Housing Needs Assessment
The Housing Needs Assessment (HNA) was conducted to provide current, detailed housing data that helps inform potential strategies that Louisville Metro Government through its Louisville CARES program, the Louisville Affordable Housing Trust Fund (LAHTF) and developers can use to identify potential policies and strategies to increase housing opportunities for all members of our community.
The HNA shows that Louisville needs 31,412 new units of housing - single-family homes and apartments - in order to provide affordable housing for our lowest income households, a task estimated to cost over $3.5 billion. Below outlines key findings of the HNA and makes the case for why Louisville needs greater housing density across all neighborhoods.
The Housing Gap
To address our housing needs and lack of affordability in Louisville, we must understand the current need and the path that brought us here. Lack of housing is the result of several factors that have been building for years. It is the direct result of redlining, and the effect of continued underinvestment in formerly D-graded areas (shown in pink on the map below). This cycle must be disrupted to eliminate the disparity in neighborhood opportunity that exists today.
The practice of redlining was not unique to Louisville; communities and families across the U.S. are impacted by its grading system and the effects linger in our city and others to this day. Louisville has made a concerted attempt to dismantle the barriers that were constructed and replace them with areas of opportunity and prosperity. In 2019, Louisville-Jefferson County Metro Government partnered with the Louisville Affordable Housing Trust Fund (LAHTF) and commissioned the Housing Needs Assessment (HNA) which set out to diagnose symptoms of these disparate impacts in Louisville neighborhoods and to identify potential strategies to reshape a housing market that works for the benefit of all Louisvillians. The 2019 HNA identified the need for at least 31,000 units of housing for the lowest income households in Louisville, and an additional 22,500 units for those households earning up to 50% of area median income. This means that approximately 50,000 households in our community need housing that is affordable. Addressing this need will have a cascading effect. Not only will it increase the supply of housing and opportunities available to individuals below 50% of area median income, but it will also create more housing choice for people making between 60% and 100% of area median income.
The cost to develop 31,412 new units of housing affordable for Louisville’s lowest income households is estimated to be over $5 billion. The cost of not addressing the need is unimaginable in terms of impact to the economic future and safety of our citizens. Real wages in Louisville are not keeping up with the cost of living. Sectors with the greatest numbers of employees have actually seen wages stagnate or decline. In total, two thirds of the area’s workforce is employed in a sector in which median annual wages have stagnated or declined since 2010, according to the HNA.
Income Growth Does Not Match Housing Costs Growth
The global pandemic affected many Louisvillians in catastrophic ways, but the most notable is the rapid rise in housing costs the community has seen. Citing numbers from the 2012-2016 American Community Survey, the HNA reported that the median rent in Louisville was $770 per month, and the median home price was $174,000. Median income was $50,099.
Flash forward to today, and income has lagged behind rising housing costs. Rent in Louisville has risen to $1,057 a month, a 37% increase, and median home prices jumped 48% to $242,900. During that same period, median income rose 29% to 64,619 (SOURCE: U.S. Census Bureau, 2022 data).
Area Median Income for Louisville
Area Median Income (AMI) is determined each year by the U.S. Department of Housing and Urban Development (HUD). AMI differs from median household income. Median household income is simply a mathematical median of the incomes of each household in Louisville, while AMI adjusts each household’s income based on the number of people who live in the household as well as local housing cost factors. AMI is described as the median income for a family of four and is used, among other purposes, to set income restrictions for assisted affordable housing units. In 2023 Louisville’s AMI for a family of four is $89,650.
In Louisville, almost 58,000 families are considered to be in poverty. Low-wage jobs, employment volatility, and narrow work opportunities exacerbate the likelihood that a family’s income will not exceed the Federal Poverty Level, which is $30,000 in 2023.
Cost Burden Analysis
Households paying more than 30% of their income in housing expenses each month are defined as cost burdened, while those paying more than 50% are considered severely cost burdened. Cost burdened households may have more trouble paying for other basic necessities like food, transportation, and childcare. In 2018, 29% of households in Louisville were considered to be cost burdened and 13% were considered severely cost burdened.
Income, rents, homeownership rates, evictions, race/ethnicity, and other demographic and housing characteristics vary greatly across our community, with significant differences between neighborhoods in the east and west. Data have shown that rates of cost burden are highest where incomes are lowest. In Louisville, cost burden is especially common throughout the west and south of Louisville and particularly in the majority of single female headed households. In some neighborhoods in the west end of Louisville, more than 50% of households were paying 30% or more of their income on housing costs, while less than 25% of renting households were housing cost burdened in the east.
