This story originally appeared in the June 9 edition of the weekly LINK Reader. To get these stories first, subscribe at linknky.com/subscribe.
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At the end of Greenup Street in Covington, just as the road bends around the city of Covington sign welcoming northern visitors and residents alike, sit two buildings.
One is an apartment complex with 25 units spread across four floors.
The other is a building that formerly housed Lil’s Bagels, a specialty restaurant that was popular among local residents.
This small stretch of road has become a microcosm of a trend that’s swept up many in the urban areas of the region, both individual residents and businesses. As cities and economic institutions have made changes to draw in new development, demand for housing and commercial space has driven up property values and rent prices, making it harder for established residents and businesses to keep pace. In the worst cases, these conditions can lead to residential displacement and the closure of businesses, both of which have occurred on Greenup Street in the past year.
Lil’s Bagels shuttered in January, following attempts to negotiate new lease terms with its property manager, Gravity Management Group. The shop had been a fixture of the community for years. Many in the city – including Covington Mayor Joe Meyer, who wrote a letter to Gravity Management officials entreating them for an amicable negotiation with Lil’s owner, Julia Keister – felt a profound sense of loss when the shop closed after Keister and Gravity failed to reach a lease agreement the business could afford.
The occupants of the residential property, called The Woodford, faced a similar situation only a few months after Lil’s left.
In the early months of 2023, Woodford residents saw completion of construction on The Hayden, a luxury apartment complex built from the shell of the former Kenton County Administration Building, which housed the jail, on East Court Street next door. Both The Woodford and The Hayden are managed by property management company Urban Sites.
The Hayden is a 110-plus unit, $31.4 million project designed to bring young professionals and their families to the Riverside District of Covington, according to the development’s website. With monthly rents ranging from $1,225 for a 550-square-foot studio to $2,600 for a two-bedroom, two-bathroom unit with double the space, one Woodford resident said he knew what the opening of The Hayden signaled: Rents were surely about to go up.
But why would the opening of a new building, albeit one that was more expensive, affect rent prices in The Woodford?
The answer lies in a set of overlapping historical and market conditions that have contributed to the rise of both rental prices and property values throughout the region and, indeed, much of the country.
To begin with, governments, civic organizations and private firms have been making conscious efforts to increase economic development, attract employers and draw new residents throughout the region since at least the 1980s, when coordinated redevelopment of commercial property along the riverfront took place.
“We want well-planned growth,” said Northern Kentucky Chamber of Commerce President and CEO Brent Cooper. “We want a vibrant community.”
The NKY Chamber is one of several economic development groups that have collaborated with local and state governments to spur such regional development. When Cooper spoke with LINK nky, he gave an example that illustrated how this model of development works. The planned construction of a new complex health science lab in Covington, he said, sprang out of prolonged coordination between development organizations, such as the NKY Chamber and BE NKY (formerly Northern Kentucky Tri-ED), private medical firms and elected officials. The project eventually got an injection of $15 million in state money from Gov. Andy Beshear.
This cross-institutional model is “a perfect example of how government, public, private folks can get together, champion something that then can lead to hopefully more investment in our community,” Cooper said. “That’s a lot of jobs, a lot of people living in our community, visiting our restaurants.”
The rationale for the kind of planned growth for which Cooper advocates goes like this: Get multiple sectors of society – government, local residents, businesses and other stakeholders – on the same page. Invest in a project that’s purported to be mutually beneficial to all parties, an investment that usually involves funding from both public and private interests. Then offer job opportunities that accompany the development to local workers, who will invest their wages and taxes back into the community.
Development, however, is often a double-edged sword, said Shannon Ratterman, interim executive director for the Center for Great Neighborhoods, a Covington nonprofit. The center owns several residential and commercial properties and has contributed to the ongoing development of the city.
“That kind of automatically creates a higher demand,” Ratterman said. “Which, of course, … that’s how the market works is that it increases the rents and what it costs to own a property.”
