Table of Contents
Housing reform in Kentucky should …
- Enhance Kentuckians’ property rights.
- Respect the timelines of Kentucky property owners who wish to create new and better housing.
- End mandates and limits on the creation of new housing that have no meaningful connection to advancing Kentuckians’ health or safety.
- Respect the wide variety of types of housing Kentuckians prefer and the ways in which Kentuckians prefer to use their property.
For businesses considering an expansion or relocation to one of several states, the cost of housing for workers is a key factor. This puts Kentucky at an economic crossroads.
The bad news is that Kentucky has seen the same increases in housing prices as other states. In urban areas, the rise in housing prices has been especially pronounced. Median home prices in Lexington and Bowling Green are now more than five times median incomes. Those increases are pushing many families out of the market for home ownership, limiting housing choices, delaying marriage and childbirth, stunting job growth, lengthening commutes, and broadly preventing many Kentuckians from leading more productive and fulfilling lives.
The Bottom Line: Without a robust housing supply, Kentucky will lose its competitive edge. Employers will struggle to attract talent, essential workers will be priced out of their communities, and local economies will suffer.
The Opportunity: The reforms Kentucky needs would enhance property rights and lower costs across the board. Lawmakers can make these reforms quickly, and none of them require a costly new government program.
What follows are changes adopted in other states (and some reforms Kentucky has considered) to streamline permitting, give individuals more control over their own property, and reduce overall housing costs. If policymakers adopted all reforms presented here, our commonwealth would soon become the undisputed leader in abundant, affordable housing … all without placing new burdens on taxpayers.
Caleb O. Brown
CEO, Bluegrass Institute
Permitting Reform
Problems with current Kentucky permitting:
Delays in permitting drive housing costs higher as property owners must navigate needless regulatory uncertainty. Local governments often fail to issue permits in a timely manner to mitigate that uncertainty. Lawmakers can streamline this process and give developers and property owners new avenues to secure permits in a timely fashion.
Kentucky lawmakers should:
- Implement the Shot Clock: Encourage or incentivize local authorities to approve housing permits in a timely manner. (Texas 2023 HB 3697) (Arkansas: 2023 HB 1207)
- Enable third party permit review either automatically or after regulatory authorities fail to approve permits in a timely manner. (Tennessee 2024 SB 2100) (Texas: 2023 HB 14)
- Ensure that exactions/impact fees are proportional to realized infrastructure costs, as Tennessee, Arkansas, North Carolina, Illinois, Ohio, Florida and Minnesota have done through courts or legislation. (see e.g. Fla. Stat. 163.31801 (2025)).
- Require “specific and objective” criteria for permits and other development approvals. (Tennessee: 2025 SB 1313) (Rhode Island 2023 S 1034)
- Secure zoning rights at application time to enhance “vested rights” in property. (Tennessee: 2025 SB 1313)
To its credit, Kentucky has already taken a significant step toward limiting the range of people who can stop new housing through litigation.That step will give Kentuckians’ more control over their property and will give developers additional certainty that many projects are worth pursuing. (Kentucky: 2025 HB 321)
Zoning Reform
Problems with current Kentucky zoning:
The purpose of zoning is to give local governments greater control over land use. Whatever its benefits, there’s no question that zoning’s control over development now extends well beyond advancing any legitimate health or safety protection. The impact of that regulation on housing prices, economic dynamism, and the property rights of Kentuckians is hard to overstate. Reducing needless zoning restrictions shows respect for property owners and is the best way to secure the benefits of abundant low-cost housing.
Kentucky lawmakers should:
- Adopt the “Golden Girls Rule” to end restrictions on unrelated people living together. (New Hampshire: 2025 HB 457)
- End local prohibitions on smaller residential lots. (New Hampshire: 2025 SB 84)
- Broadly allow up to four residential units on residential lots. (Maine: 2025 LD 2003)
- Legalize residential housing in all commercial zones. (Florida: 2023 SB 102)
- Allow charities to circumvent a range of zoning restrictions when building new housing. (Kentucky: 2025 SB 59) (Oregon: 2021 SB 8)
- Legalize home-based businesses. (Florida: 2021 CS/HB 403)
- Legalize accessory dwelling units. (Arkansas 2025 HB 1503) (Montana: 2023 SB 528)
- Establish a presumption of freedom in zoning code interpretations. (Montana: 2025 SB 214)
Containing Housing Costs
Problems with current and future high housing costs:
Two of Kentucky’s largest cities feature median home prices of more than five times median incomes. Other housing markets are trending in the same direction. For young people seeking a future in our commonwealth, it’s a troubling harbinger of things to come absent serious cost-cutting reform.
Kentucky lawmakers should:
- Increase residential code threshold to four units. (North Carolina: 2023 HB 488)
- Direct the state building code agency to study and propose recommendations that will collectively cut code-related costs by 20%. (California: 2025 AB6)
- Amend codes to legalize single-stair buildings statewide (Tennessee: 2024 SB 2834)
- Limit or eliminate off-street parking requirements for most developments. (Montana: 2025 HB 492) (Washington: 2025 SB 5184)
- Overhaul the building code process to require real cost-benefit analysis.
- Clarify statutes to preclude cities from forbidding building materials otherwise allowed by state building code. (Arkansas 2019 SB 170)
In this area, Kentucky has made a significant and overdue change that will pay dividends for would-be homeowners going forward: Lawmakers this year strengthened protections for manufactured homes by prohibiting local governments from discriminating against them in zoning regulations. (Kentucky: 2025 HB 160)
Additional notes
Taken together, these reforms would place Kentucky at the center of a housing boom. The follow-on effects of such a dramatic shift in how the commonwealth treats housing would include a lower cost of living for tens of thousands of Kentucky families, a dramatic expansion in housing production, and dependably robust job growth for years to come.
The Bluegrass Institute is grateful for the assistance of Charles Gardner and M. Nolan Gray in preparing these recommendations.
