcan CommunlLy Survey 1-?ear LsumaLes, 1ables 819038 and 822008 Source: 2012 Amerlcan CommunlLy Survey 1-?ear LsumaLes, 1ables 819038 and 822008
Looklng only aL famlly households, Lhere are 7,493 famllles (represenung over 10 of all famllles) llvlng
below Lhe poverLy llne. 1here are also 3,466 poor non-famlly households headed by someone 43 years
old or older and 2,184 poor non-famlly households headed by someone 23 Lo 44 (alLhough some poruon
of Lhese households ls llkely made up of sLudenLs.) Addlng Lhe 3,466 Lo 7,630 (3,466 + 2,184) non-
sLudenL poor non-famlly households" Lo 7,493 poor famlly households" ln LexlngLon geLs Lo a number
slmllar Lo Lhe roughly 13,000 generaLed by publlc asslsLance and food sLamp recelpL, suggesung LhaL
13,000 represenLs a good esumaLe of aordable houslng need."
Who are these poor fam|||es? MosL (83) lnclude chlldren under 18 and 61 are famllles wlLh chlldren
headed by slngle moLhers. (1he poverLy raLe among Lhese famllles - slngle moLhers wlLh chlldren - was
42 ln 2012.) MlnorlLy famllles are also over-represenLed among LexlngLon's poor famllles: whlle 24
of all LexlngLon famllles are headed by a mlnorlLy householder, Lhls ls Lrue of 37 of poor famllles. (1he
poverLy raLe ls 24 for Afrlcan Amerlcan famllles and 37 for Plspanlc famllles, compared Lo [usL 6 for
non-Plspanlc whlLe famllles.) noL surprlslngly, famllles headed by someone who has noL graduaLed
from hlgh school are also over-represenLed among poor famllles.
role of All lamllles and 1hose 8elow overLy role of All lamllles and 1hose 8elow overLy role of All lamllles and 1hose 8elow overLy role of All lamllles and 1hose 8elow overLy role of All lamllles and 1hose 8elow overLy role of All lamllles and 1hose 8elow overLy
layeue CounLy
All lamllles All lamllles oor lamllles oor lamllles
overLy 8aLe layeue CounLy
# #
overLy 8aLe
All lamllles 69,738 100 7,462 100 10.7
All lamllles wlLh Chlldren <18 33,276 31 6,173 83 17.3
Slngle MoLher 13,926 23 4,778 64 30.0
Slngle MoLher wlLh Chlldren <18 10,900 16 4,378 61 42.0
non-Plspanlc WhlLe Pouseholder 33,123 76 3,241 43 6.1
MlnorlLy 16,613 24 4,221 37 23.4
8lack Pouseholder 9,926 14 2,422 32 24.4
Plspanlc Pouseholder 3,393 3 1,337 18 37.2
Pouseholder has <PS uegree 3,434 8 1,443 19 26.3
Source: 2012 Amerlcan CommunlLy Survey 1-?ear LsumaLes, 1able S1702 Source: 2012 Amerlcan CommunlLy Survey 1-?ear LsumaLes, 1able S1702 Source: 2012 Amerlcan CommunlLy Survey 1-?ear LsumaLes, 1able S1702 Source: 2012 Amerlcan CommunlLy Survey 1-?ear LsumaLes, 1able S1702 Source: 2012 Amerlcan CommunlLy Survey 1-?ear LsumaLes, 1able S1702 Source: 2012 Amerlcan CommunlLy Survey 1-?ear LsumaLes, 1able S1702
age 12 of 23
czb for 1he ClLy of LexlngLon, k?
MosL poor famllles (71, or 3,337 ouL of 7,493) and an even larger share of famllles recelvlng lood
SLamps (84, or 8,198 ouL of 9,786) lnclude aL leasL one worker. In a||, there are 16,211 emp|oyed
Lex|ngton res|dents ||v|ng be|ow the poverty |eve|.
Why are they fac|ng hous|ng cost burdens |n such h|gh numbers? 1he need for more aordable
houslng ln LexlngLon appears so acuLe Loday noL only due Lo Lhe large number of very-low-lncome
famllles buL also because, noL long ago, Lhese households were falrly well served by Lhe prlvaLe houslng
markeL. As recenLly as 2000, for example, almosL half (44) of all aparLmenLs wlLh cash renLs had gross
renLs below $300 per monLh - and Lherefore aordable Lo households wlLh lncomes up Lo $20,000 (30
of Lhe Area Medlan lncome). 8y 2012, [ust 17 of apartments had rents be|ow 5S00, and the number
of apartments at th|s pr|ce range had fa||en by more than ha|f - from 20,238 |n 2000 to 8,94S |n 2012.
