FRANKFORT — Without significant state funding for new housing, “we’re going to experience the largest out-migration in Appalachian history,” Sen. Brandon Smith of Hazard told the Kentucky Lantern in a telephone interview just before 2023 began.

Yet, despite the thousands of homes lost to last summer’s flooding, no significant housing proposal emerged during the legislature’s first week in session — from lawmakers or Gov. Andy Beshear.

Smith’s nine-county district in southeastern Kentucky includes places heavily damaged by flooding, where he says one of residents’ biggest needs remains securing food.

“I have a hard time talking about it. I think people have — even on the floor of the Senate? — know I get emotional, but I have seen what’s happening here up close and so personal that I will never forget it.”

Major natural disasters have hit the eastern and western regions of Kentucky in the last 13 months, accelerating the need for housing replacement and repair. In response, a coalition of nonprofit housing organizations is asking the legislature to create a $300 million emergency affordable housing trust fund, but has yet to find a sponsor for the proposal.

Smith said the nonprofits’ plan would be “a tremendous start in the right direction” and that he was open to sponsoring a housing package. Bills appropriating state money must originate in the House.

Smith, a Republican, said many legislators care about the issue and that his message to constituents is: “We’re going to reinvest back in your community because we believe this community is going to grow and not just die on the vine like every other coal town down here, just kind of to be forgotten to history. We’re not letting that happen.”

Looking to the legislature

The only concrete action introduced in the legislature so far is House Bill 89, sponsored by Rep. Derrick Graham, D-Frankfort, which includes Beshear administration funding priorities, including money to build a veterans center in Bowling Green.

HB 89 would provide $15 million from the state’s General Fund for the state’s existing Affordable Housing Trust Fund in the 2022-23 fiscal year.

The legislature’s Republican leaders have said they are reluctant to open the state’s two-year budget in a non-budget year for any but a few priorities, including the veterans center.

The House has already approved another cut in the state income tax, at a cumulative cost of $1.2 billion a year. The state is running a record revenue surplus, pushing up the Budget Reserve Trust Fund, or rainy day fund, to $2.7 billion.

After Beshear’s State of the Commonwealth Address last week, Republican Senate President Robert Stivers said the legislature has a couple of options to address housing recovery: appropriating more money or broadening the use of funds already allocated. He estimated that $80 million to $85 million of $200 million allocated for the West Kentucky State Aid Funding for Emergencies (SAFE) has been drawn down and about $40 million has been drawn down from the East Kentucky SAFE fund. More funds may be spent soon as construction increases.

Beshear and the legislature responded to Eastern Kentucky’s record flooding during a three-day special session in August that approved a $213 million relief package. Smith unsuccessfully pushed for? an amendment providing $50 million in affordable housing aid.

Smith’s proposal was rejected at the time out of concern such an appropriation could jeopardize federal funding for flood victims, but some ?lawmakers suggested housing could be revisited in the regular session, which resumes Feb. 7.

Filling gaps in federal aid

Housing coalition members say their proposal is designed to fill gaps in federal funding and to leverage funding sources.

“FEMA was never intended to be an organization to make people whole,” said Chris Doll, assistant director of the Housing Development Alliance in Hazard. “We can discuss whether that should be the way it is. That’s the way it is,” said Doll.

The maximum from FEMA for losing one’s entire house in last summer’s flood disaster is $37,900, said Doll, whose nonprofit serves Breathitt, Knott, Leslie and Perry counties.

Doll’s boss, Scott McReynolds, executive director of the Housing Development Alliance, has estimated that 2,300 new or repaired homes are needed at a cost of more than $600 million.

It’s difficult to pin down the number, Doll explained, because not everyone is self-reporting and the number rises as homes are going from repairable to non-repairable. For example, someone might leave wet insulation in place so pipes won’t freeze only to have mold in the basement six months later.

The coalition is proposing the Affordable Housing Emergency Action Recovery Trust Fund, or AHEART. The plan calls on the General Assembly to invest $150 million in this session and another $150 million in 2024 to support replacing and repairing housing damaged by natural disasters.

The coalition also proposes that? the General Assembly beef up the state’s existing Affordable Housing Trust Fund in 2024 by about $115 million and double the deed transfer tax from $6 to $12. Proceeds, from the tax, paid each time a residential mortgage is recorded with a county clerk, goes into the state’s existing Affordable Housing Trust Fund, administered by the Kentucky Housing Corp. It now generates $4 million to $6 million a year. With the proposed change the deed tax would generate $10 million to $12 million annually for affordable housing.

If the General Assembly approves the coalition’s proposal, potential benefits could be vast, said Fahe’s Director of Advocacy Maggie Riden. Fahe is a Community Financial Development Institution (CDFI) that serves central Appalachia and is based in Berea.

Secure housing can attract employees and businesses, she said. There is also potential to blend state resources, federal COVID-19 recovery and natural disaster aid dollars together within the next five to 10 years.

An inflection point

“Places like rural Appalachia have incredibly aged housing stock, and that is true in Eastern Kentucky, and frankly, to a degree in Western Kentucky too,” Riden said. “So, if we can take this moment as an inflection point, and invest in houses that can withstand increased heat, increased cold, that are built at higher elevation, by and large, we won’t be in the same position (in) five or 10 years when another event occurs and we’re having to rebuild communities from scratch.”

The AHEART proposal puts the legislature in a powerful position to use the state’s surplus to help communities recover, Riden said, especially since federal resources can be slow to arrive.

Groups supporting AHEART include developers, financial counselors and housing groups such as HOMES, Inc., the Housing Development Alliance and the Kentucky Affordable Housing Coalition.

“When the most recent round of flash flooding occurred, it became pretty apparent that we needed a collective and really thoughtful response to rebuild in a way that really maximizes resiliency,” Riden said.

Before the most recent tornadoes and floods, Kentucky had a shortage of 79,000 homes for low-income households according to the National Low Income Housing Coalition, using data from the American Community Survey.

The coalition’s funding request falls short of overall need because it takes into consideration the state’s current capacity to build and subsidize housing, said Adrienne Bush, executive director of the Homeless and Housing Coalition of Kentucky —? “middle ground between need and what communities can do.”

Doll, of the Housing Development Alliance (HDA) in Hazard, said limits include money, carpenters and land available to buy. The inflated cost and shortage of building supplies also complicates rebuilding,

Before the flood, HDA was building 20 houses a year and doing repairs on 50 to 60, he said.?“Now thousands of people need new homes and repairs.”

State funding would help housing organizations ramp up and hire more construction workers and subcontractors. “Everybody is stretched pretty thin right now,” said Doll.

Smith, a businessman who was elected to the House in 2000 and to the Senate in 2008, said that after the flood many people had to make a decision about living in temporary housing, living with family members or if they should leave the area.

He was delivering water to a food bank in Jenkins as he spoke to a Lantern reporter and said that seeing the floods’ effects on his home region has changed him.

Smith added that housing is only one need as food insecurity also has increased. “Everybody can do something to help and that’s what I encourage you to do.”

Jamie Lucke contributed to this reporting.