The Case for Full Funding for Affordable Housing

The Mayor’s Proposed Budget for the coming Fiscal Year 2021 includes a cut of $1.8M from the $2M annual allocation to the city’s Affordable Housing Fund. Here, in a set of bullet points, is the case for restoring full funding.

Background:

There is a large and widening gap between earning power and cost of housing for low-wage earners

  • Without incentives, the private sector is not able to build/maintain housing that is affordable to those at 80% of the Area Median Income (AMI) of $58,000 or below
  • The need for additional housing in Fayette County at all levels, but especially for low-wage earners, has been well-documented
  • This year the argument for full funding is even more compelling than usual because of a special opportunity

The Opportunity:

  • Kentucky Housing Corporation (KHC) has tentatively allocated tax-exempt bonds, subsidy dollars and Low-Income Tax Credits for four affordable housing developments in Lexington that will serve households whose incomes are at or below 60% of AMI
  • The credits are 4% credits and are not competitive
  • These projects offer an unusually high level of leverage
    • Total projected investment for the four projects: $146M
    • Total units to be created: 710
    • Total units to be rehabbed; 92
    • These units would add in one year almost half as many units as the Fund has helped create or rehab in five years (1,700)
    • The Fund’s investment for these projects would be roughly $3,000 per unit, as contrasted with the average for other projects of $8,300 per unit
    • Half of this investment would be in the form of low-interest loans, with principal and interest repaid to the Fund over time
  • KHC is requiring all of the projects to close by the end of the calendar year.
  • All projects would be able to be completed within the required time-frame (12-18 months after closing)
  • Funding from the Affordable Housing Fund is the final financial piece needed to enable these projects to get final approval from KHC
  • The full $2 M is required for the Affordable Housing Board to consider funding these four projects

Conclusion:

  • We have a rare opportunity to almost triple the usual leverage of our Fund dollars, substantially increase our stock of affordable housing, and stimulate our local economy with $146M in building projects
  • Our financial participation is key for these projects to move forward

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