Source: 2000 Census, 2012 Amerlcan CommunlLy Survey 1-?ear LsumaLes,
1able 823063 for ACS, P062 for 2000 Census
age 13 of 23
czb for 1he ClLy of LexlngLon, k?
Whlle Lhe number of aparLmenLs renung for $300 Lo $649 sLayed falrly consLanL, Lhe numbers ln all
hlgher prlce ranges rose. And whlle Lhe number of aparLmenLs renung for $630 Lo $799 rose modesLly,
Lhe number renung for $800 Lo $999 more Lhan Lrlpled and Lhe number renung for more Lhan $1,000
rose more Lhan ve umes over.
Cross 8enL ln 8enLer-Cccupled Pouslng unlLs
layeue CounLy 2000 2006 2008 2010 2012
Less Lhan $300 20,238 14,066 10,821 10,240 8,943
$300 Lo $649 13,203 11,960 10,792 11,498 12,311
$630 Lo $799 7,074 7,637 10,043 9,623 10,266
$800 Lo $999 3,361 7,046 8,033 10,963 11,030
$1,000 Lo $1,249 1,136 2,937 3,671 6,799 6,047
$1,230 Lo $1,999 738 2,136 2,909 3,023 3,909
$2,000 or More 232 386 1,136 712 1,331
Source: 2000 Census, Amerlcan CommunlLy Survey 1-?ear LsumaLes (2006, 2008, 2010, and 2012),
1able 823063 for ACS, P062 for 2000 Census
ln oLher words, even Lhough houslng remalns falrly moderaLely prlced ln LexlngLon, households wlLh
lncomes below $20,000 and looklng for renLal unlLs are lncreaslngly belng prlced ouL of Lhe markeL. lor
a sense of scale: Lhere are now [usL 8,943 low-cosL renLals Lo accommodaLe Lhe roughly 13,000 very-
low-lncome households.
WhaL's more, Lhls klnd of pressure on Lhe renLal markeL shows no slgns of abaung. 8ulldlng permlLs for
mulufamlly unlLs reached a hlgh polnL ln LexlngLon ln 2008 and nearly maLched LhaL amounL ln 2012.
Source: u.S. Census 8ureau, 8ulldlng ermlLs 8eporLed
age 14 of 23
czb for 1he ClLy of LexlngLon, k?
AL Lhe same ume, Lhe unlverslLy of kenLucky ls ln Lhe mldsL of a bulldlng boom" wlLh plans Lo updaLe
and add Lo lLs on-campus and near-campus houslng opuons for sLudenLs. And Lhls whlle Lhe campus ls
experlenclng record enrollmenLs, exceedlng 29,000 for Lhe rsL ume ln Lhe unlverslLy's hlsLory (llnk Lo
uk).
5ootces. bup.//www.keotocky.com/201J/09/10/2814457/oolvetslty-of-keotocky-eotollmeot.btml#stotyllok=cpy, bup.//www.oky.eJo/lkl/stoJeots/eotollmeot/blstcolleqe/
eotoll.Jeqlev.f940J.oll.btml, bup.//www.oky.eJo/lkl/stoJeots/eotollmeot/blststotos/9908oll_okbystotos.btml
uL LogeLher, Lhese Lrends have LranslaLed lnLo more houslng lnsLablllLy and hlgher houslng cosL
burdens for LexlngLon's lower lncome households. 1o lmprove Lhe houslng slLuauon of low-lncome
households, 10-eot lloo to oJ nomelessoess as well as Lhe kepott of tbe Moyots commlssloo oo
nomelessoess boLh recommend worklng Lo lncrease lncomes and wages on Lhe one hand, and lncrease
Lhe amounL of aordable houslng, Lransluonal unlLs, and renLal vouchers on Lhe oLher.
age 13 of 23
czb for 1he ClLy of LexlngLon, k?
