Matt Mains stood before the Kenton County Planning Commission in September.
Mains, a development manager with Drees Homes, was seeking a zoning change that would allow for a development with homes priced between $350,000 and $550,000. He responded to pushback from commissioners, who felt the prices seemed too steep.
“Right now it’s nearly impossible to build affordable housing for what affordable housing costs,” Mains said.
The average construction cost of a typical single-family home in the United States last year was $428,215, according to a 2024 survey from the National Association of Homebuilders, which sampled about 400 home builders around the country and compared it to census data. That’s about $162 per square foot.
Northern Kentucky leaders and residents alike are working together to find innovative ways to address the region’s housing shortage.
If about 6,600 new housing units aren’t added to what’s currently available in Northern Kentucky within the next five years, a recent study found that the region will start losing people – and fast.
Every other month, LINK nky sends out a newspaper to all 173,000 Northern Kentucky households. We call these Super Issues. Each of these editions takes a deep dive into a topic that affects our community and the solutions that have made our region better.
This month, we’re talking about housing and how our region is addressing that sobering outlook.
We’re exploring creative ways zoning could allow for the creation of more housing; whether adapting and reusing old buildings could make a dent in the problem; we explore the many ways people can get assistance around the region; and more.
You should be getting your Super Issue in the coming days. We encourage you to sit down and take your time with it. The topics we tackle are heavy and hard to fully take in while scrolling online.
But, seeing as how you’re reading this online (and because we want you to share these stories of resolve and positive problem solving far and wide), we also wanted you to have links to each of the stories.
Click here to read my introduction to the series, exploring how even a mindset can be part of making change. From there, you can read the other stories in this super issue, or find links to them below:
Thank you for reading, and please, if you have feedback, ideas, or want to find ways to connect to your community, reach out to me at mgoth@linknky.com.
-Meghan Goth, executive editor
What is a Super Issue? A note from the editor
“The cost of construction per square foot was $80 in 2011, $95 in 2013, $103 in 2015, $86 in 2017, $114 in 2019, and $153 in 2022,” according to the survey’s analysis. (Note: The figures from previous years have not been adjusted for inflation).
With construction costs that high, the only way home builders can turn a profit is to invest in large, high-price projects marketed to affluent buyers.
At the same time, much of the nation is reeling from a shortage in smaller, so-called starter homes and rental properties that working and middle class families can afford. More and more, housing experts in the region are concluding that market mechanisms alone cannot address the housing problem.
The problem is, what’s the alternative? What can cities, counties and other institutions do to either encourage affordable development or help working and middle-class people access shelter without destroying their finances?
Alternative funding
Besides housing that’s publicly owned, the primary alternative to conventional, market-driven development employs some form of subsidized funding to defray the cost of development. Often these take the form of tax credits.
In conjunction with each of our super issues, we hold a Community Conversation event to bring the community together to talk about solutions and provide resources.
Our event about the region’s housing shortage is scheduled for June 12 from 6 p.m. to 7:30 p.m. at the Erlanger branch of the Kenton County Public Library.
Click here to learn more about the speakers and to register for the free event. We hope to see you there!
Want to join the conversation?
One of the most well-known credits is the Low-Income Housing Tax Credit, or LIHTC, a federal tax credit created through the Tax Reform Act of 1986. These credits are allocated every year through state and local agencies and are specifically aimed at buying, building or rehabilitating rental properties for tenants living below 60% of the area’s median income.
There currently are 54 LIHTC complexes sporting a combined total of 2,825 low-income units in Boone, Kenton and Campbell counties, according to the U.S. Department of Housing and Urban Development. That’s more than a quarter less per capita than the number of LIHTC properties in Hamilton County.
Applying for a federal home-building subsidy is complex and onerous. Many conventional developers will simply avoid dealing with it for fear of falling out of compliance with the law. As a result, specialized nonprofit developers trained in subsidy compliance often take the reins in developing subsidized, low-income housing or housing aimed at renters who receive federal housing choice vouchers (known more commonly as Section 8 vouchers).
One of those nonprofits is Neighborhood Investment Partners in Covington. It’s officially independent but is affiliated with the city. It owns 132 housing units.
Neighborhood Investment Partners was founded by the city and the Housing Authority of Covington specifically to develop affordable housing and keep it affordable long-term. Brandon Holmes, Covington’s director of neighborhood services and a former HUD fellow, serves as the nonprofit’s chairman.
Despite its name, the housing authority manages all publicly owned housing in Kenton County. Neighborhood Investment Partners’ footprint doesn’t extend beyond Covington, though.
LIHTC is one of several funding vehicles that Neighborhood Investment Partners uses to ensure affordability.
