PILOT Program Coming January 1, 2027

Kentucky Housing Corporation (KHC) is pleased to announce the launch of the KHC Payment In Lieu of Taxes (PILOT) Program, beginning January 1, 2027. This new initiative is designed to support the development of residential multifamily housing across the Commonwealth by reducing property tax burdens for eligible developments. 

Through this program, KHC may acquire property for residential development, lease it to eligible developers, and enter into PILOT agreements with local governments as outlined under KRS 198A.200. This framework is intended to reduce overall development costs and help increase the availability of affordable housing statewide. 

Eligible applicants include both for‑profit and nonprofit entities. Developments must:

-Be located in Kentucky
-Receive an award of 9% or 4% Low‑Income Housing Tax Credits
-Add at least 48 new units of multifamily housing
-Be subject to an extended use agreement in favor of KHC

Developers participating in the program must demonstrate site control, negotiate PILOT terms with all applicable local governments, and obtain the required written consents. KHC will acquire the real estate, enter into ground leases, remit PILOT payments to local taxing authorities, and ensure affordability through ground lease terms or deed restrictions. Compliance monitoring will occur periodically throughout the lease term. 

KHC is currently drafting the program guidelines, policies, and procedures, which will be published once finalized to support developers and stakeholders in preparing their applications and project plans.

KHC looks forward to offering this new tool to strengthen the feasibility of multifamily housing and help address the Commonwealth’s significant housing needs.

PILOT Program FAQs

How will the land that KHC acquires and makes available for lease be marketed or made known to developers, and will this be a competitive process?

KHC will not be purchasing property independently or marketing land for lease to developers. Instead, KHC’s approach involves acquiring property directly from the project, meaning developers would secure the site themselves and, if eligible, KHC would acquire the property from the project as part of the PILOT process.

Is it possible for land or sites that developers acquire on their own to take out and enter this program in some way?

Developers can procure their own sites and potentially participate in the program, provided all other eligibility requirements are met.

How will the PILOT payment be calculated?

Developers will propose a PILOT structure through direct negotiations with the applicable taxing jurisdictions.

Is KHC going to be involved in the negotiations?

No. Developers are responsible for negotiating the PILOT terms with all applicable political subdivisions. KHC’s role is not to negotiate on the developer’s behalf but to ensure that the final PILOT agreement meets statutory and program requirements and is incorporated into the ground lease.

What happens if the local governments are unwilling to provide a PILOT / Are unreasonable in said negotiations?

Projects that are unable to secure required approvals, would not qualify under the statute and be unable to participate in the PILOT program.

Is the thought that these would be upfront payments, annual, or some sort of hybrid?

Developers must make annual payments equal to the negotiated PILOT amount.

What is the term of the PILOT anticipated to be?

The lease itself could be potentially up to 99 years, but the PILOT/tax-exemption term aligns with the LIHTC extended use period, typically 30 years.

What will the extended use agreement would be?

The statute requires that the property be subject to an extended use agreement (EUA) in favor of KHC for the tax exemption to apply.

This requirement will be satisfied by the Low-Income Housing Tax Credit (LIHTC) Land Use Restriction Agreement (LURA) required by Internal Revenue Code Section 42 and by KHC for all LIHTC properties.

When will the PILOT program be available?

The PILOT program will be available after January 1, 2027.

When will the PILOT program materials be available?

KHC is currently drafting the program guidelines, policies, and procedures. Those materials will be published once finalized.

For now, consult the FAQs for questions about the PILOT program.