1he Current kesponse
1he ClLy of LexlngLon and Lhe LexlngLon Pouslng AuLhorlLy (LPA) have several eorLs worklng along
Lhese llnes. ln addluon Lo 1,363 publlc houslng unlLs and 2,046 Pouslng Cholce vouchers operaLed and
overseen by LPA, Lhere are also 2,694 prlvaLely-owned buL publlcly subsldlzed unlLs, developed uslng
monles from Puu's pro[ecL based Secuon 8, Secuon 811, Secuon 202, Secuon 221 (u) (4), Secuon 236,
and Secuon 221 (u)(3) 8Ml8 programs, and Lhe Low-lncome Pouslng 1ax CredlL rogram and Lhe PCML
lnvesLmenL arLnershlps rogram.
ClLy of LexlngLon's Subsldlzed Pouslng SLock
Source: ClLy of LexlngLon/layeue CounLy
?eL, even wlLh Lhese eorLs - ALL Cl WPlCP A8L lunuLu Wl1P nCn-LLxlnC1Cn uCLLA8S - Lhe clLy
remalns roughly 6,000 unlLs shorL of meeung lLs needs. 1hls leaves roughly 6,000 LexlngLon households
- mosL of whom lnclude aL leasL one chlld, and mosL of whom lnclude aL leasL one worker - faclng
serlous houslng cosL burdens and houslng lnsLablllLy.
age 16 of 23
czb for 1he ClLy of LexlngLon, k?
rogrammanc kecommendanons for "Catch|ng Up" and "keep|ng Up"
Several recenL plannlng and communlLy ouLreach processes - prlmarlly around Lhe lssue of
homelessness - have hlghllghLed how lmporLanL lL ls for Lhe clLy Lo acL on Lhls subsLanual gap beLween
Lhe number of low-lncome households and Lhe number of avallable low-cosL (parucularly renLal)
houslng unlLs ln LexlngLon. WlLh a robusL approach Lo prevenung and addresslng homelessness galnlng
more supporL, lL makes sense Lo move Lhe conversauon Lo one focused on how Lhe clLy should go abouL
addresslng Lhls remalnlng gap. 1he opuons before Lhe clLy are somewhaL consLralned by Lhe facL LhaL
Lhe amounL of federal and sLaLe fundlng golng Lo munlclpallues for Lhe developmenL or provlslon of
aordable houslng, fundlng LhaL has been largely responslble for produclng Lhe clLy's currenL supply of
publlc and publlcly subsldlzed unlLs, ls decreaslng.
CranL funds Lhrough Lhe ueparLmenL of Pouslng and urban uevelopmenL - CommunlLy uevelopmenL
8lock CranLs (Cu8C), PCML lnvesLmenL arLnershlp rogram (PCML), and Lmergency Soluuons CranLs
(LSC) - are allocaLed Lo enuLlemenL communlues based on formulas. Cu8C dollars, for example, are
allocaLed based on a munlclpallLy's or counLy's LoLal populauon, number of overcrowded houslng unlLs,
populauon ln poverLy, and older houslng unlLs (Lhose bullL before 1940). ln a slmllar way, PCML funds
are allocaLed based on locallues' supply of subsLandard renLal houslng, number of low-lncome famllles
ln poor quallLy renLals, Lhe cosL of bulldlng houslng, and Lhe local poverLy raLe.
LexlngLon/layeue CounLy ls an enuLlemenL communlLy" for Lhese resources, as a resulL, Lhe counLy
recelves an auLomauc allocauon (deLermlned by Lhe formula for each) every year. 1he amounL owlng
Lo Lhe counLy, however, has been sLeadlly decllnlng over Lhe lasL decade - ln facL, by 201J, tbe coooty
tecelveJ mote tboo 51 mlllloo less lo fooJloq tboo lt boJ teo yeots ptlot.
age 17 of 23
czb for 1he ClLy of LexlngLon, k?
Source: nauonal Assoclauon of Counues (hup://www.naco.org/counues/ages/cdbghome.aspx), ueparLmenL of Pouslng and urban uevelopmenL (hup://porLal.hud.gov/hudporLal/Puu?src=/program_omces/comm_plannlng/
abouL/budgeL#home, hup://archlves.hud.gov/omces/cpd/abouL/budgeL/budgeL01/lndex.cfm).
Source: nauonal Assoclauon of Counues (hup://www.naco.org/counues/ages/cdbghome.aspx), ueparLmenL of Pouslng and urban uevelopmenL (hup://porLal.hud.gov/hudporLal/Puu?src=/program_omces/comm_plannlng/
abouL/budgeL#home, hup://archlves.hud.gov/omces/cpd/abouL/budgeL/budgeL01/lndex.cfm).