Ratterman’s perspective offers a glimpse into market forces that eventually subsumed Keister’s ability to negotiate effectively with Gravity Management, the same forces that found their way onto Woodford residents’ doorsteps.
In March, after construction on The Hayden concluded, Woodford tenants began receiving notices to vacate. Various upgrades were planned for the building, and in order for the company to execute them, the tenants could not live in their units.
One tenant, Matthew Craig, said he saw it coming.
Craig wears his politics on his sleeve, sometimes literally. He grew up in the region but returned to Covington in March 2022, after traveling across the country stumping for the presidential campaign of U.S. Sen. Bernie Sanders, I-Vermont.
Craig said he leased the apartment knowing there would be some moving pieces the closer he got to the end of his lease.
“When I moved here, they were clear that the whole premise was that the building was likely to be sold, and ownership was likely to change,” he said. “So, when I was looking at the building, it was cheap. It was cheaper than a lot of apartments in the area.”
Some tenants were given the minimum amount of time required by law to vacate, while others were able to extend their leases month-to-month, with the only constant being that they had to leave.
“Last year, there were a lot of residents that were very uncertain what’s going to happen,” Craig said. “But there was just a lot of confusion as to, ‘Why or how can this happen?’ There are neighbors here on a fixed income that cannot find somewhere else.”
Craig said he is OK financially and can afford a higher rent, but that doesn’t mean he’s pleased with the dissolution of the community he settled into at The Woodford.
“It’s going to be very different,” Craig said in March before he moved out. “It’s going to bring in an entirely different kind of vibe to Covington. A lot of people will complain that it’s kind of changing the face of this area and it’s disrupting.
“If we weren’t forced to leave, the community of residents would stay intact. There was a community that existed when I came in, that would have continued to exist, and there are tenants that need this community. We have folks that are on Medicaid and Social Security on a fixed rent. We look out for each other.”
The sort of planned growth for which Cooper advocates is but one kind of economic development that has taken place in the region and one of several factors that contribute to the phenomenon of people getting priced out.
Brian Miller, executive vice president of the Northern Kentucky Builders Association, explained how these factors play out in Northern Kentucky, citing three main causes: increases in materials costs, expenses to remain compliant with zoning restrictions and shortages of skilled labor. Several contractors who spoke with LINK nky corroborated the rise in materials costs.
“In Greater Cincinnati, when you raise the cost of a home by $1,000, you have priced out over 1,200 families from being able to buy that home,” Miller said.
“You cannot make more used homes, right?” he said. “So that means that you have a fixed supply, and when you move people out of the new market, it means you have more people in the used market. Supply and demand: You’ve got a fixed supply with a higher increase in demand, (and) costs go up.”
What’s more, the region’s population has been steadily increasing, which puts even more pressure on supply. As LINK nky pointed out in the May 12 edition of the LINK Reader, Campbell, Kenton and Boone counties’ populations increased by about 3%, 6% and 15%, respectively, between the 2010 and 2020, according to data by the U.S. Census Bureau.
Finally, spiking U.S. inflation over the last year has amplified the pressure on the development market.
These forces overlap in such a way that they disincentivize the construction of property for low- and middle-income people and ratchet up the price of existing property.
Even when developers build new homes, they often have to market to demographics that will pay enough that the developers turn a profit.
“Lately, that has been the affluent,” Miller said.
Academic and government literature reviewed by LINK nky in the reporting of this story broadly corroborate Miller’s assessment.
Economist Nathaniel Baum-Snow, professor of economic analysis and policy at the University of Toronto, explored the issue in a recent white paper published in the Journal of Economic Perspectives. He analyzed the effects of housing demand on different communities throughout the United States, noting that the “rate of new housing construction has been low or falling in all types of locations since 2000.”