“There’s a cadre of resources,” Holmes said. “Local governments can get creative and create subsidy pools, if they want to, to drive down interest costs, loan loss reserve pools. You can use some of the federal resources to do that. So, it really all depends on what your community needs, what the strategy is, and if you have the political support and long-term vision to buy in.”
Catalytic Fund tackles ‘hard stuff’
For more regional efforts, you have to look to community development financial institutions. These are federally designated nonprofits that invest in properties that wouldn’t otherwise be bankrolled through conventional banks. The primary community development financial institution in Northern Kentucky is the Catalytic Fund.
The fund was started in 2008 but wasn’t fully capitalized until 2012. Today, the fund contains roughly $32 million – supplied by both federal grants and private investors – which the organization lends out to projects that CEO Jeanne Schroer described as the “really hard stuff.” Any money the fund makes on project investment is channeled back into the fund for future projects.
Schroer pointed to the Kent Lofts rehabilitation in Bellevue as a project the fund has invested in.
“Our developer client, he had a plan to convert that into 66 housing units,” Schroer said. “We really loved that plan. The units are not subsidized, but they are affordable in that 80% of [area median income] range. If you’re focusing on housing, you know that that is a huge demand for that type of housing in the region. So, we really wanted to support this project.”
Challenges with the property, though, made it practically radioactive to conventional lenders. For one thing, the developer wanted to turn the property quickly, even though the building was an old warehouse, meaning it would have to go through environmental studies, zoning changes and a lot of capital investment to get it up to modern residential standards. Plus, there was the question of affordability: How would the developer ensure the property would remain affordable given the current market pressures, not to mention peculiarities of the building itself?
“This is where we provide what we call our development services and assist the developer with figuring everything out, particularly in helping him acquire the primary financing,” Schroer said.
The fund helped the developer get buy-in from the county, school district and city to support a zoning change. It also helped the property get on the National Register of Historic Places so it could qualify for historic tax credits. In the end, the fund gave the developer a loan to purchase the property, something that likely would not have happened had the developer gone to a traditional bank.
Yet, there’s a limitation to the Catalytic Fund’s reach. Though it does invest in affordable housing, it does not have a specific program dedicated to affordable development, and there’s no guarantee the properties it invests in will end up with affordable units.
A model in Cincinnati?
A community development financial institution across the river, the Cincinnati Development Fund, could serve as a model to emulate. It functions similarly to the Catalytic Fund, but it has a program dedicated specifically to the construction of affordable housing. Called the Affordable Housing Leverage Fund, it provided roughly $75 million in investment to 54 projects, comprising about 1,800 income-restricted units, in the fund’s service area between September 2022 and September 2024.
Over the past 10 years, said Luke Blocher, the fund’s chief strategic officer and lead counsel, the organization has funded projects in Cincinnati proper as well as the city’s suburbs.
Blocher gave an example of how a project ensures its units stay affordable.
“There’s something on the property recorded against the property that says – and any low income housing tax credit would have this – the units in this building have to be rented to people who are income verified at this income level, and the rents are set to a level that won’t exceed 30% of the average income of [a] person under a formula that comes out of the federal government,” Blocher said.
Since banks aren’t incentivized to invest in properties where potential profits are legally curtailed, a dedicated fund through a CDFI could function as an alternative because it could cushion a builder or owner against development expenses.
Blocher said it was important to distinguish the projects that he described above, which are bound by federal strictures, to housing that’s simply more reasonably priced than other units. This can be confusing because both of these categories are often referred to as “affordable housing.” This is especially true when governments and institutions are considering ways to attack the problem.
“There’s a really important, incredibly important sort of difference between… traditional capital A, capital H affordable housing, what people are talking about in that setting, and let’s call it affordable, attainable workforce housing,” Blocher said, “which is, we just want to have housing that is at rents that are not all luxury, can be more attainable, reasonable for the different folks in our market, but it’s not necessarily because there’s this specific income restriction. It’s just that they’re set up to be a different sort of class of product and targeting a different rent rate.
“That’s a different thing, and there’s different sorts of approaches to try to get at that, but that becomes a very important choice that guides what something like an affordable housing fund would do.”
Other alternatives
Development costs are only one part of the picture, though, and the concerns of many working and middle class people focus less on the cost of building and more on the cost of living. This is especially true for renters, because the money they spend on housing isn’t building wealth in the form of equity. It’s a fee for using the space.
Still, home ownership isn’t right for everyone. Maybe you don’t have cash flow to maintain the property. Or maybe you have some kind of physical limitation that would prevent you from taking on the responsibility of maintaining a home, even if you’re gainfully employed.