Available Vacant Land
Developing 15,000 units of housing using a traditional single-family (R4) design model would require over 3,100 acres of land. To develop the number of housing units needed with our current available land and funding resources, a variety of building design types must be considered. While we recognize the role single family, neighborhoods and large-scale apartment complexes play in meeting our housing needs, we also must consider other types of units, known as the “missing middle”. These types of units include duplexes, triplexes and cottage-style units that will allow development to address our supply shortage at a more rapid pace, while also using vacant land in a more sustainable fashion. A simple numerical example illustrates how redevelopment of existing single-family lots with higher density can improve affordability and utilize available land.
By rezoning land to allow for more density by right, we can reduce the needed 3,100 acres to just 431 acres and reduce the overall cost to the community. Urban sprawl creates strain on our residents, infrastructure, the environment, and local budgets. We must consider designs that include walkability standards, creating sustainable resident lifestyles, create green environments, and encourage pedestrian safety and community. The construction of multi-family rental housing is an essential tool needed to address the current supply shortage.
Housing Affordability
Housing affordability is critical for all Louisvillians. Every person, regardless of their income, life stage, or the area they live in, should have decent, safe, quality affordable housing. It is not just about lowincome housing. It is about ensuring that as a city we are offering affordable housing opportunities for our firefighters, police officers, child-care workers, teachers, sanitation workers, construction workers, young professionals, small business owners and other working families.
Affordable housing is about providing meaningful access to opportunities for our residents. It is about providing housing opportunities for our service industry workers and healthcare workers who fuel our economy and care for us and our loved ones. It is about providing housing opportunities for our veterans who have served our country and fought for our freedom. It is about providing housing opportunities for young adults and young families, who are our future, as well as existing residents who have fueled our economic growth. It also means enabling our seniors and legacy residents to age in place.
Currently, the average rent for a one-bedroom apartment in our community is approximately $1,189 per month, which is affordable to households earning at or above $47,000 annually. Our community’s average rent is not affordable to residents earning minimum wage, which includes service industry and many other essential workers. The current median home price in Louisville is $242,900 (U. S. Census Bureau). The only income level that can afford to purchase a median-priced home, are families that make at least 100% of AMI, which has risen to $89,700 for a family of four.
This chart, from the 2019 HNA, provides a visual of the area median incomes, the maximum rents households earning those incomes can afford, and the maximum affordable mortgage for each household. It is important to note that as interest rates rise, the affordability of a mortgage decreases. The financial burden associated with housing can result in tough trade-offs, such as foregoing or delaying healthy food, preventative healthcare, or essential medications to manage chronic conditions. This trade-off is felt most frequently by lower income renters and those experiencing homelessness. A family may also sacrifice housing quality for the sake of its affordability or pay higher rent in order to live in a neighborhood with quality schools. Extreme financial burden can strain social and mental health as well.
Additionally, a 2016 Greenhouse Gas Inventory study found that residents will bear higher costs in energy bills, property damage, and insurance as Louisville experiences worsening urban heat island effect, storms, flooding, and other increasingly extreme and frequent weather impacts. These factors further drive up the cost for residents to both attain and maintain homeownership. A household is considered energy burdened if over 6% of household income is spent on energy costs. Data provided by the U.S. Department of Energy indicates that 8.5% of Louisville’s population is energy burdened.
Those who have difficulty affording their homes are more likely to be financially unstable and face involuntary displacement in the form of eviction for renters or foreclosure for homeowners. Unsurprisingly, foreclosure and eviction rates are higher in areas that have lower income and higher poverty rates.
Infrastructure
Simply put, housing is infrastructure.
Like roads and bridges, sidewalks and sewers, housing is a long-term asset that provides a safe, quality living environment for families in our community. Interest rate increases and significant increases in construction costs have hindered growth in affordable housing. Lack of affordable housing options prevents households from moving to our city where they may find more economic opportunity. This makes it difficult for businesses to attract and retain the workers they need.
Every dollar invested in housing infrastructure boosts our local economy and creates public-private partnerships that lift resident earnings and local tax revenue, as well as supports job creation and retention. In fact, the National Association of Home Builders estimates that, for every single-family home constructed, 2.9 jobs are created and $129,647 in taxes are generated. Construction of an average rental apartment is estimated to generate 1.25 jobs and $55,909 in taxes. $100,000 spent on remodeling is estimated to generate 0.75 jobs and an additional $29,797 in taxes. Increasing affordable housing supply has a clear and direct link to increasing economic opportunity in our city. (National Association of Home Builders, National Impact of Home Building and Remodeling: Updated Estimates, 2020)
Health, Sustainability and Housing
The neighborhood a person lives in is one of the most significant determinants of life expectancy. In Louisville, the poorest neighborhoods have lower life expectancies, sometimes as much as 10 years shorter than the overall Louisville Metro life expectancy.
