Fayette County

Revival of Lexington’s older neighborhoods risks pricing out longtime residents

Councilman James Brown on Johnson Avenue in Lexington on Dec. 23, 2016.
Councilman James Brown on Johnson Avenue in Lexington on Dec. 23, 2016. cbertram@herald-leader.com

From Midland Avenue to Sixth Street in Lexington, new restaurants and stores are opening.

Historic homes on several streets have been gutted, renovated and sold again.

But with development comes a problem — long-time residents struggling to stay in homes they own because property values and property taxes inch up.

“There is a lot of concern that people can no longer afford to live in places they have lived for decades because they can no longer afford the property taxes,” said Lexington Councilman James Brown, who represents the East End, an area that has seen a lot of new investment over the past several years.

Brown wants a council committee to explore a program that will help long-time residents pay property taxes in areas where new investment and development is starting to drive up property taxes. Brown, who put the issue in committee in December, said he hopes the Budget, Finance and Economic Development Committee will tackle the topic early in 2017.

The city is exploring a program modeled on one in Philadelphia called Longtime Owner Occupants Program or LOOP that pays the increase in property taxes for people who have owned their homes for more than 10 years and meet certain income guidelines. The fund is for lower-income or people on fixed incomes such as Social Security or pensions.

P.G. Peeples, president and CEO of the Urban League of Lexington-Fayette County, said residents near the Jefferson and Sixth Street corridors have complained about rising property tax bills after an influx of new investment drove up property values and taxes.

“I am not against development and progress,” Peeples said. “I am very concerned. Especially for the elderly African-American property owners in the area whose property taxes could escalate to a point where they can no longer afford to stay in a place where they have been for generations.”

That fear is grounded in history, Peeples said. A predominately black neighborhood called Pralltown off Scott Street near the University of Kentucky was largely driven out by rapid redevelopment. Much of that area is now rental housing for UK students.

Billie Mallory of the East End Community Development Corporation said she does not know of any East End homeowners who have been forced out of their homes because they can’t pay property taxes.

Yet.

There are pockets of redevelopment throughout the East End. Developers are buying homes, gutting and renovating and selling them. It’s created a lot of distrust and tension between developers and people who have lived there for generations, Mallory said.

“Our redevelopment has been spotty,” Mallory said. “It’s been one or sometimes two or three houses at a time. But it’s coming.”

Many are wary and fearful they will not be able to live in an area they have been for decades. Others realize the investment will help preserve a neighborhood that has struggled and lost large portions of its population, Mallory said.

“We have to be very mindful of how that development moves forward. There must be a balance,” Mallory said. “We don’t want entire populations of people to be displaced.”

Planning Commissioner Derek Paulsen has been looking at what other cities have done to help lower-income residents stay in neighborhoods experiencing rapid redevelopment. Philadelphia’s LOOP program is worth further study. The city needs to get in front of the problem before it gets worse, Paulsen said.

Paulsen said the issue is much broader than gentrification. It’s also about ensuring that Lexington has affordable housing. A February 2014 report by czb consultants showed the city has lost more than 28,000 affordable housing units over two decades. The city started an affordable housing fund in 2014 to help address the affordable housing shortfall. That fund received approximately $2 million in city money each of the last two years.

A fund to help pay for portions of a property tax bill is another tool Lexington can use to keep its affordable housing stock, Paulsen said.

“You are helping people stay in their homes, particularly elderly people,” he said. “We know there is a growing demand for affordable senior housing. We also want to encourage single-family home ownership. It strengthens neighborhoods.”

Paulsen said he’s gathering more information about the Philadelphia program. He also wants to get more data to see how much such a fund would cost to start. The fund wouldn’t pay someone’s entire tax bill, just the increase. Once a home that uses the fund to pay for the increase in the property taxes is sold, that money could be repaid back into the fund.

There is no good data available yet on how many people in Fayette County have been forced to sell homes because they can’t afford the property taxes.

Fayette County Property Value Administrator David O’Neill said he has not heard of a homeowner who has been forced to sell because their property tax bill was too high.

That may be in part because O’Neill’s office has tried to mitigate dramatic increases in property tax bills in areas where there is a lot development. Property values are determined by comparable sales in a certain geographic area. But even inside neighborhoods there can be dramatic differences in home sale prices. For example, Kenwick, an area off Richmond Road, saw the most dramatic increase in sales prices in the last 10 years — upwards of 40 percent. But much of those home sales and redevelopment in Kenwick is in the first two blocks of streets such as Hanover, Richmond and Victory avenues. The 300 hundred block of those streets has not yet been redeveloped.

That 300 block is in a different assessment district.

The same is true for streets in the East End. For example, a lot of homes have been renovated and sold on Johnson and Rand avenues. Some of those renovated homes are selling for more than $175,000. But next door a non-renovated home may be assessed for less than $80,000.

The renovated homes on Rand and Johnson are grouped in the same assessment district. The lower-valued homes that have not been renovated are in a different assessment district. That keeps property tax bills from sky-rocketing, O’Neill said.

Still, O’Neill said the data shows that the problem is going to get worse. Population estimates show Lexington will grow to 375,000 by 2030, an increase of about 75,000 from the the 2010 census that showed the city’s population at 295,803. Because of Lexington’s growth boundary, there is a limited amount of acres available for development.

But it’s not just population growth that will drive redevelopment in Lexington’s core, it’s who is buying the homes. Millennials, those age 20-36, are a growing demographic group who are also buying homes, O’Neill said.

“They want to live near parks and downtown and want to live close to where they work,” O’Neill said.

Mallory said that’s largely who’s buying homes in the East End.

“We have a lot of young professionals with two incomes,” Mallory said.

Because of its proximity to downtown, the East End and the Georgetown Street corridor will likely face the most redevelopment pressure, O’Neill said. The housing prices in those areas are lower, making them ripe for developers to buy and flip, he said.

But those homes and apartments are affordable, he said.

“We face a serious shortage of affordable housing,” O’Neill said. “We don’t want to become a community where people can no longer afford to live in the same place they work.”

Art Crosby, the executive director of Lexington Fair Housing, which investigates housing complaints, said he has not received complaints from people who can’t afford their property taxes. But they have seen people who have sold their homes to developers, lured by what they believe is a good deal. But those homes sometimes aren’t sold for much — $60,000 or $80,000. That’s not enough to buy another home in Fayette County.

“There’s literally no place for people to go,” Crosby said.

Beth Musgrave: 859-231-3205, @HLCityhall

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