As housing prices increase, Lexington considers doubling affordable housing funds

Nearly a decade after Lexington’s affordable housing fund was created, the Lexington council took its first steps to increasing funding for the program that has either preserved or created more than 3,000 affordable housing units.

During a Lexington-Fayette Urban County Council Budget, Finance and Economic Development Committee meeting Tuesday, the committee voted 8 to 1 to set aside 1% of the city’s revenues for the program. The new ordinance would also set aside $750,000 for homelessness.

It will now move to the full council for approval in June.

The city’s projected revenue for the current fiscal year is $419 million. One percent of that total would be $4.19 million. That’s roughly twice the $2 million the city puts into the fund most years.

The fund was started in 2014 with $3 million and was controversial at the time it was created. An ordinance set the minimum to be allocated from the general fund at $2 million, said Councilman James Brown, chairman of the committee. A dedicated funding source for affordable housing was debated and ultimately defeated at the time it was created.

The contributions into the fund have varied over the years but were typically between $2 and $3 million depending on the fiscal year and the city’s finances. In recent years, the city has increased its contributions to more than $3 million.

The fund got a substantial funding increase as part of the $121 million in American Rescue Plan Act funding. To date, the city has set aside $13.2 million of federal coronavirus relief funds into the fund.

Brown said several task forces, including the Task Force on Neighborhoods in Transition and a subcommittee of Mayor Linda Gorton’s Commission on Racial Justice and Equality, recommended an increase or consistent funding source for affordable housing.

Brown said if the full council approves the change, it would not take effect until the budget that begins July 1, 2024.

“This is the evolution of the program,” Brown said. “We know more resources need to be allocated to the program.”

Brown said the city has spent roughly $11,000 per unit but building costs are only increasing. That means the city has to put more into the program, he said.

Is an audit necessary?

An inter-denomination group called Building a United Interfaith Lexington through Direct Action, commonly called BUILD, pushed for the creation of the affordable housing fund in 2014. It has also pushed in recent years for the city to set aside a dedicated funding source.

Members of BUILD were in the audience Tuesday as the committee debated setting aside a dedicated funding source.

“I want to thank BUILD,” said Councilman Chuck Ellinger. BUILD has been consistent in its advocacy for more affordable housing for more than a decade.

Councilman Fred Brown said $36 million has gone to affordable housing to date. It’s supposed to be a revolving fund. That means developers paying off loans will pay back into the fund.

“I think we need an audit or accountability of this revolving fund,” Brown said. “What have we gotten out of it?

Brown said he would like to see how much money per unit the city has spent. Brown said putting the 1% revenue goal in place “handicaps future councils.”

Vice Mayor Dan Wu said council members can change the ordinance in the future. It was time the city revisit the funding structure for the program, he said. It’s been nearly a decade since the council looked at the ordinance.

Commissioner of Housing Advocacy and Community Development Charlie Lanter said roughly half of the awardees of affordable housing funding are loans. Lanter said the city receives a little more than $350,000 a year from loan repayments in the program. The city’s money is typically “gap financing” or the last money into the program.

Councilwoman Liz Sheehan said she supported the 1% funding for affordable housing but she said she thinks the city may need to look at the $750,000 for homelessness programs. For example, Sheehan said many people need transitional housing with wrap-around services, called supportive housing, that cannot be funded through the affordable housing program.

3,000 units in nine years

Since its creation, the affordable housing fund has either preserved or created 3,082 units. The fund uses either loans or grants to create and keep affordable housing units. The fund leverages city money with other types of funding, both private and public, to create affordable housing units.

Roughly half of the 3,000 units — or 1,513 units — are new to Fayette County.

Lanter said that does not include roughly 800 units that are currently under construction and are projected to be finished at the end of the year.

“That’s game-changing,” said Councilman Preston Worley of the amount of units created and slated to be created. “We need to recognize that we have a housing shortage.”

Councilman Fred Brown was the only committee member to vote against. Brown said it was because he did not think the city should commit a percentage of revenue to any program. Brown said he supported affordable housing. Those who voted in favor were councilors James Brown, Ellinger, Sheehan, Wu, Worley, Kathy Plomin, Jennifer Reynolds and Whitney Elliott Baxter.