The underlying determinants of life expectancy are broad-reaching and pervasive. They include the quality and quantity of housing (including the degree of residential segregation), education, income and employment, transportation, natural and built environment, air quality, community safety, and access to healthy food, parks and opportunities for physical activity. Collectively, these factors exacerbate one another, and neighborhoods in south and west Louisville are more likely to experience several of these factors simultaneously, creating an exponentially greater effect. (Source: Louisville Metro Health Equity Report, 2011) Place matters and neighborhoods impact opportunities for health.
Because the research has shown that differences in neighborhood environments can predict health and wellbeing, it is important to place housing in areas with many opportunities, such as transportation, quality schools, employment corridors, grocery stores, and community spaces.
The ability to be stably housed in a quality home is a basic foundation of overall quality of life. It is a foundation upon which other positive health outcomes, including physical and mental health can be built. This ability is currently much more difficult to achieve in some of the city’s neighborhoods than it is in others. Recognizing that sustainability contributes positively to life expectancy, My Louisville Home will integrate and incentivize impactful energy efficiency and sustainability strategies in the housing sector.
A pivotal opportunity that will be transformational in the coming decade is the Inflation Reduction Act (IRA). This is the federal government’s largest ever investment in climate, which is making billions of dollars available to catalyze the adoption of environmentally sustainable technologies. To make the most of this once in a generation opportunity, this plan will include strategies to leverage the tax credit, rebates, grants, and other incentives that will drive down costs of building and retrofitting housing to be highly efficient.
In addition to the falling costs of energy efficient technologies, the IRA now offers up to $5,000 in tax credits for builders that achieve U.S. Department of Energy’s Zero Energy Ready (ZER) Home certification. Establishing a Green Bank, as proposed in this plan, will serve as a key catalyst to integrate resources and transform the market to deploy these essential standards and technologies at scale over the next several years.
In 2022, Louisville applied and received the U.S. Department of Energy’s Communities Local Energy Action Program (LEAP) technical assistance grant, which will by the end of 2023, furnish a roadmap to integrating sustainability into housing. This work, which will be completed by the end of 2023, will include recommendations for energy efficient technologies, policy, benchmarking, workforce, and finance. Recommendations from the plan will be evaluated and integrated into My Louisville Home.
Vacant and Abandoned Properties
Vacant and abandoned properties (VAPs) negatively impact quality of life for Louisville’s residents, particularly in areas of high VAP concentrations. Many affordable housing strategies have the potential to positively impact Louisville’s concentrations of VAPs by repurposing land and abandoned structures. Many dilapidated properties are maintained by the city but are privately held and are not able to be sold or redeveloped without a lengthy legal process such as foreclosure. Those properties differ from properties already under LMG control. The Louisville Landbank – a partnership between LMG, JCPS, and the Commonwealth–acquires formerly abandoned properties, cleans the title of liens, and disposes of those properties for a community benefit, like affordable housing. The Louisville Landbank’s inventory includes mostly vacant lots with only a few structures and is concentrated in western neighborhoods where affordable housing is also concentrated. Strategies around the repurposing of vacant properties for affordable housing will focus on increasing new construction in neighborhoods in which limited options exist.
Housing Quality
Shelter is a basic human need, along with food and water, but today, the cost and availability of affordable and quality housing is scarce for our lowest income community members. Many citizens in our community live in places that are unsafe or unfit. For example, the presence of lead-based paint, asbestos and other toxic materials, poor maintenance resulting in mold or allergens, and aging housing stock can result in a dangerous and unsafe living environment.
For our homeless community, physical risk is higher still, as unhoused persons are exposed to a host of threats to health and well-being, from increased exposure to violence to the lack of a safe place to store medicine or recover from a medical procedure. Communicable and chronic disease, mental illness and poor childhood development can result from, and can be compounded by, poor housing conditions.
The Value of Homeownership
Where we live, the neighborhood and the opportunities in the community matter. Residing in a home near quality schools, parks, and healthy food retailers provide residents with opportunities that positively impact their overall wellbeing. Research shows the consequences of historic disinvestment, such as concentrated poverty or limited opportunity for wealth building, result in other negative outcomes, such as violent crime. Violent crime also can deter economic investment, which further limits neighborhood development (Source: Louisville Metro Health Equity Report, 2017).
Owning a home is largely considered a tool for creating wealth. It is not, however, a foolproof recipe for creating wealth. The home’s neighborhood has a major impact on its value. In west Louisville, many neighborhoods suffer from low home and land appraisal values even after significant redevelopment has occurred.
Some populations have faced distinct challenges in finding, securing, and maintaining housing that supports health and provides opportunity. This was caused largely by federal, state, and local governments that created policies and programs that discriminated against and intentionally limited housing opportunities for people of color, people with disabilities, survivors of domestic violence, LGBTQIA communities and different age groups. While many of these policies and programs may no longer be legal, some are still practiced. The impact of these discriminatory practices can be seen today in wealth and income disparities, which ultimately influence health and access to opportunity.