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Eastern Kentucky groups say state’s $300M plan to house flood victims 'unfair'

An apartment outside of Hazard, Kentucky was destroyed by water and mud during the flood.
Justin Hicks
An apartment outside of Hazard, Kentucky was destroyed by water and mud during the 2022 flooding.

Kentucky’s Department for Local Government received plenty of criticism on its plan to spend hundreds of millions of dollars in federal flood recovery, but the agency submitted the plan to the feds with few changes.

In March 2022, the U.S. Department of Housing and Urban Development (HUD) announced that nearly $298 million dollars would be dedicated to addressing a housing crisis in the most flood-ravaged areas of Kentucky.

It’s not a blank check. Before the state can access that money, it has to create a thorough plan on how to spend it. Federal regulations require the state to assess how much money is needed for housing and gather input on how to best spend the award.

Kentucky’s Department for Local Government (DLG) is managing the planning process. DLG asked for public comments – a requirement from the federal government – and got an earful. But when the DLG submitted its plan just before Christmas, it had just one change: moving $20 million slated for multi-family construction to single-family home construction.

While the plan awaits final approval from HUD, key housing groups in eastern Kentucky say the plan still needs improvement. They say even the way DLG calculated the amount of money needed to revitalize flood-devastated communities is opaque, and likely underestimated.

A screenshot from the housing plan the Kentucky Department for Local Government sent to HUD, outlining its budget for the money.
Screenshot of DLG submitted plan
Housing groups say the $337 million figure cited in DLG's plan is most likely far too low. They also question why infrastructure was "overfunded" while housing was underfunded compared to the estimated amount of need.

Will Breathitt County get left behind?

The plan DLG submitted says it expects most of the funding will go toward building single-family homes in high ground communities around eastern Kentucky.

Whatever is left could be used for other projects including single-family homes on private land, according to the plan.

So far, Governor Andy Beshear has announced seven of these sites and DLG hints at the possibility of “additional high ground locations.” Early site assessments indicate the state’s estimated budget for just three of the seven sites would use up to $117 million dollars — or 39% — of the HUD funding.

Elected officials and housing groups note that Breathitt County was hard hit during the floods, but doesn’t have a high ground site in the works. They fear flood survivors there will miss the boat on flood aid.

“If they say the majority of the money will be spent on high ground sites, then we’re just totally left out and that’s totally unfair,” Jackson Mayor Laura Thomas said before the plan was submitted. “I want everyone to get help, but the federal dollars — they’re not going to be enough for all the unmet needs in our communities.”

A graphic from the Kentucky governor's office shows the approximate locations of all seven high-ground sites announced so far.
Kentucky Governor's Office
The plan submitted to HUD says it's anticipated that much of the money will go towards development of high ground sites. Housing groups are quick to note that flood-devasted Breathitt County doesn't have a site currently being developed.

Key Douthitt, the head of housing efforts for Breathitt County’s long-term recovery team, said it feels like their concerns were “ignored.”

“You had people — not just from Breathitt County, but from other counties — who were saying this doesn’t really seem right, it doesn’t seem quite fair,” he said. “Yet nothing was changed. It kind of says that we have this public comment period and we’ll listen to you… but we’re not going to change anything.”

Why is all of Pike County on a priority funding list, although just one zip code was identified as being hard hit?

The federal government uses data to determine the “most impacted and distressed” or, MID, areas. Those areas are supposed to be prioritized for 80% of the funding. The other 20% is slated for less damaged areas.

In Kentucky, just one zip code in Pike County (41572) was identified as being “most impacted and distressed.” DLG exercised an option to expand the MID-targeted money to the entire county. Pike County has the largest population in the region and housing groups fear it would dilute the impact of the funding.

“If they spend out of the 80% pot for the MIDs, then that’s less money for Breahitt, Knott, Perry and Letcher that had the most impact,” Scott McReynolds with Housing Development Alliance, said. “It just doesn’t make sense to me.”

“The Commonwealth expanded the MID designation to allow for more territory to build homes for flood survivors within Pike County,” DLG wrote in response to our questions. “Each recipient of DR funds will still need to have been directly impacted by the flood.“

No high ground housing development has been announced yet for Pike County, although DLG’s plan hints at the possibility of funding being used for more than seven.

“It only makes sense if they’re eyeballing a hefty expenditure,” McReynolds said in response to DLG’s statement. “Why not just spend the 20% there? Why do they need to come after the 80%?”

Who is best to administer this money efficiently?

LPM received a copy of all of the comments submitted in a public records request. Many others are also attached to the submitted plan. Several community leaders expressed concern that overwhelmed county and city governments don’t have the capacity to apply for and navigate the ins and outs of another aid program.

Several commenters asked DLG to partner with the Kentucky Housing Corporation — a “quasi-government” agency that regularly administers state and federal funding to build new affordable housing.

A letter submitted by the Kentucky Housing Corporation indicated that it had already proposed a partnership with DLG in June 2023. It even attached a detailed plan they wrote that proposed to issue funding notices as early as 2024. But that wasn’t anywhere in the submitted plan.

“The Action Plan should incorporate a new approach for housing-related activities… to leverage the capacity and expertise of other state-level agencies and regional housing partners,” the housing corporation’s letter stated. “If KHC’s approach is not incorporated in the Action Plan, another partnership model should be developed as soon as possible.”

A screenshot of the plan KHC developed and sent to DLG in their comments.
KHC letter obtained through open records request
The Kentucky Housing Corporation letter attached a copy of the plan they developed in June 2023 where they proposed a partnership to assist the state in creating housing quickly.

Later, in an email response to questions from Louisville Public Media, the Department for Local Government said “KHC will be a sub-recipient for DR funds and will be Kentucky’s lead entity on the use of funds for housing purposes.”

“Kentucky must perform direct financial management and direct management of grants,” DLG wrote. “KHC will assist and advise Team Kentucky as the Commonwealth performs these duties. KHC remains an integral partner in the rebuilding process.”

Is it too late to change the plan?

Right now, the plan is with HUD, the federal government’s housing agency. It’s determining if all the items meet federal rules.

Louisville Public Media asked if HUD would also be reviewing if the plan appropriately addressed public comments.

"The state grantee knows their individual disaster recovery situation the best," a spokesperson replied in an email. "Therefore, the state grantee is responsible for examining their unmet needs and designing disaster recovery activities that best address those needs."

HUD also acknowledged that their federal aid simply won’t address all the housing needs after a disaster, a sentiment DLG echoed.

“The unmet needs exceed available funding, but Kentucky will continue to work to secure additional funding for flood survivors,” DLG wrote.

The Department for Local Government says the plan isn’t set in stone. HUD allows for the plan to be amended through a formal process.

“Kentucky is committed to maintaining an open and transparent public comment process as programs are rolled out,” DLG wrote in a statement. “This plan will continue to evolve as it is implemented, and it is best to view this as a living document.”

In a written statement, DLG said it met “numerous times with local officials” and that meetings are ongoing so that “nobody will be left behind.”

Justin is LPM's Data Reporter. Email Justin at jhicks@lpm.org.