Lexington needs more than 22,549 additional homes to meet housing demand.
The vast majority – 17,005 – must be affordable units. That’s for those who earn less than 80% of the median income of $62,908 or less than $50,326 per year.
Rents in Lexington have skyrocketed in recent years, meaning more people are paying more than 30% of their income on rent or mortgages, according to the research from EHI Consultants and TPMA.
Average rental prices increased by 47% between 2019 and 2024. The average rent is now between $1,200 and $1,250, the survey found.
Another consequence: High housing costs drive people to work in Lexington but live in surrounding communities.
“It causes many middle-income residents to look elsewhere for housing,” says Ed Holmes of EHI. “Rents are rising at an alarming rate.”
The study unveiled Tuesday during the Lexington-Fayette Urban County Council work session is the first affordable housing study in a decade. A 2014 CZB study showed that more than 15,000 households require rental subsidies.
The study found that the city cannot rely solely on its affordable housing fund to build more affordable housing, and suggested that the city broaden its partnerships and adopt more regulations to ensure more housing, and especially more affordable housing would be built.
What it means for the city’s affordable housing fund
The study comes as the city has increased the amount of money it invests in affordable housing from roughly $2 million to just over $4 million per year, thanks to a 2023 city council ordinance that sets aside 1% of city revenue for affordable housing housing.
The city has invested more than $47.5 million in its affordable housing fund, which was established in 2014, shortly after the CZB study was published. That money paid for 1,750 new units and preserved 1,754, at an average city cost of $13,566 per unit.
Rick McQuady, who has helped oversee the city’s affordable housing efforts since the fund was created in 2014, said the EHI and TPMA study will inform the city’s affordable housing priorities in the coming years the city will help determine. The research shows that the city needs more supportive housing for people with special needs, such as those with serious mental health issues.
“We need more permanent supportive housing units,” he said.
The study also found that the city needs the most affordable housing at the bottom of the income ladder, McQuady said.
McQuady said the median household income of city-supported affordable housing is about $24,000. Eighty-two percent of those tenants – minus tenants in senior housing and tenants with serious mental illness – have a job, but without assistance do not earn enough to pay market rent.
Homeowners and renters are feeling the pressure
More than half, or 54.3%, of renters spend more than 30% of their income on rent, which is the U.S. Department of Housing and Urban Development’s definition of taxable costs, according to the study. That data comes from the US Census Bureau’s American Community Survey.
Just under a third (28%) are extremely cost-burdened, spending more than 50% of their income on housing costs.
Additionally, a survey of 1,200 Fayette County residents found that the majority – two-thirds – struggle to pay for the maintenance of their homes.
“More than half of respondents have difficulty paying housing costs,” says Holmes.
“Average wages are going up, but not necessarily across the board,” says Adam Klier, planner at EHI.
This doesn’t just apply to Lexington. That applies to the entire country, Klier added.
How will Lexington close the gap?
The city has already made some regulatory and other changes to encourage developers to build more low- and moderate-income housing.
It recently adopted a revision to its zoning rules, allowing for more types of housing in more zones. It has also done a lot to leverage state and federal dollars to finance its affordable housing projects, Holmes said.
Boosting capacity in the nonprofit sector to build more affordable housing will also help, Holmes said. For-profit builders are unlikely to fill the gap in affordable housing.
The council voted in 2023 to add 2,800 acres to the city’s growth boundary. The master plan for those 2,800 hectares emphasizes multiple housing types that could yield between 17,000 and 26,000 homes, preliminary plans show.
A hearing on the master plan for the expansion area is scheduled for Thursday at 1:30 p.m. in the Urban County Planning Commission council chambers.
The master plan will be ready on December 1. But it will likely take decades for that new land to be developed.
Housing Advocacy and Community Development Commissioner Charlie Lanter said the city is applying for a grant from the U.S. Department of Housing and Urban Development, or HUD, to make affordable housing a reality in the expansion area.
The grant could help the city build sewers, curbs and other hard infrastructure costs, which would, among other things, lower the price to develop the land. Lanter said the city will know whether it will receive the grant in the spring of 2025.