A study from Fannie Mae in October 2022 suggested that housing supply throughout the country has failed to keep up with demand, although that study said the Greater Cincinnati region has tended to be more stable than other regions.
Michael Denigan, owner and operator of Florence-based Hillcrest Home Solutions, has been in the real estate business since the 1980s. From his vantage point operating a large real estate firm, he’s witnessed the region change over the years.
Denigan said the region has always been attractive to developers due to its low cost of living, low property tax rates and high general quality of life when compared with other regions. He added that the housing market in Northern Kentucky has tended to be stable when compared to other markets.
“Three or four years ago, we were selling bilevels for $160,000,” Denigan said. “Now they’re $250 or $240 (thousand). … That caused the rents to all go up.”
An increase in economic activity attracts even more investment to the area, continuing the cycle. Yet, unlike with a planned-growth approach such as Cooper endorses, later arrivals to the local economy are often less deliberate in how they act.
“It used to be, the investors were all local,” said Sherri Walker, Hillcrest’s property manager, whom Denigan hired in 2011. “Well, because this market – it’s such a sweet spot around here with all the variety of industry in Cincinnati and everything – now we’ve got investors coming in from all over. You have hedge funds like American Homes 4 Rent and a couple of the other ones that are coming in and buying up all that property.
“They’ve bought about 6,000 homes in the Greater Cincinnati area.”
American Homes 4 Rent, which has changed its name to AMH, isn’t alone among hedge funds and private equity firms that have entered the regional market.
Brandon Holmes, Covington’s neighborhood services director, said Berkshire Hathaway and Blackstone also have a presence in the region, although he was unsure of the scale of their investment. Holmes is a former fellow with the Department of Housing and Urban Development and a self-proclaimed “housing geek.”
Hedge funds have drawn criticism from some due to their model of buying large numbers of single-family homes and either letting them remain vacant while equity increases, or converting them to rental properties.
At Hillcrest properties, Walker said, the median rent these days is between $1,500 and $1,700 per month. Its properties’ values, meanwhile, range from about $160,000 to $400,000.
“The market sets it all,” Denigan said.
Most of the sources LINK nky spoke with confirmed the challenges the region faced.
“I think all businesses and residents need to find ways to continuously adapt to new market forces and impacts on our community,” Cooper said. “A big issue for us right now, and it’s every community in the country right now, for sure, are issues of inflation. … I think we have two jobs for every one person right now in the country. That is an issue that we’re all going to have to deal with.”
To that end, a variety of programs, policies and organizations have been established in Northern Kentucky to aid in the development of small businesses and the increase in both affordable housing and the number of homeowners.
One such government program is the Northern Kentucky HOME Consortium, which uses federal grants to provide 0% homebuyer loans in the consortium’s member cities. It also invests in community organizations that aid in reducing homelessness and increasing affordable housing, such as The Center for Great Neighborhoods and Housing Opportunities of Northern Kentucky, often shortened to HONK.
On the policy side of things, there are programs to encourage the development of small businesses. Covington, for example, has instituted facade-improvement grants and rent-subsidy programs, which Covington Economic Development Director Tom West said helps new businesses get on their feet.
“If someone has a startup retail operation or a startup marketing business or maybe they’re moving from an incubator accelerator into a bricks-and-mortar location for the first time, we want them that first year focused on running their business, building their clientele, establishing their brand – really focused on their business, not on trying to make rent,” West said.
Still, although sources interviewed by LINK nky said these programs and policies are helpful to their beneficiaries, the mathematics of the market make it difficult to keep up.
For example, HONK’s flagship rent-to-own pipeline places people in refurbished properties it owns before gradually turning over the property to the clients over a 12- to 18-month period. The program, however, can carry only about 10 families over the course of a year, said David Hastings, HONK executive director.
“We get a lot of phone calls from people who are at wit’s end,” Hastings said. “(We’re helping two handfuls of families in a year … providing maybe 10 new opportunities. iven the scope of the need for housing, that’s a drop in the bucket.”
