Kentucky's housing market faces a complex challenge: a significant gap between available housing and the needs of residents. This section dives into the various factors contributing to this shortage. From the lingering effects of the 2008 recession to rising costs and local regulations, there's a multifaceted story behind Kentucky's housing gap. By understanding these root causes, we can work towards creating a more balanced and sustainable housing market for all Kentuckians.
Possible Causes
- Fewer builders after the 2008 recession - many went out of business.
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Inability to get a loan - banks are reluctant to extend enough credit to fund many projects, or high interest rates deter builders and developers.
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High land and construction costs - land and material costs are escalating pricing many builders out of the market or causing them to scale back their projects.
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Lack of public funding - federal funding for affordable housing has not increased in many years despite higher costs, and Kentucky provides little funding for housing development.
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Local resistance - communities challenge the construction of affordable or alterative housing in their area and create restrictive zoning laws preventing multifamily units, income-restricted units, manufactured housing construction.
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Time - most units are stick built which takes time to add units to the market.
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Natural disasters - the Western Kentucky tornadoes and Eastern Kentucky flooding of 2021 and 2022 damaged or destroyed more than 5,000 housing units, displacing thousands of families, and their counties did not have sufficient housing to rehouse them.
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Economic development - while more jobs is a win for the state, we need housing for the new workers.
Possible Solutions
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Update land use and zoning policies and decisions locally.
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Encourage development projects that meet market demand.
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Fund disaster recovery efforts.
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Identify available land for development.
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Address local issues including homelessness, community revitalization, insufficient infrastructure.
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Discuss barriers to creating new units, including outside investors buying available units, appraisal values are not covering the development costs.
What KHC Is Doing
Kentucky Housing Corporation (KHC) already has taken steps to close the gap. It now uses the majority of its Low Income Housing Tax Credits to create new rental units for low-income Kentuckians. Previously, KHC used its annual allotment to fund both new development projects and rehabilitation of existing units.
- As part of its regular programs, KHC provides housing by:
- Providing mortgages and down payment assistance to new homebuyers.
- Funding the construction of new rental properties for low-income renters.
- Funding the construction of new homes for moderate- to low-income homebuyers.
- Paying a share of the monthly rent for more than 26,000 households.
- Administering programs focused on homelessness and energy efficiency.
- Governor Beshear announced June 3, 2024, that KHC and the Department for Local Government pooled their resources to award $223 million to four Western Kentucky counties to produce nearly 1,000 multifamily units. It will spur economic development, aid disaster recovery and help close the housing gap in those areas.
Additional Resources
To gain further insights into the Kentucky Housing Gap Analysis and related topics, we encourage you to explore the following resources: