Lexington Faces Affordable Housing Crisis, Needs Over 22,000 New Units
Lexington is confronting a critical housing shortage, with a recent study indicating the need for more than 22,549 additional housing units to meet growing demand. Alarmingly, 17,005 of these units must be affordable for individuals earning less than 80% of the area median income, which is currently pegged at $62,908 annually.
The study, conducted by EHI Consultants and TPMA, revealed that skyrocketing rents have forced many residents to allocate over 30% of their income for housing. Median rents in the city have surged by 47% from 2019 to 2024, with average monthly rents now ranging from $1,200 to $1,250.
This crisis is prompting a significant demographic shift, with moderate-income residents increasingly opting to live in neighboring communities due to housing affordability issues. “It’s causing many moderate income residents to look elsewhere for housing,” said Ed Holmes of EHI. “Rents are increasing at an alarming rate.”
The recent housing study, the first of its kind conducted in a decade, was presented during the Lexington-Fayette Urban County Council work session. A previous study in 2014 indicated that over 15,000 households required rental assistance.
In light of these findings, city officials recognize that relying solely on the affordable housing fund—which has been increased from approximately $2 million to over $4 million annually—is insufficient. It is essential to broaden partnerships and reevaluate regulations to promote the construction of affordable housing in the coming decades.
Since its inception in 2014, the city’s affordable housing fund has contributed over $47.5 million, yielding 1,750 new units and preserving 1,754 units at an average cost of $13,566 per unit.
Rick McQuady, who oversees the city’s affordable housing initiatives, emphasized the need for more permanent supportive housing for individuals with special needs, including those with mental health challenges. He took note of the urgent need for affordable units at the bottom end of the income spectrum, as 82% of tenants in city-supported affordable housing earn an average of $24,000 and struggle with rent costs.
According to the study, 54.3% of renters in Lexington experience cost burdens, defined as spending over 30% of their income on housing. Furthermore, 28% of these renters are classified as extremely cost burdened, dedicating over 50% of their income to housing expenses.
Recent surveys indicate that two-thirds of Fayette County residents find it challenging to afford housing. While wages are rising, they are not increasing uniformly across sectors, compounding the affordability crisis.
In an effort to combat the issue, the city has already implemented regulatory changes to support developers in building low- and medium-income housing. A recent overhaul of zoning regulations allows for diverse housing types in various zones.
With plans to expand the city’s growth boundary by 2,800 acres, the master plan aims to create 17,000 to 26,000 housing units in the future. A public hearing regarding this expansion is scheduled for 1:30 p.m. Thursday before the Urban County Planning Commission, with a finalized plan expected by December 1.
As part of the city’s initiative, a grant application is underway to secure U.S. Department of Housing and Urban Development (HUD) funding, which could significantly reduce development costs for new housing projects in the growth area. The city anticipates a decision regarding the grant application by spring 2025.