AL Lhe same ume, Lhe LexlngLon Pouslng AuLhorlLy (LPA) - wblcb ls fooJeJ by tbe feJetol qovetomeot - ls
able Lo provlde far less houslng Lhan local resldenLs demand. Accordlng Lo Lhe kepott of tbe Moyots
commlssloo oo nomelessoess, as of november 2012, 2,376 households were on Lhe walung llsL a publlc
houslng unlL and 316 were on Lhe walung llsL for a Secuon 8 renLal voucher (17). Maklng a locol
moneLary commlLmenL Lo lncrease Lhe supply of aordable houslng unlLs, and Lo provlde servlces
necessary Lo ensure sLablllLy for Lhose ln houslng," ls lncreaslngly necessary ln Lhe face of rlslng houslng
cosL burdens for Lhe worklng poor and decllnlng federal funds avallable Lo respond.
8ecenL sLudles furLher suggesL LhaL lnacuon acLually brlngs lLs own slgnlcanL cosLs. 1he Pouslng llrsL
program would address LexlngLon's problem of chronlc homelessness, Lhereby reduclng cosLs whlle
provldlng help.
As a resulL, Lhe Mayor's Commlsslon on Pomelessness proposed a 1 lncrease ln Lhe fee levled by Lhe
local governmenL on lnsurance premlums would generaLe nearly $4 mllllon ln fundlng per year Lo spend
on Lhese goals - spllL ln half beLween eorLs Lo reduce houslng cosL burdens and make quallLy
aordable houslng more readlly avallable, and as LargeLed homelessness lnLervenuons such as a
Pouslng llrsL approach Lo servlng currenLly homeless lndlvlduals and famllles (19).
age 18 of 23
czb for 1he ClLy of LexlngLon, k?
Catch|ng Up and keep|ng Up
8ased on our analysls, we propose a local conLrlbuuon Lo aordable houslng nanclng (subsldy) of
roughly $20 mllllon per year pald lnLo a LrusL fund for aordable houslng. 1he below Lable lllusLraLes an
lncremenLal approach of provldlng - on average - 300 new renLal vouchers and 167 redeveloped unlLs
each year unul LexlngLon caLches up.
Year Year Gap
Market
Loss
Resulting
Gap
Voucher
Units
New
Units
IH/TDR
Units
Total
New
Actual
Gap
Gap NI
Market Loss
Cost
1 2015 6,000 400 6,400 333 0 0 333 6,067 5,667 1,998,000
2 2016 400 6,467 520 policy 520 5,947 5,147 5,118,000
3 2017 400 6,347 520 policy 520 5,827 4,627 8,238,000
4 2018 400 6,227 520 policy 520 5,707 4,107 11,358,000
5 2019 400 6,107 520 policy 520 5,587 3,587 14,478,000
6 2020 400 5,987 520 200 policy 720 5,267 2,867 18,798,000
7 2021 400 5,667 520 200 policy 720 4,947 2,147 23,118,000
8 2022 400 5,347 520 200 policy 720 4,627 1,427 27,438,000
9 2023 400 5,027 520 200 policy 720 4,307 707 31,758,000
10 2024 400 4,707 507 200 policy 707 4,000 0 36,000,000
11 2025 400 4,400 policy 0 4,400 0 36,000,000
214,302,000
400 500 167 0 545 19,482,000
Wh||e we|| be|ow the amount needed to c|ose the ennre 6,000-househo|d gap between the number of
|ow-|ncome househo|ds and the number of |ow-cost renta|s, creanng a 1rust Iund starnng w|th 54
m||||on |n annua| revenue, 52 m||||on of wh|ch wou|d be des|gnated for the c|ty's aordab|e hous|ng
strategy |n the hrst year, |s an |mportant hrst step. An lnlual $2M rsL sLep of Lhls sorL could provlde
renal vouchers Lo more Lhan 300 worklng households, and lf connecLed Lo code compllance, have a
slgnlcanL lmpacL on subsLandard houslng sLocks. ln facL, Lhese dollars could be LhoughL of as sLarL-up
funds" for a larger local commlLmenL Lo meeung aordable houslng needs: Lhey glve Lhe clLy Lhe
opporLunlLy Lo puL organlzauonal sLrucLures and key personnel ln place, and also Lo help exlsung servlce
provlders and aordable houslng developers Lo lncrease Lhelr own capaclLy Lo bulld, rehablllLaLe, or
manage aordable unlLs or vouchers.
age 19 of 23
czb for 1he ClLy of LexlngLon, k?