One organization in Cincinnati called Renting Partnerships offers a glimpse into what co-founder Margery Spinney characterized as a “third option,” through which people who are renting can build a financial safety net before taking on the risks of homeownership.
“That is what most low-income people need,” Spinney said. “What they need first before buying a house is to be financially stable.”
Rental Partnerships operates on what’s called a rental co-op model. The organization, Spinney said, has actually changed forms several times, but it’s always focused around community management of properties while attempting to provide financial stability for its residents.
Rental Partnerships’ footprint is small; the nonprofit owns only 16 units, mostly in Cincinnati’s Avondale neighborhood. Some of the properties were, in fact, purchased with a loan from the Cincinnati Development Fund. To live in one of those units, tenants sign a contract in which they agree to rent their unit for five years, contribute to the overall upkeep of both their own property and other properties in the community and attend a monthly community resident meeting (and pay their rent on time, of course). In exchange, residents earn financial credit over time. The amount they earn varies, but Spinney said the credit usually evens out to about $10,000 over a 10-year period.
“How do you build equity if you don’t own a house?” Spinney asked. “Well, here’s a way we can do it.”
The details of the model have changed with the organization, Spinney said.
“In this original iteration, we were simply a management program, and [the residents] could use that money to pay rent, they could use it to pay off debt, they could do other things,” Spinney said. “They could invest it and take it out and invest it in something else. They could pay for a car. They could do whatever they needed to do to help them remain stable and to put themselves in a better financial situation.”
By keeping the residents actively engaged in maintaining the rentals, the organization managed to save enough money to provide the residents with financial credits.
“I did this for 10 years in Over-the-Rhine when we were managing other people’s property and we had about 59 units,” Spinney said. “What we found was that, with the residents’ engagement in the management system and their commitment to stay for five years at a minimum, we saved enough money on the turnovers and vacancies compared to what was in that budget for the project that we could pay the financial credits for the residents, and the project would not be any more expensive to operate than any other comparable affordable housing development. So, it didn’t cost more to have the residents engaged. They actually created the savings that paid the financial credits.”
The credit can be paid out in cash, Spinney said, and many residents will use the money toward rent, medical expenses and other cash-heavy expenses that can derail the lives of people with low incomes. Since the credits tend to get higher over time, however, there’s an incentive for the residents to wait to cash out the credit.
Old used car housing
In discussing housing broadly, those who spoke with LINK nky had varying attitudes about how we got here, so to speak, and what the future might hold.
Joe Klare, the Catalytic Fund’s COO, diagnosed the problem by comparing the home market to the markets for new and used cars: Even as cars age and deteriorate, there’s still a ready-made market for lower-value used cars in the form of younger drivers, students and so forth. Much of the region, he said, has been actively prohibiting the proliferation of entry-level, old used car-type housing.
“If we had a greater supply, as demand for those units went down, some would filter out and be more naturally occurring affordable housing,” Klare said. “But we’ve had a lot of communities that, just frankly, have not made it easy to develop apartments and density in their communities. A lot of places with very rigorous single family zoning haven’t been willing to change zoning to allow more housing.”
Holmes’ diagnosis was more straightforward: “Money.”
“Why am I going to make $30,000 or $40,000 on a unit in the city, when I can go out to the suburbs and make $120,000 doing the same exact work,” Holmes said, putting himself in the shoes of a developer. “Actually, less work because it’s easier to do development in the suburbs versus the city because of all the regulations and everything.
“It’s the same process, though. It’s the same house. It might have different things on it, but a developer’s looking at their process in time. So, if I can do the same process and make four times the amount of money, why do I care about doing this over here?”
Spinney was the most pessimistic, deriding the entire American housing system as “feudal,” referring to the medieval system of political economy whereby wealthy noble families kept peasants in poverty through back-breaking agricultural labor and endless rent extraction.
“It goes back forever, right, to the fact that some people own everything,” Spinney said. “The landlords are the lords – the pharaoh, the king – they own the land, and they own everything on the land and they rent to everyone else. That’s our system, and that system … perpetuates a certain stratification.”
Although the United States has tried to loosen the constraints around this system through its history, Spinney said, many mechanisms from the postwar period that allowed for easier access to attaining property are falling apart. As such, the problem won’t change without massive changes in public policy.
“We allowed some people to get into home ownership that otherwise might have taken them 30 years to save enough money, to really help build the middle class, and it was very, very successful,” Spinney said. “But in my opinion, we’ve reached the limit where it’s not working anymore. We don’t have the same conditions we had after World War II.”
While Holmes wasn’t as downbeat Spinney, he had no illusions that the problem had been a long time in the making. As such, it will require long-term vision and long-term political will from the region to address.
“We didn’t get here overnight,” Holmes said. “It’s not going to change overnight.”