It’s a problem that’s been years in the making: Kentucky has a shortage of housing. Some estimates put the deficit at more than 200,000 homes and rental units. Based on current economic and workforce growth projections, the Kentucky Chamber of Commerce says the state will need some 500,000 new homes over the next 25 years.
It’s not just a matter of quantity. Housing advocates and realtors say it’s also a matter of buyers being able to afford the housing that is available as well as accessibility to housing no matter where you live in the commonwealth.
“It’s not just an urban problem, it is a statewide problem,” says Kentucky Housing Corporation Executive Director and CEO Winston Miller.
While low-income and first-time home buyers are finding it especially difficult, housing has become more expensive across the board. Pam Featherstone, president of Kentucky Realtors, says prices for land and construction materials, especially lumber, have skyrocketed. Regulations also drive up costs, she says, whether that’s tighter building codes that require certain materials or construction practices, or zoning restrictions that mandate certain lot or home sizes. Higher interest rates have also made home-buying more expensive.
“Now we’ve gotten to a point to where the housing shortage is creating havoc all over the place,” says Adrienne Bush, executive director of the Homeless and Housing Coalition of Kentucky. “It’s not working for most of us.”
In terms of buying a home, median home prices were 2.5 times greater than median household incomes in 1992, according to Charles Aull, executive director of the Kentucky Chamber Center for Policy and Research. He says by 2022, home prices were 5 times greater than household incomes.
At the same time home prices have jumped, rental rates have also increased. A traditional rule of thumb says you should pay less than 30 percent of your household income on rent payments. But Miller says 44 percent of Kentucky renters are paying more than 30 percent of their monthly incomes for their housing. He says almost a quarter of renters in the state pay more than half of their incomes.
Task Force Reviews Housing Challenges
Since June, a new legislative committee has been studying the state’s housing shortage and what to do about it.
“We all recognize there is no silver bullet on this,” says state Rep. Susan Witten (R-Louisville), co-chair of the Kentucky Housing Task Force. “Even if you fix one problem, two or three more problems pop up, so whatever our solutions are going to be, we have to be really creative.”
The committee started with a thorough review of the housing data and supply chain issues. In August, the panel will hear about the challenges that hamper local governments from creating more housing.
“This task force is really doing a great job of surveying the landscape and finding the things that we need to know so that we can impact the lives of Kentuckians,” says Rep. Lindsey Burke (D-Lexington) a member of the committee. “The willingness to get in there and do the hard work is present.”
In later meetings, Witten says the task force will hear solutions that other states have pursued to address their housing shortages.
“This is not a unique problem to Kentucky,” says Witten. “This is happening in, really, all 50 states.”
Those ideas range across a variety of areas, from allocating more money to affordable housing trust funds to addressing regulatory issues that Aull says inflate the cost of housing.
“Labor and employment law regulations can ultimately contribute to the end costs of housing,” he says, “similarly with things like energy codes and building codes.”
Aull says reviewing and reducing construction-related regulations can be done in such a way as to lower construction costs and preserve safety. But others fear rolling back those regulations could lead to substandard housing.
“I don’t want to see vulnerable Kentuckians be the most likely to end up in a home that isn’t safe,” says Burke. “I don’t want us to race to those types of solutions when we could look at other solutions first.”
While state lawmakers can’t tackle every issue, Aull says Frankfort can encourage better local housing policies. He points to legislation passed in Indiana that encourages city and county governments there to reform land use and zoning ordinances. He says the state will provide extra funding to those communities that implement the best practices.
Miller says the state of Oklahoma has appropriated $200 million for low-interest development loans that builders can access in order to construct more single and multi-family homes.
Fiscal policy can help in other areas as well. Aull says Kentucky could put more funding into work-ready scholarships that train builders and construction workers. Featherstone says lawmakers could also create tax-friendly savings accounts for first-time homebuyers.
Kentucky does have two trust funds that specifically target housing heeds of low-income individuals: The Affordable Housing Trust Fund and the Rural Housing Trust Fund. Bush says those funds are supported by a $6 fee assessed on all real estate transactions in the commonwealth. But she and Rep. Witten say that funding mechanism needs to be updated.
“We are so grateful to the General Assembly for dedicating that revenue back in 2007, but I think we are all in agreement that it’s not quite to the scale that we need it to be,” says Bush
“If it’s something that we haven’t looked at in close to 20 years with all that has changed in the last 20 years, then I think it warrants a look,” says Witten.
One option, according to Burke, would be to change from the flat fee on transactions to a 0.25 percent transaction fee assessed on mortgage companies. Rather than adding yet another cost on home buyers, she says the percentage assessment would come from the corporations that already benefit from home sales.
‘More Housing Is Good’
Constructing new homes and rental unites takes land. But urban infill projects as well as building on open suburban and rural lots also come with challenges. Some current homeowners oppose the prospect of higher density housing moving into their neighborhoods because they fear it will decrease their property values. Featherstone says realtors need to do a better job of communicating to homeowners that the opposite is true.
“As new homes are built, it actually increases your value,” says Featherstone.
New construction also requires infrastructure from roads, to power and water service, to sewer connections. Burke says she hopes lawmakers will consider those needs in the next state budget, which comes up in 2026.
“There are priorities that we could do in our budgeting process so that we really maximize our infrastructure growth, and then the housing growth can follow,” says Burke.
In the end though, the state can only do so much on housing. Bush says it will take a combined effort from federal, state, and local governments as well as non-profit organizations and developers to tackle the overall housing shortage.
“The opportunity... is to turn this ship now,” says Bush. “But we need to do it now before we sink into deeper unaffordability.”
Homeownership can help create generational wealth and lead to more stability within a community. Aull says it’s also vital to ensuring that Kentucky can continue to experience workforce and population growth.
“One of the things we all need to work together on is selling the message to Kentuckians that more housing is good,” he says. “Building more housing at all different price points... is going to be absolutely critical not only for maintaining Kentucky’s great quality of life but also for making sure that we can grow our economy in a sustainable way.”