PLANNING TOOLS
TDRs, IZ, Land Trust, Density Bonuses
HEALTHY NEIGHBORHOOD TRUST FUND
FOCUS ON UPGRADING EXISTING STOCKS
Legacy
Recent Prosperity
Current
Gap
Build
20%
Rental Subsidy
80%
Catch Up
Future Gap Keep Up Future Prosperity
LEXINGTON, KY AFFORDABILITY STRATEGY
100% Goal by 2025
czbLLC 2014
Federal
100%
Lexington
100%
Lexington
100%
Rental Subsidy
20%
Build
80%
In the |nter|m, |t |s |mportant to rea||ze that when |t comes to subs|d|z|ng aordab|e hous|ng, 52
m||||on |s not a |ot of money.
Cne challenge wlLh relylng on new consLrucuon Lo Lackle Lhe clLy's gap ls lLs shear expense (nanclal and
pollucal), ln addluon Lo Lhe dlsLance beLween Lhe local capaclLy Lo bulld aordable houslng (LlP1C and
PCML funds supporL roughly 73 and 80 unlLs per year) and Lhe number LhaL would need Lo be produced
Lo make a nouceable denL ln local aordable houslng needs.
AlLernauvely, markeL-raLe renLs, Lhough clearly ouL of reach for households beLween 0 and 30 of Lhe
Area Medlan lncome, are noL excesslvely expenslve. As a resulL, Lhere ls only a small spread beLween
whaL a poor household can aord Lo pay and whaL prlvaLe aparLmenLs cosL. Addresslng LhaL spread -
uullzlng subsldles modeled aer Lhe federal Pouslng Cholce voucher rogrammlng - ls a posslbly far
more emclenL way of maklng houslng aordable. lor example, Lhe average Secuon 8 subsldy for renLal
asslsLance ln LexlngLon ls $6,000 per household per year, a gure well below Lhe roughly $100,000 lL
age 20 of 23
czb for 1he ClLy of LexlngLon, k?
Reduce Housing Costs
(BRING THEM DOWN)
Increase Purchasing Power
(BRING WAGES UP)
Reduce Land Costs
Reduce Hard Costs
Livable Wages
Improve Employability
DEVELOP
RENTAL SUBSIDY UPGRADE EXISTING HOUSING
would Lake Lo bulld a new unlL of aordable houslng. ln oLher words, whlle $2 mllllon would fund Lhe
consLrucuon of [usL 20 new aordable houslng unlLs, lL could supporL renLal asslsLance for 300
households - nearly enough Lo clear Lhe enure Secuon 8 walung llsL.
lL ls recommended LhaL Lhere be an allgnmenL of Lhe managemenL and overslghL of Lhese new locally
funded renLal vouchers wlLh Lhe sysLem currenLly managlng and overseelng Lhe federally funded Secuon
8 program, parucularly ln Lerms of program accounung and lnLake (deLermlnlng ellglblllLy, gemng onLo a
walL llsL, eLc.) 1hls would be a chance, Loo, Lo address ways Lo sLrengLhen Lhe Secuon 8 program and
make lL work beuer for households and nelghborhoods - for example, ensurlng properues are lnspecLed
regularly and maklng paruclpaung landlords ellglble for granLs and/or low-cosL loans Lo address code
vlolauons and make faade lmprovemenLs.
ulumaLely, Lhe goal should be deslgnlng a program LhaL makes lL worLh landlords' whlle Lo paruclpaLe
and also requlres good behavlor on landlords' parL LhaL wlll generaLe splllover beneLs beyond
aordablllLy, mosL noLably ln Lerms of houslng quallLy and nelghborhood quallLy.
Accordlng Lo daLa from Lhe Code LnforcemenL omce, Lhere are currenLly nearly 200 resldenual
properues wlLh acuve, serlous code vlolauons and anoLher 1,000 wlLh acuve, less serlous code
vlolauons.
