How has the City supported Affordable Housing?
In November 12th’s Social Services and Public Safety (SSPS) Committee, Affordable Housing Manager Rick McQuady presented an overview of projects funded by the Affordable Housing Fund and the American Rescue Plan Act (ARPA).
The Affordable Housing Fund was created in 2014 to provide public funds for housing projects developed for low-income Lexington residents. Money is allocated toward developments through loans and grants. Because housing is so expensive to construct, the Fund subsidizes construction costs for developers so that they can keep rents at a lower prices for residents.
Last year, Council passed an ordinance requiring that 1% of the City’s General Fund Revenue must be set aside to go toward the Affordable Housing Fund.
This year, the City Budget allocated $4,795,035 to the Affordable Housing Fund.
In previous years, Council would decide how much money to allocate to the Fund as part of the budgeting process, resulting in inconsistent support for the Fund.
The presentation overviews how much money the City has given toward affordable housing projects.
Since 2014, $26,373,210 has been allocated from the Affordable Housing Fund toward housing projects.
$17,126,790 has been allocated toward affordable housing projects from the City’s ARPA funds, given to the City from the federal government during the COVID-19 pandemic.
Altogether, 3,522 units have been constructed or preserved at an average per-unit cost of $13,980.
All affordable housing units in Lexington are targeted at residents in certain income brackets based on the percentage of the Area Median Income (AMI) residents earn. The AMI for a two-person household in Lexington is $76,187; 80% of AMI — the highest income bracket for most affordable housing projects — is $60,950.
87.7% of affordable housing units in Lexington are for tenants who earn 60% or lower of the AMI.
Roughly 40% of affordable housing units in Lexington are reserved for specific populations of people, such as seniors, those in substance abuse recovery, veterans, and more.
This update comes just a month after Council heard the results of a Housing Needs Assessment conducted by EHI Consultants. The Assessment found that Lexington needs 17,005 additional affordable housing units.
The Assessment also found that only modestly reducing that gap would cost the city roughly $79 million over ten years, with year one requiring an investment of $6.78 million — more than the Affordable Housing Fund has been given in the Fiscal Year 2025 Budget.
You can review the full presentation slides starting on page three of this packet.
Councilmember At-Large Chuck Ellinger asked how many homeownership units there were out of the 3,522 housing units subsidized by the Affordable Housing Fund. McQuady responded that only 18 were homeownership units as it is difficult for the Fund’s target population to qualify for a mortgage.
Ellinger also asked how the forgivable loans were determined. McQuady said that it depended on the deal. For example, if the developer was aiming to serve a population with lower than 60% of the Area Median Income (AMI), they may not be able to afford typical loan payments and thus might qualify for a forgivable loan.
District One Councilmember Tanya Fogle asked how deed restrictions — legal agreements limiting how the property can be used – for the homeownership units worked. McQuady explained that homeownership units have shorter deed restrictions than rental units as the City does not want to inhibit individuals who increased their income and wealth via homeownership from choosing who they sell the house to.
A deed restriction on a homeownership unit would require the homeowner to sell the unit to someone under a certain income level.
Rentals are deed-restricted for 15 years, whereas most homeownership units have 5-year deed restrictions.
Additionally, Fogle asked whether property developers were local, to which McQuady responded that they had only worked with one out-of-state developer so far. He also said any project that used tax credits had to be local.