The lemmy user in the database needs superuser privilages. Add superuser to the lemmy account, drop the database, and then recreate it.
sudo -iu postgres psql -c "ALTER USER lemmy WITH SUPERUSER;"
sudo -iu postgres psql -c "DROP DATABASE lemmy;"
sudo -iu postgres psql -c "CREATE DATABASE lemmy WITH OWNER lemmy;"
Edit: they may have fixed this but I'm not sure what version it's in. Let me know if that doesn't work. https://github.com/LemmyNet/lemmy/pull/3002