Land use Code All roperues
roperues wlLh
Less Serlous
Code vlolauons
roperues wlLh
Less Serlous
Code vlolauons
roperues wlLh
Serlous
Code vlolauons
roperues wlLh
Serlous
Code vlolauons
Land use Code All roperues
# #
AparLmenLs, 1-19 8enLal unlLs 1,360 93 7.0 27 2.0
AparLmenLs, 20-39 8enLal unlLs 78 18 23.1 7 9.0
AparLmenLs, 40+ 8enLal unlLs 214 73 34.1 10 4.7
Condomlnlums 3,438 11 0.2 1 0.0
Slngle-famlly Pomes, uuplexes, 1ownhouses 88,267 880 1.0 131 0.2
All 8esldenual roperues 93,377 1,077 1.1 196 0.2
* ltopetues wltb setloos coJe vlolouoos locloJe tbose tbot ote 8ootJeJ/vocoot, bove ltome uomoqe/uetetlotouoo, bove MolJ/MllJew, bove
No lecttlc/Cos/neot/not wotet, bove 5ttoctotol uomoqe, ot ote uoft fot nomoo nobltouoo. less 5etloos coJe vlolouoos locloJe oll otbets
tbot telote to tbe ptopetty. (1bls louet coteqoty Joes oot vlolouoos fot weeJs ot Nolsooces.)
5ootces. loyeue coooty, czbllc.
Whlle code vlolauons aecL a slgnlcanL number of mulufamlly bulldlngs (nearly one-Lhlrd of properues
wlLh 20 Lo 39 renLal unlLs and 39 of properues wlLh 40 or more renLal unlLs), Lhey lmpacL [usL 1 of
slngle-famlly unlLs, duplexes and Lownhouses.
1o ensure LhaL lower-lncome renLers recelve noL [usL aordable houslng buL poollty aordable houslng,
any aordable houslng sLraLegy should be orlenLed Lo address boLh households' cosL burdens and
houslng unlLs' physlcal condluon. 1hls wlll llkely requlre noL only addluonal fundlng buL also addluonal
collaborauon beLween clLy code enforcemenL sLa and rehablllLauon speclallsLs, and LPA sLa currenLly
overseelng Lhe Secuon 8 program.
age 21 of 23
czb for 1he ClLy of LexlngLon, k?
1he comblnauon of renLal subsldy plus new consLrucuon - as shown ln Lhe Lable on p 19 - can reduce Lhe
gap of 6,000 Lo zero by 2023, and by Lylng subsldles Lo properLy lnspecuons, Lrlgger needed upgrades
across LexlngLon. 1hls means Lhe sysLem" LhaL ls recommended be bullL fundamenLally conslsL of Lhree
plpellnes.
1. 1he rsL ls Lhe dellvery of renLal subsldy Lo low lncome households for use ln pre-lnspecLed code
compllanL renLal unlLs.
2. 1he second ls Lhe consLrucuon of new or redevelopmenL of exlsung unlLs when posslble.
3. 1he Lhlrd ls pollcy-creaLed unlLs Lhrough plannlng and zonlng frameworks as noLed.
1hls Lhlrd polnL ls cruclal. Creaung and resourclng a LrusL fund - even one LhaL fully zeros ouL Lhe currenL
6,000 unlL gap by 2023 - sull leaves LexlngLon ln an addluonal 4,400 unlL gap by 2023, because, as noLed,
Lhe markeL wlll conunue Lo shed aordable unlLs aL a slzable annual cllp. ln 1990, 88 of Lhe renLal
unlLs ln LexlngLon were aordable Lo low-lncome worklng households. 8y 2000 LhaL had shrunk Lo 44
8y 2010 lL had dropped Lo 19 and by 2012 Lo 17
1o ensure LhaL by 2023 Lhls gap ls also zeroed ouL, Lhe ClLy of LexlngLon wlll have Lo aggresslvely rene
lLs currenL reperLolre of plannlng Lools. 1ools such as zonlng and developmenL rlghLs Lransfers are
markeL-orlenLed plannlng mechanlsms LhaL Lrade addluonal proL Lo Lhe markeL ln exchange for houslng
resources or more economlcally susLalnable nelghborhood ouLcomes. 1he ueparLmenL of lannlng,
reservauon and uevelopmenL would have Lhe responslblllLy of worklng wlLh LexlngLon's plannlng
dlvlslon and relaLed boards and commlsslons Lo rene Lhe clLy's Comprehenslve lan and relaLed
developmenL documenLs, polnung all munlclpal Lools ln one common dlrecuon, someLhlng LhaL does noL
now exlsL.
age 22 of 23
czb for 1he ClLy of LexlngLon, k?
