KY task force urges regulation reform, more spending to reverse housing shortage
Some of Kentucky’s lawmakers want the rest of the General Assembly to consider incentivizing the construction of more housing and infrastructure and easing regulations for developers as the state stares down a significant lack of residential units across the commonwealth.
In a nine-page report released Nov. 24 , the Kentucky Housing Task Force said the state’s need to address the housing shortage during next year’s legislative session is urgent.
Without a coordinated effort to build more units, the state may need to fill a gap of more than 287,000 units by 2029, according to an estimate in a housing study commissioned by the Kentucky Housing Corp. last summer.
The task force’s report, which includes several policy recommendations for regulatory reforms and state-funded support, is the culmination of four meetings held during the interim.
The task force heard from stakeholders such as Commerce Lexington, the Kentucky Chamber of Commerce, the Kentucky Housing Corp., the Homebuilders Association of Kentucky and others, who expounded on the state’s housing unit shortfall which has accumulated over decades due to underbuilding, in turn causing a substantial increase in home prices and rental rates.
In 2024, the task force studied housing and in 2025, meetings were meant to focus on identifying policy solutions.
Last year’s report did not include recommendations, but housing-related bills still passed preventing local governments from restricting manufactured housing, allowing local governments to issue bonds for multi-family developments and others.
Most housing proposals during the 2025 session quietly died, especially those sponsored by Democrats, including a policy that would have limited how many homes real estate investors can acquire and another bill that would have put more money into the state’s Affordable Housing Trust Fund. Another bill that would have helped religious institutions put affordable housing units on their property stalled in the House though it had bipartisan support.
During next year’s legislative session, legislators will craft the state’s next two-year budget largely under financial constraints brought on by the federal tax and spending bill passed July 4. As part of budget negotiations, lawmakers have already said they’ll be dedicating time to figuring out how to shoulder costs shifted to them for Medicaid and the Supplemental Nutrition Assistance Program, or SNAP.
“Generally, the regulatory reforms recommended by presenters would encourage or mandate that the state and local governments eliminate barriers to the construction of new homes,” the report said. “While the recommendations involving state support were varied, they generally involved either direct appropriations by the General Assembly to funds that would jump start new housing construction or tax credit for housing developers that would assist in defraying their cost.”
The state support recommendations from the task force are as follows:
- Adopt legislation that will provide local governments with tools, including incentives, to promote housing construction;
- Consider legislation updating the real estate transaction fees that fund the affordable housing trust fund to bring them in line with peer states;
- Adopt proposed changes to the rehabilitation tax credit that will result in a more efficient use of resources and encourage projects that increase the number of housing units; and
- Consider state appropriations to address housing issues by directly supporting housing construction, including appropriations to a residential infrastructure revolving loan fund or a state matching low-income housing tax credit.
The task force is also recommending the General Assembly look at reforming housing-related regulations that would largely eliminate barriers to building new homes across the state.
The regulatory reform recommendations are as follows:
- Ease requirements and eliminate mandates placed on multifamily and middle housing such as duplexes and triplexes, townhomes and accessory dwelling units in the state building code to treat them like single family homes;
- Place a two-year moratorium on changes to the state building and electric codes that would cause an increase in the construction costs of residential housing;
- Require state agencies consider the effects of regulation on housing costs before adopting them;
- Allow qualified third parties to conduct required inspections during housing construction;
- Implement changes to local land use policy reducing requirements for minimum lot size, setbacks, parking and single stair;
- Require local governments do plan reviews in a timely manner;
- Adopt legislation allowing religious developers to construct affordable housing on their property;
- Allow development and redevelopment of property that matches the existing characteristics of an area that encourages urban infill and conversions of commercial space to residential; and
- Secure the rights of housing developers at the time they apply for permitting from a planning unit.
.JPG)