Louisville proposes incentives to build affordable homes onsite
Louisville’s proposed ordinance would keep the 12% affordable-housing requirement while offering density, height, parking and fee incentives for onsite units and sharply raising the ownership fee-in-lieu rate.
Louisville City Council is scheduled to consider changes to the city’s inclusionary-housing rules after staff reported that no project has been approved with qualifying onsite affordable units since 2021.
Ordinance 1936, Series 2026, would keep the 12% affordable-housing requirement for market-rate residential development but change how affordability is targeted. Rental projects would provide units affordable to households earning no more than 80% of area median income. For-sale projects would provide units for households earning 80% to 120% of AMI, [the proposed ordinance says](https://louisvilleco.api.civicclerk.com/v1/Meetings/GetAttachmentFile(fileId=4137).
The proposal is designed to make onsite construction more feasible than paying a fee in lieu. Projects with onsite affordable units could receive up to 20% more residential density and lot coverage. Projects consisting entirely of qualifying affordable rental housing could receive up to a 30% density bonus.
The City Council also could approve up to one additional story or 15 feet of height, whichever is less, for projects with onsite affordable housing. The discretionary increase would have to be consistent with adopted plans and policies and would not apply in the Old Town Overlay District or Downtown Louisville Core Area.
Qualifying projects would not have minimum vehicle-parking requirements for residential uses and could receive waivers of zoning-related development-review fees. The city would continue to review access, circulation, emergency access and neighborhood impacts case by case, [staff told council](https://louisvilleco.api.civicclerk.com/v1/Meetings/GetReportFile(fileId=1265).
Developers could continue using the fee-in-lieu option. The proposed ownership fee would rise from $9.24 to $19.08 per square foot; the rental fee would change from $4.72 to $4.73. The City Manager could recalculate the fees periodically using a City Council-approved method and current market data.
In the city’s example, a 40-unit, 2,200-square-foot for-sale project would pay an estimated $1.68 million under the proposed rate, compared with $813,000 under the current rate. A 40-unit rental project with 1,000-square-foot units would see its estimated fee rise from $188,800 to $189,200.
Why the city is proposing changes
Louisville adopted its current inclusionary-housing ordinance in 2021. It requires 12% of new residential units to be permanently affordable, split between households earning at or below 60% and 80% of AMI, regardless of tenure.
The staff materials identify one project subject to the rules: the 36-unit East Street Village development at 533 East Street. In October 2024, the council approved that project’s fee-in-lieu option, and staff said the city was beginning to receive payments as building permits were submitted.
The record does not establish that no affordable units were built or occupied anywhere in Louisville; the staff statement concerns projects approved with qualifying onsite units.
The proposal is described as an interim step before a broader development-code and inclusionary-housing evaluation expected in 2026. The Planning Commission recommended approval in May but did not review the height incentive, which was added later for council consideration.
As of July 24, the city’s agenda lists the ordinance for a July 28 first reading. The meeting is scheduled for a staff presentation and council questions, with no public comment. A second reading and public hearing will be scheduled later, with two rounds of public comment. No hearing date or final text is included in the available materials, so the proposal could change before final action.