By Liam Niemeyer, Kentucky Lantern · May 4, 2026

It all came down to scrambled eggs. 

In the early 1990s, affordable housing advocate Michelle Budzek was told that if she wanted to get something done at the legislature – like a statewide trust fund for more low-income housing – she had to talk to First Lady Libby Jones. 

Jones knew exactly what to do: she didn’t serve eggs at the governor’s annual Kentucky Derby breakfast at the State Capitol.

“She would take the first stab at showing that the trust fund was an important thing to have by not serving eggs at the governor’s breakfast that year for the Derby, which was significant,” Budzek said.

The Associated Press reported the savings from the scaled-down breakfast brought in $100,000, and the Kentucky Housing Corporation, a quasi-governmental agency that manages federal and state housing funding, matched the savings with another $100,000. 

The state’s Affordable Housing Trust Fund has allocated over $48 million in loans and $118 million in grants since 1994, leveraging over $1 billion total in other private and federal funding to build affordable housing across the state, according to the Kentucky Housing Corporation. Over 12,600 housing units have been built from that funding across all 120 counties. 

But decades after its creation in 1992, advocates and nonprofit builders see the Affordable Housing Trust Fund at a crossroads as the state faces a growing and worsening housing shortage in Kentucky’s largest cities and rural communities alike. A 2024 study commissioned by the corporation, found that Kentucky’s housing shortage will grow to more than 287,000 housing units across the state by 2029 if no action is taken. 

Calls from nonprofit builders and affordable housing advocates to bolster the affordable housing fund with massive one-time appropriations — asking for hundreds of millions of dollars in 2024 —  from the state’s billions of dollars in its reserve have largely gone unheeded by the GOP-controlled state legislature. 

A bipartisan effort to also boost the only reliable source for the fund — a fee on real estate transactions — also faltered this past legislative session with realtors and for-profit builders opposing it.

Budzek, 67, who founded a Cincinnati-based firm focused on homelessness, said she believes the “housing crisis” started to become apparent as it “started creeping up into the middle class.” 

“If we would have been building for low-income folks, low-income families, if we were building affordable housing over the years, this wouldn’t be where it is today,” Budzek said. 

A declining housing fund

Seth Long was a volunteer in 1992 at the nonprofit housing builder HOMES Inc. in Letcher County when he heard the executive director of the nonprofit talking about a new source of funding — the Affordable Housing Trust Fund — to help people in Eastern Kentucky. 

“In those years, a lot of our work was putting first-time bathrooms in people’s homes that didn’t have bathrooms,” Long said, thinking back to the early 90s. “Seems like a long time ago, but that wasn’t so long ago.” 

Now having been the executive director of H.O.M.E.S. Inc. for nearing two decades, his work in recent years has been largely one of rebuilding. His county and much of Eastern Kentucky were inundated with devastating flooding that destroyed thousands of homes and killed 44 people. 

Long said the Affordable Housing Trust Fund has been a “critical” source of funds in repairing homes and building new homes on higher ground out of the floodplain. 

The trust fund provides loans or grants to primarily nonprofit builders for a number of projects ranging from repairing existing homes or building single-family homes and multi-unit rental properties, and those who qualify to live in the housing must have an income 60% or lower than the statewide median income: a little over $50,000 for a family of four or lower. 

Long said another difference from 1992: the “astounding” rise in the cost to build a new home that means “money doesn’t go near as far.” 

Wendy Smith, the deputy executive director of housing programs at the Kentucky Housing Corporation, also said the funding going into the state’s Affordable Housing Trust Fund doesn’t go as far, either. 

State lawmakers in 2006 established a $6 fee on home transactions when deeds and mortgages are filed with county clerks to provide an annual source of revenue to go into the Affordable Housing Trust Fund, but the fee has remained the same in the two decades since. 

“We’re getting static to decreasing funding and incredibly escalating development costs,” Smith said. “We’re really concerned about that.” 

With fewer home transactions happening because of higher interest rates and increased construction costs, Smith said, the corporation has seen a gradual trend of less revenue into the fund. The fund received approximately $3.8 million in fiscal year 2025 while receiving $5.8 million in fiscal year 2021. 

With the average investment from the fund to go toward building single-family homes averaging $70,000 per housing unit, according to the corporation, the funding can be used up fast, particularly with the corporation’s policy of committing funding early for a project’s development. 

Some housing advocates were disappointed the state legislature didn’t pass a number of housing regulatory reforms at the end of this year’s legislative session in mid-April. One of the bipartisan bills that didn’t make it across the finish line was House Bill 411. 