Summary
LexlngLon ls shorL 6,000 aordable renLal unlLs. 1hls wlll grow by abouL 400 a year lf Lhe clLy does
noLhlng.
Lach of Lhese unlLs wlll cosL abouL $6,000 per year per household Lo address, and Lhls cosL wlll noL go
away. Aordable houslng gaps (problems) are noL ever solveJ ln Lhe convenuonal way soluuons Lend Lo
be LhoughL of. 1he only way Lo solve" such a problem ls Lo ralse Lhe earnlng power of workers Lo Lhe
polnL where wages keep pace wlLh houslng cosLs.
ln Lhe absence of such a shl ln earnlng (elLher Lhrough acLual wages or wage subsldles), worklng low-
lncome earners ln LexlngLon wlll elLher overpay for houslng or llve ln subsLandard condluons, and ln
elLher case, cosL Lhe LexlngLon economy ln one way or anoLher.
Creanng a hous|ng trust fund to beg|n address|ng th|s prob|em |s a w|se d|recnon to take. 8uL Lhe
magnlLude of Lhe challenge ls so large LhaL unless a LrusL fund ls commensuraLely large, Lhe problem wlll
remaln slgnlcanL, and, as noLed, acLually grow. ln addluon Lo creaung a fund Lo close aordablllLy
gaps, lL ls lmporLanL LhaL Lhe whole armada of clLy land use and developmenL pollcles be reshaped so as
Lo harness markeL capaclLy ln ways LhaL keep Lhe aordablllLy problem from gemng worse.
lully fundlng Lhe Lools needed for such a large endeavor wlll be very cosLly. 8uL Lhe LexlngLon economy
ls very large, and fully capable of absorblng Lhese cosLs. 1hls ls noL an lssue of wheLher LexlngLon can
zero ouL lLs aordable houslng gaps and keep Lhem narrow, buL wheLher lL wanLs Lo badly enough.
Seaule wanLed lL badly enough Lo Lwlce pass aordable houslng levles each ln excess of $100M.
8oulder, Colorado requlres all slngle famlly houslng developers Lo pay a 23 lncluslonary zonlng ln lleu
fee lnLo a local LrusL fund LhaL also collecLs a 20 lncluslonary fee for mulufamlly renLal houslng
developmenL. ln Lhe case of Seaule, Lhe funds are dlsLrlbuLed annually on a compeuuve basls - allgned
wlLh many of Lhe elemenLs of Lhe SLaLe of WashlngLon's Lax credlL allocauon process - Lo local nonproL
developers LhaL - over Lhe lasL 20 years, have bulld slgnlcanL capaclLy. ln 8oulder Lhe funds are
generally dlsLrlbuLed back Lo 8oulder Pouslng arLners, Lhe clLy's houslng auLhorlLy. new ?ork ClLy
under Lhe 8loomberg AdmlnlsLrauon wanLed lL badly enough Lo masslvely upzone large secuons of four
of Lhe ve clLy's boroughs, and ln Lhe process creaLed 163,000 aordable houslng unlLs. ark ClLy, uLah
wanLed lL badly enough Lo creaLe a developmenL rlghLs Lradlng bank, wlLh lncenuves for developers Lo
provlde aordable unlLs. Alexandrla, vlrglnla wanLs lL badly enough Lo evaluaLe all developmenL
proposals from Lhe perspecuve of lmpacL on aordable houslng, ln Alexandrla, clLy sLa provlde ClLy
Councll wlLh an esumaLe of aordable unlLs pro[ecLed Lo be, and, ln Lurn, developers musL remedy LhaL.
1he common denomlnaLor ln Lhe above examples ls LhaL Lhese are clues ln Lhe Lhlck of coplng wlLh Lhe
consequences of prosperlLy. And Lhey have been aL lL for a long whlle, and Lhus have become
accusLomed Lo addresslng houslng aordablllLy as a mauer of course. 1haL doesn'L mean Lhey have
solved" Lhelr problems. 1hey haven'L. 8uL Lhey are commlued Lo addresslng aordablllLy gaps for low-
lncome worklng households uslng Lhelr own resources.
age 23 of 23
czb for 1he ClLy of LexlngLon, k?