Kentucky passes law allowing munis for large multifamily housing

The Kentucky government has passed a law allowing the use of municipal bonds for costs of developing and constructing multifamily housing developments of 48 or more units.

The law, Senate Bill 25, extends local government authorization for the use of industrial revenue bonds to cover multifamily housing developments of 48 or more units. The bill became law at the end of March.

The bonds can be issued on either a tax-exempt or taxable basis depending on whether the units' rent is based on tenants' income.

Normally, local governments issue these bonds on behalf of private developers. If the local government retains ownership of the improvements the property can be exempt from local property taxes. In this arrangement, the developers would lease the property, gain the rent, and pay the bonds from the rent proceeds.

The developments can sometimes be eligible for reduced state property taxes, if the Kentucky Economic Development Finance Authority approves it.

The Kentucky Housing Task Force recommended the expansion of IRB bonds to include multifamily housing projects in a report last year aimed at addressing the state's housing shortage.

The law, which had provisions unrelated to bonds or housing, passed by 31 to 6 in the Kentucky Senate and 72 to 19 in the House. Republican Senators Robby Mills and Donald Douglas sponsored the bill.