KY cities could have more options to incentivize affordable housing under new bill
A Kentucky state senator wants local governments across the Bluegrass State to have more freedom to incentivize affordable housing development in their communities.
Senate Bill 9, filed Monday, is a byproduct of the Kentucky Housing Task Force that, for the past two years, has asked lawmakers, local leaders and industry experts to identify the most practical solutions to the state’s growing housing shortage.
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 2024 housing study commissioned by the Kentucky Housing Corp. during the task force’s first year of meetings.
That same year, Lexington’s first affordable housing study in a decade showed the Fayette County city needs more than 22,550 additional housing units to meet housing demand. The vast majority — 17,005 — need to be affordable units for those that make less than $50,325 a year.
The bill, filed by Sen. Robby Mills, R-Henderson, gives local governments the ability to use funding and other tools in order to support large residential developments in their communities as well as their infrastructure and utility needs.
“If we’re going to grow our population, if we’re going to do all the things we’ve been talking about the last five or six years — like cutting personal income tax to bring more people into our commonwealth — we’ve got to have people and places for those people to live,” Mills told reporters Monday before he filed the bill.
One of those tools, establishing “residential infrastructure development districts,” lets local governments identify an area of 5 or more acres for development then issue a no more than 30-year bond to a developer.
Once the district is established, the bond — or a government-backed loan — would be negotiated based on infrastructure costs needed for the project. Those cost needs would be communicated by the developer to a local government and the public through the establishment process.
“These pieces of infrastructure can be hundreds of thousands, if not millions of dollars, to get the water and sewer to these developments,” Mills said. “If we’re able to bond those up front, give the developer money to put those infrastructure pieces in place, that’s going to bring ... possibly a lot of new residential lots, the ability for people to develop on. “
Mills said each lot in a residential infrastructure development district would have a special assessment assigned to it, and the local government will collect the special taxes annually to help pay down those bonds.
The second part of the bill creates a framework for a “housing development district,” which would allow local governments to negotiate with developers in returning a portion of their property taxes on projects on pieces of property that are not more than a contiguous 1,000 acres and were defined or created for development or revitalization.
Similar to the infrastructure district designation, developers apply, local governments establish the district and taxing authorities choose whether to participate. Incentive payments could be awarded annually for up to seven years for new construction or up to 15 years for revitalization projects.
Mills, who serves as Senate majority caucus chair and was co-chair of the housing task force in the interim, said while the legislation filed Monday is focused on residential and neighborhood development, the caucus will do more work to incentivize apartment complexes and middle housing — the term for multi-unit, house-scale residential buildings like multifamily duplexes, accessory dwelling units, town houses and others.
“A home is one of the major investments that people make,” Mills said. “Having a place for somebody to purchase a home in Kentucky keeps people in Kentucky and will grow our state. I think it’s (housing) something that we’ve got to take a couple of baby steps before we take one big step. But I feel good about the work that we’ve put in to this point over the last couple years.”
Most housing proposals filed 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 that would have put more money into the Affordable Housing Trust Fund.
Another bill that would have allowed religious institutions to put affordable housing units on their property stalled in the House, though it had bipartisan support.
During the first week of this year’s legislative session, GOP lawmakers outlined the purpose of bills they anticipated filing that aim to close the state’s affordable housing gap, improve access to affordable housing and create a better foundation for Kentucky to continue its trajectory of positive economic development.
A number of them, including Senate Bill 9, have been introduced.
Reps. Steve Bratcher, Susan Witten, Erika Hancock, Nima Kulkarni and Richard White are sponsoring House Bill 411. It would increase and modify fees received by a county clerk that go toward the state’s Affordable Housing Trust Fund. The fund gives grants and loans to nonprofits and developers to create housing for low-income Kentucky residents.
Witten, R-Louisville, is also sponsoring House Bill 338 alongside Reps. Stephanie Dietz, Emily Callaway, Anne Gay Donworth, Kulkarni and White. If passed, the bill would provide for expungement of records in eviction proceedings that are dismissed.
There’s also House Bill 333, sponsored by Reps. Michael Sarge Pollock, Beverly Chester-Burton, Mike Clines, Sarah Stalker, Joshua Watkins and Wade Williams, that would let the state’s religious institutions bypass local planning and zoning rules to put affordable housing on property it owns so long as a local body approves of the project.
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