Understanding NKY’s housing shortage

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Listings for two-bedroom condos in Newport’s luxury riverfront housing complex Ovation went up on Zillow this week, with purchase prices starting at $975,000. Nearby on 5th Street, an apartment complex called The Cadence of Newport has two-bedroom apartments listed for $1,495 per month. Yet, many in the community still remember the apartments by their former name, Victoria Square, which used to charge only $710 per month for an apartment.

In short, recent discussions have taken a pessimistic tone: On the ground, it seems to many that there’s an overabundance of newer, higher-end luxury developments while smaller and more accessible forms of housing appear to be drying up.

Although there are some exceptions, broadly speaking, these worries have a basis in reality. In fact, for many, finding secure, affordable housing has become more and more of a challenge.

Let’s unpack the specifics and examine how it got that way.

Housing in NKY

In September, the Northern Kentucky Area Development district released a study of housing in Boone, Kenton, Campbell, Gallatin, Carroll, Owen, Grant and Pendleton counties that revealed some troubling trends for housing in the region.

Conducted in partnership with the county fiscal courts, the engineering firm Stantec, as well as local businesses and civic organizations, the study suggested that the above counties need “to build 6,650 housing units to support economic development in the next 5 years, which equates to 1,330 units per year.”

Broken down by income level, the study showed that largest need is for what they called “workforce housing,” which refers to households whose wages ranged from $15 to $25 with monthly housing costs between $500 and $1,500. The region needs about 3,000 more housing units to provide for people within that income range.

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“About half of the new housing demand… is low-income residents earning up to 60% of the area median household income of $103,600.

“Current housing in Boone, Kenton and Campbell is positioned for middle to upper-middle professional incomes, but affordability for warehouse, service, and low wage healthcare workers is currently lacking and will be exacerbated by incoming residents,” the study states.

The study illustrates the discrepancy with a bar graph showing median wages for common professions in the region compared to the available housing stock. A teacher making the median salary of $43,740, for example, could only afford 26% of the region’s available rentals and 16% of available-for-sale housing.

Percentage of available housing versus median salaries. Graph provided | Northern Kentucky Area Development

As such, the demand for one- to two-bedroom rentals and owned properties consistently exceeds their supply. On the other hand, supply for three and four-bedroom properties consistently exceeds demand.

Tables displaying the difference between supply and demand for different sized housing units across different income levels for Boone, Campbell and Kenton Counties. Tables provided | Northern Kentucky Area Development District


As indicated in the study, the region’s economic and population growth has outpaced its ability to house everyone.

“Right now there are almost 2.7 workforce jobs for every housing unit that those jobs could afford,” Nels Nelson, senior associate at Stantec Urban Places, the firm’s housing and urban planning division, said at the meeting of the Boone County Fiscal Court where the findings of the study were presented. “And that’s going to be a limiting factor in the future.”

What’s more, macroeconomic trends in the housing market itself have disincentivized both the buying and building of smaller housing.

Housing values have risen precipitously since the start of the pandemic. Although the acceleration of prices has slowed a bit over the last year, they’re still trending upward at an alarming rate. The east south central census division of the United States, of which Kentucky is a part, saw a 14% increase in housing prices from August 2021 to August 2022, according to the Federal Housing Finance Agency. Prices rose about 5% from August 2022 to August 2023. On a larger scale, housing prices throughout the country have increased 83.1% since their previous peak in April 2007.

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Changes in housing prices in United States from April 2007 to August 2023. Data and chart provided | Federal Housing Finance Agency.

“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,” said Brian Miller, the executive vice president at the Building Industry Association of Northern Kentucky.

“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.”

Inflation and pressures on the supply chain haven’t helped, although those pressures have eased up a little in recent months.

As costs to build go up, this makes its harder to turn a profit on smaller starter homes and rental properties; builders are unwilling to risk investing in smaller properties because they’re less likely to recoup the costs incurred in building them. This puts more strain on the existing supply of smaller homes.

This situation means that builders will inevitably cater their projects to demographics who can pay enough to turn a profit.

“Lately, that has been the affluent,” Miller said.

The housing study projects that median household salaries for Campbell, Carroll, Kenton and Pendleton counties are likely to increase over the next two years, whereas as the other counties are likely to see a slight decrease.

“Subsidized housing programs can generate new affordable apartments, as does Naturally Occurring Affordable Housing (NOAH),” the study said. “Strategies to increase this housing stock and to preserve NOAH rents are necessary and viable strategies to ensure adequate
workforce housing.”

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Read our June story on those who have been priced out of the river cities, which further explores the mechanisms of housing in NKY and shines a light on the stories of people affected by rising housing prices, here.

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