For comparison, there were 121 eviction cases scheduled to appear before a judge in April in Kenton County.
Most of the cases, 54 exactly, were dismissed before trial, meaning the tenants either paid their rents or worked something out with their landlords to get them to drop their cases.
Thirteen were settled out of court, five were dismissed in court and 19 were scheduled for trial at later dates.
Thirty cases, meanwhile, received a default judgment from the court, which usually means the tenants did not appear at the assigned court time. Invariably, the court rules in favor of the landlord when this occurs.
Although the number of cases in eviction court vary from month to month, if one were to use the 30 cases ruled in favor of the landlord as a typical monthly pattern of outcomes, that would mean for every 10 families annually placed in sustainable housing with the help of organizations like HONK, at least 360 other people in the region lose housing.
Craig, the Woodford resident who moved in knowing that an ownership change was likely imminent, eventually relocated to The Hayden when his lease expired due its proximity to his former apartment. Although he was fortunate enough to be able to afford the new building, many of the other Woodford residents, he said, were not so lucky. Some couldn’t afford to stay in Covington at all.
“I want to be in an inclusive city,” Craig said at a public hearing related to federally subsidized homeownership programs at Covington City Hall in April. “I was very fortunate that when my building was legally evicted, I could move next door to the new development. But most of my neighbors couldn’t, and most of my neighbors don’t reside in Covington anymore.”
Changes in rent are one thing, but Kentucky tenants’ ability to legally oppose an eviction is slim when compared to many other states.
There is no statewide statute for escrow, for example, unlike in Ohio and many other states. This means that if a landlord fails to make major repairs necessary to make a residence safe or habitable, a tenant cannot pay his rent to the court to legally fulfill the contract while depriving his landlord of income until repairs are made or some other solution makes the apartment habitable.
Tenants in Kentucky also have no statewide right to legal counsel, meaning that if they can’t afford a lawyer in an eviction case, the court has no obligation to provide them with one as it does in criminal cases.
Several advocacy and citizens groups, such as the Northern Kentucky Tenants Union, have engaged in efforts for statewide or, at least, countywide tenant bills of rights. Such regulations would guarantee things like the right to legal counsel, just cause for eviction – renovation would not count among the union’s list of just causes – and the right to first purchase, which would compel property owners to offer properties to tenants before the broader market if they decide to sell. As it stands, however, the only way a tenant can gain a legal advantage is to pay his rent, regardless of the action or inaction of the landlord.
It doesn’t help that many landlords in the area refuse to accept federal housing vouchers, often due to stereotypes about perceived bad behavior by Section 8 tenants.
Holmes, Covington’s neighborhood services director, estimated that there are about 1,200 housing vouchers administered for Kenton County annually, with at least 1,000 active contracts with landlords who accept housing vouchers. This means that there are about 200 tenants – including entire families – at any given time foundering in the rental market because they can’t find a landlord who will accept vouchers.
“I realize that everybody wants to live in a certain place,” Cooper said. “We don’t have the options for that right now, that is true. But I do think we can work deliberately, intentionally to change that.”
If you visit Greenup Street today, you’ll find that things have changed even as they’ve remained the same.
The Hayden is complete and still accepting tenants. The Woodford, meanwhile, is under construction. A temporary wire fence cordons off the sidewalk in front of the building, allowing room for workers to haul drywall and other materials out onto the pavement. A nearby office building has a “space available” sign on its window.
The building that housed Lil’s Bagels is empty. The business itself has since partnered with Roebling Point Books and Coffee and serves food out of the shop’s Newport and Dayton, Kentucky, locations. It no longer serves bagels.
One artifact from the former occupant still adorns the building: A paper sign in a plastic-framed bulletin board displays the restaurant’s former hours and a message inscribed to its loyal customers.
The message reads:
“We’ll get through this together!”
Alecia Ricker contributed to this report.