The legislation, primarily sponsored by Rep. Steve Bratcher, R-Elizabethtown, would have increased the real estate transaction fees going into the fund by a cumulative $24 and tied the fees to Consumer Price Index, a marker of economy-wide inflation. 

The Republican co-chair of the legislature’s previous Housing Task Force had supported it, but the bill didn’t get a committee hearing.

“There are special groups out there that want things done for themselves,” Bratcher said. “But as a legislator, I have got to look at what’s right for Kentucky and help move the state forward.”

“I’m not really a fan of increased fees and taxes, but I do recognize from a business perspective and economic sustainability perspective that we’ve got to do something or we’re going to pay 10 times that on the back end,” Bratcher said. 

In particular, Kentucky Realtors and the Home Builders Association of Kentucky, which represents thousands of for-profit builders and related professionals, had opposed HB 411 on similar grounds that an increased fee at closing could impact housing affordability.

In a February letter to Bratcher, the home builders group wrote that “even small fee increases ultimately fall on homebuyers, at a time when housing affordability is already a challenge across Kentucky.” 

Smith disagreed with the argument by realtors and homebuyers, saying the $24 increase wasn’t a barrier to homeownership. She has also pointed to other states, including West Virginia and Ohio, that currently have a higher real estate fee going into similar state housing trust funds.

“I feel like we have some common interest with them. It gives me some heartburn that a $24 fee increase was seen as a line they weren’t willing to cross,” Smith said. “It’s disappointing, because we’ve got to figure out some ways to make something happen in Kentucky.” 

Anetha Sanford, the CEO of the home builders association, said the group stands by its position on HB 411 and that the group was trying to “reduce unnecessary cost burdens wherever possible.” 

The future of the fund

Scott McReynolds, the executive director of the nonprofit home builder Housing Development Alliance in Perry County, said even before the 2022 floods hit Eastern Kentucky, the region has had a “housing crisis” with people needing safe, affordable places to live. 

He said his nonprofit currently has a wait list two to three years long of requests of people needing home repairs living in substandard, unsafe conditions, or people living in adequate rentals but asking the nonprofit to build them a better, affordable home. 

He said one woman they’re helping had been living in a small shed she had converted into “not a great house.” Another man with a daughter the nonprofit helped had been living in a trailer with only a shower, and his daughter was too young to take a shower; they instead used a Tupperware container for her to take baths. 

“When we say housing crisis, we mean people living in really bad housing,” McReynolds said. “There’s a human cost to it.” 

McReynolds said he views the Affordable Housing Trust Fund as particularly important because it’s a pool of flexible state money; McReynolds and Long, the Letcher County builder, both say the hundreds of millions of federal dollars provided for housing in the wake of the floods have been very difficult to use because of bureaucratic hoops. 

These nonprofit builders in past years have come before the legislature asking for a massive one-time appropriation — hundreds of millions of dollars into the fund. Democrats, including Beshear, have also called for more than $100 million to go into the trust fund, ballooning the fund to a level it hasn’t reached before. 

Republicans have instead allocated modest one-time amounts into the fund, some in the past questioning the capacity of nonprofit builders to use large amounts of funding efficiently. In the latest approved two-year state budget, lawmakers allocated $5 million into the trust fund and $10 million into a new fund to support residential infrastructure development, along with other funding for specific housing projects around the state. Overall, lawmakers appropriated roughly $1.7 billion in one-time spending on airports, water infrastructure and other initiatives across the state. 

Smith, the housing corporation executive, told the Lantern that when nonprofit housing builders in Eastern Kentucky were given funding, they were able to grow their capacity to build and their workforce multi-fold to build higher-ground communities in the region. 

“They have demonstrated that when they have multiple years of predictable, known pipeline of dollars to get projects going, they can radically increase their production levels,” Smith said. “We have partners that are building far more units than they used to before the disasters.” 

Smith also believes a “radical” one-time appropriation of more than $100 milllion into the trust fund could be “market-moving,” to the point where the corporation could do ambitious initiatives to try to tackle the housing shortage, though she noted the trust fund is one piece of boosting housing supply across all income levels. 

Rep. Susan Witten, R-Louisville, the co-chair of the Housing Task Force, who supported efforts to boost the real estate fee, said she believes housing advocates may have been disappointed following this year’s legislative session because they saw an opportunity and that lawmakers “just kind of missed on this one.” 

“None of the issues have gone away. I think that the issues that we were fighting for this past session are still wonderful solutions to the housing crisis and ones that I think we need to continue to fight for,” Witten said. 

She referenced a years-long effort by another state senator to get a constitutional amendment on the ballot as an example of the multi-year effort it could take to pass housing legislation.

“I think the affordability crisis really just affects lower-income Kentuckians on a larger scale, and it hurts them more,” Witten said.