This is part two of a five-part series—Road to Recovery—looking into the state of recovery from 2021 tornadoes in Western Kentucky and 2022 floods in Eastern Kentucky, with a focus on what each region needs from its political leaders. 

When Scott McReynolds left the Housing Development Alliance office the day before the flood, over 500 families needed housing in one form or another, whether it was a repair, a new home or a rental.

The preexisting housing crisis was “fundamentally economic,” said McReynolds, HDA executive director.

About 42% of Eastern Kentuckians in HDA’s service area — Breathitt, Knott, Leslie and Perry counties — live on a less than $25,000 annual household income, he said.

“When a significant portion of your population can’t pay for housing, you’ll end up with a broken housing market. Almost nobody’s building new houses, and the ones that are are typically doing the higher end,” he said.

“Other than us, nobody’s out there consistently building starter homes or entry-level homes.”

Then the flood happened.

“That, obviously, did not help the housing crisis,” McReynolds said.

From June 26 to 30, 2022, Eastern Kentucky got over 14 inches of rain. The National Weather Service called the amount of rainfall “historically unheard of.”

45 people died in the flood. The Eastern Kentucky region lost thousands of housing units in the storm.

How big is the need?

It’s difficult to pinpoint the scale of the need, McReynolds said. To do so accurately, one would have to evaluate every house to know what needs repairing, what needs replacing and what the condition was before the floods.

“If you were living in a 1980 model trailer and you got a few inches of water in it, that’s a very different proposition than if you were living in a two year old brand new, well-built house,” he said.

“So getting those concrete numbers is really, really hard.”

But he did some quick math.

Both FEMA and the Red Cross agreed that 500 houses were completely destroyed in the flood. Another 2,500 had significant damage.

“So I think as a region, we’re going to need to be thinking about replacing 3,000 housing units,” McReynolds said. “That’s a huge undertaking.”

Another 300 to 500 houses were impacted — some that might only need rehabbing, and others that may need to be replaced entirely, depending on their locations and the original conditions, he added.

According to an analysis from the Ohio River Valley Institute and the Appalachian Citizens Law Center based on FEMA data and interviews with flood survivors, the low end of housing recovery would cost $450 million.

“And that assumes that most people stay put,” McReynolds said. “If you count on the opposite end, if you say we’re going to get most people out of harm’s way, that jumps up to $950 million.”

According to that analysis, state and federal aid funding doesn’t even meet the lower end of the need.

FEMA allocated $100 million for housing. Team Kentucky and Foundation for Appalachian Kentucky together added about $20 million. During the 2023 session, the legislature allocated $10 million for housing. And Eastern Kentucky is expecting another $200 million through federal Community Development Block Grant–Disaster Recovery funds.

It sounds like a lot, McReynolds said, but it only gets them to $330 million for housing.

“So you’re $120 million from the low end of the estimate and half a billion from the high end,” he said. “And so the need is just astronomical.”

The problem with flood insurance

To add to the cost, only four percent of impacted Eastern Kentuckians had flood insurance.

Regular homeowner’s insurance does not cover floods or landslides.

FEMA’s help is conditional; it often hinges on whether impacted individuals have flood insurance. The first time someone is flooded, FEMA will help, as long as they agree to maintain flood insurance forever.

If they don’t, and they get flooded again, they are ineligible for all federal assistance, including FEMA money and CBDG-DR funds. The federal government wants to encourage long-term solutions, like moving out of the floodplain for good.

The problem is, many impacted Eastern Kentuckians can’t afford to move. They also can’t afford flood insurance; it’s a $2,000 bill they have to pay up front when their monthly income may be $1,500.

McReynolds said some Eastern Kentuckians had FEMA claims denied after the 2022 floods because they had not maintained flood insurance after previous flooding.

Getting state housing money

During the 2022 special session, the legislature created the Eastern Kentucky State Aid Funds for Emergencies (EKSAFE) to help the region recover.

The $212 million aid package focused on repairing public infrastructure, local school districts and recovery planning efforts. But it was missing one key component—housing.

After a disappointing special session, Eastern Kentucky housing organizations came together to pool a million dollars to build the first 16 houses.

McReynolds said they kept spreading the message that housing couldn’t wait.

“The other part of it was one of the reasons the state gave for not putting money in was, ‘You don’t have the capacity. You’re not ready to build houses,’ and we’re like, ‘Yes, we are.’ ”

During the 2023 regular session, the legislature listened, adding $10 million to the Rural Housing Trust Fund for recovery housing.

Monday, Gov. Andy Beshear announced the first round of Rural Housing Trust Fund Awards. It includes $9 million for counties in Eastern Kentucky impacted by floods.

This round focuses on home repair, recovery and reconstruction to help existing owners, as well as single-family homebuyer development, according to a press release.

What does Eastern Kentucky need from the government?

McReynolds said that the state’s housing organizations are grateful for this help, but they need more. State housing organizations have a few asks.

First, they would like resources to go to people who have done the best they can with what they have to find temporary solutions.

For example, flood survivors have moved in with family members, decided to live in campers, turned sheds into tiny homes, fixed their house in place and bought single and double wide mobile homes and placed them right back in the floodplain because they don’t have anywhere else to go.

McReynolds wants state and federal organizations to look at those solutions as what they are — temporary.

“If they’re still in the floodplain, can we find a way to help them move that out of the floodplain?” he said.

Second, they want more local, community-based housing solutions alongside higher ground communities, like finding small tracts of land close to survivors’ former homes, but out of the floodplain.

Not everyone wants to live in a subdivision or leave their community, McReynolds said.

Third, they’d like the state to refund the Rural Housing Trust Fund at higher than $10 million.

Fourth, they are asking the state to add to the Affordable Housing Trust Fund.

For the short term, they’d like to add $30 to $40 million of the state’s current historic surplus to the fund to spur immediate housing.

For the long term, they’re asking to double the real estate transaction fee that funds the trust fund, from about $12 to $24, inflation indexed to keep up with the economy. The fee hasn’t changed since 1996, McReynolds said.

Finally, they want to create an affordable housing tax credit to incentivize developers to serve lower income people.

A significant portion of the region is on Social Security Income, less than $1,000 a month. There aren’t many tools to help that population. About one in six households make less than $15,000 a year, McReynolds said.

“I think the folks with more resources are going to get helped first,” he said.

” … But at some point in time, we’re going to look around and we’re going to have a bunch of folks with almost no income and that are really hard to house and no housing solutions for them.”