Kentucky is still not building nearly enough housing

LEXINGTON — Kentucky is still not building nearly enough homes across all incomes, but especially for lower-income people, to bridge the state’s large housing supply gap that’s burdening some Kentuckians with severe housing costs, according to a state housing executive. 

Kentucky would need to build more housing at a higher rate than currently just to not widen the existing gap — approximately 206,000 housing units, including for both renters and homeowners, said Wendy Smith, the deputy director of housing programs at the Kentucky Housing Corporation, told attendees at an affordable housing conference in Lexington Wednesday

“We’re still not building enough, and as a result of that, plus all these factors in the marketplace, there are incredible pressures on affordability for folks all over Kentucky,” Smith said. 

The housing corporation commissioned an Ohio-based firm to publish an analysis of the state’s housing supply gap in 2024, which found the gap would worsen to more than 287,000 units by 2029 if no action was taken. Low-income renters would especially face rising cost burdens, the analysis detailed. The Kentucky Housing Corporation is a quasi-governmental agency that manages federal and state housing funding.

According to federal data she presented from multiple sources, including the U.S. Census Bureau, much of it available on an online dashboard created by the housing corporation, Kentucky built an average of 15,540 housing units a year between 2023 and 2025. To maintain the current housing supply gap, builders would need to construct 16,183 units a year. 

To close the housing supply gap entirely by 2035, she said, Kentucky builders would have to roughly double their current rate of construction by building 28,712 units a year. 

Not aggressive enough

Even with efforts taken by state lawmakers to study the housing supply gap and a bipartisan housing bill passed this year by Congress, she said there’s been “an absence of aggressive action at the state and federal level.” She said she’s pleased to see “good momentum at the state level” that featured a number of housing bills introduced, but that it was not nearly enough. 

Smith also detailed some small victories from what state lawmakers passed during this year’s legislative session, but also major disappointments on what lawmakers failed to enact. While lawmakers appropriated $15 million total into funds for housing construction and infrastructure, she said it’s not nearly enough when “major investment” is needed. 

Affordable housing advocates and nonprofit builders have previously called for hundreds of millions of dollars to go into the Affordable Housing Trust Fund managed by the housing corporation to help subsidize housing construction. A GOP-sponsored bill that would have increased real estate transaction fees that provide revenue into that trust fund died after the state homebuilders association and realtors opposed increasing the fees. 

A major housing bill with a slew of reforms supported by groups across the ideological spectrum also died on the last day of the session, containing a controversial provision that would have largely banned local governments from regulating short-term rentals including Airbnbs. 

Smith told the Lantern incremental approaches to housing can help, but it’s not enough. 

“We are falling behind other states that are taking even more aggressive action and putting a lot of dollars behind it, putting legislation behind it to reduce barriers to housing. We have got to catch up with other states,” Smith said. 

Worsening rural homelessness

A growing housing supply gap, Smith said, leads to more Kentuckians facing severe cost-burdens in paying for housing and an upward trend of homelessness seen throughout the state. She said while Louisville and Lexington had made “real efforts to address unsheltered homelessness” including increasing supportive housing in Louisville, rural parts of the state were seeing significant increases in reported homelessness. 

She also said the omnibus anti-crime bill called the Safer Kentucky Act — passed in 2024 by state lawmakers which controversially bans sleeping outside in a public place — could also be making people experiencing homelessness hide, thereby causing a lower count in reported homelessness numbers. 

Smith told the Lantern that housing construction rates are also the lowest in Kentucky’s rural areas, meaning the lack of housing supply is exacerbating homelessness in those communities. 

“We’re just not gaining ground because there’s not enough supply,” Smith said.