Housing Policy Gains Momentum in the 2026 Legislative Session

​Given Kentucky’s growing housing shortage, legislative leaders are making housing policy a top priority for the 2026 Regular Session. Lawmakers in the House and Senate are tackling affordability and accessibility challenges across the Commonwealth through a two-pronged approach:

1. Creating new investment tools for local governments and developers to build critical infrastructure.
2. Advancing regulatory reforms to remove barriers and accelerate housing development.

Senator Robby Mills (R-Henderson), Senate Majority Caucus Chair and co-chair of the Kentucky Housing Task Force, introduced Senate Bill 9.  The legislation provides two new financing tools designed to help local governments stimulate residential development tailored to their communities.  Modeled after similar legislation in Tennessee, this provision allows local governments to establish development districts and partner with developers to finance essential infrastructure — such as roads and utilities — through special assessments on benefited properties and municipal bonding. This approach spreads infrastructure costs over time rather than requiring large upfront payments, helping projects move forward more quickly.

Commerce Lexington’s Policy Council Chair Branden Gross (left), and policy team members Andi Johnson and Anthony Allen met with Senate Majority Caucus Chair Robby Mills to support SB9.

The other tool in the bill allows local governments to establish housing districts and provide housing incentive payments to developers to offset infrastructure costs through temporary property tax abatements.  This concept is also championed by Representative Josh Bray (R-Mount Vernon), who filed House Bill 536.  

UPDATE: SB 9 passed the Senate on February 17, 2026, and now heads to the House for consideration.

Regulatory Reforms
On the House side, Representative Susan Witten (R-Louisville), co-chair of the Kentucky Housing Task Force, introduced House Bills 617 and 618 to reduce regulatory barriers to promote higher-density housing, limit restrictive local zoning barriers, streamlines permitting and building standards and expands access to third-party inspections.

Additionally, House Bill 530, sponsored by Richard White (R-Morehead), accelerates permit review processes, limits third-party challenges to development projects, and create judicial remedies through fee-shifting provisions that favor applicants.

Affordable Housing:
Another measure, House Bill 411, introduced by Steve Bratcher (R-Elizabethtown), addresses affordable housing by increasing recording fees to provide additional funding for Kentucky’s Affordable Housing Trust Fund.  The Kentucky Banker’s Association also continues to advocate for a proposal supporting banks investing $20M in an affordable housing loan fund for affordable housing like Lexington’s Transformational Affordable Housing Partnership (former Transy baseball field site).

Much of this legislation stems from recommendations in the Kentucky Housing Task Force’s Final Report issued in November 2025. During the interim, the task force heard testimony from a diverse group of stakeholders, including the Kentucky Housing Corporation, Building Industry Association of Kentucky, Kentucky Chamber of Commerce and Commerce Lexington.

The Scope of the Housing Challenge:
In 2024, the Kentucky Housing Corporation released its Housing Gap Analysis, reporting a statewide deficit of more than 200,000 housing units to meet current demand across both rental and homeownership markets.

For Lexington-Fayette County alone:

• An estimated 22,000 additional housing units are needed today.
• By 2030, that number is projected to exceed 30,000 units.
• The city is currently building only about 600 new homes per year — roughly one-third of pre–Great Recession production levels and far below what is required to close the gap.

Several factors are contributing to rising housing costs in Lexington. Internal challenges such as limited available land, regulatory complexity, and infrastructure expenses are compounded by external pressures including building material costs, inflation and elevated interest rates.

Over the past decade:

• Median home prices have increased 100 percent.
• Median household wages have increased only 30 percent.
• Rental prices have risen 47 percent in the last five years.

Why It Matters:
Rising home prices and rents disproportionately impact young professionals, low-income families, and essential workers. However, the housing shortage affects the entire regional economy. Employers increasingly report difficulty attracting and retaining talent due to limited housing options.

Commerce Lexington supports thoughtful regulatory reforms and expanded financing tools that increase investment, encourage public-private partnerships, and accelerate housing production. Ensuring accessible and affordable housing that meets workforce needs will remain a top priority throughout the remainder of the 2026 Legislative Session as these bills advance.