photo by: Chad Lawhorn/Journal-World

An affordable housing project under construction near 11th and New Hampshire streets is shown on April 25, 2025.

Kansas will see about 80% fewer affordable housing projects in the coming year, a top Lawrence builder predicted after Gov. Laura Kelly signed a bill that limits tax credits for the developments.

“What I can tell you is we are (expletive,)” Tony Krsnich, developer of multiple affordable housing projects in East Lawrence and downtown, told the Journal-World shortly after Kelly announced on Friday that she had signed a bill that places an $8.8 million cap on future affordable housing credits, and eliminates one portion of the program altogether.

Kelly on Friday sent out a press release listing several bills that she recently had signed. House Bill 2289 was included on the list of signed bills, but the release from the governor’s office didn’t provide any comments from Kelly on why she chose to sign the bill. She had the option of vetoing the bill, which likely would have held, given that the Kansas Legislature has already adjourned for the year.

The bill eliminates, after 2025, a 4% tax credit that has been used by many projects in Lawrence, including for several hundred rent-controlled apartment units in Lawrence near the South Lawrence Trafficway. Additionally, the bill placed a cap of $8.8 million in tax credits that can be issued in total for Kansas affordable housing projects in any given year.

That’s compared to approximately $30 million in affordable housing tax credits that the state has been issuing in recent years.

“I will not be surprised that next year we will develop fewer affordable housing projects than we did in 2022, when we didn’t yet have the tax credit program,” Krsnich said.

He said the tax credit program has become more vital since its adoption because back in 2022 mortgage interest rates were around 3%, and construction costs were about 40% less than they are today.

“Now we are dealing with the great inflation,” Krsnich said.

The tax credits serve as a unique form of revenue for affordable housing developers to partially fund their projects. A tax credit allows any taxpayer to apply the credit to to their tax bill and automatically reduce the amount of taxes they owe. Often, affordable housing developers don’t need the tax break but they do need money to fund their building projects. The tax credit program allows developers to sell the tax credits to other businesses or individuals who want to reduce their tax liability. A $100,000 credit, for example, might sell for $80,000, thus giving the buyer a tax break and giving the developer cash needed for construction.

Developers who receive the tax credits from the state must sign agreements limiting the amount of rent they will charge for apartments they build, and also agree to rent to individuals who are at or below certain income levels.

Krsnich, in his role as the legislative chair for the Kansas Housing Association, had been lobbying the Kelly administration to reject the bill. But the bill had support in the Republican-controlled Legislature, which had made a goal of cutting state spending. Krsnich said he thinks lawmakers didn’t understand the impacts of the bill well enough.

“Affordable housing might be the No. 1 issue statewide,” Krsnich said. “I think most counties and cities would say that it is, but this was one of a hundred some bills that they had to become an expert on in a short period of time. It is unfortunate it works that way.”

Krsnich, though, said he doesn’t understand why Kelly, a Democrat, signed the bill. Krsnisch said Kelly has shown a strong understanding of the need for workplace housing and a desire to end homelessness.

“I don’t understand the play here,” Krsnich said. “Where are these people going to live?”

In Friday’s press release, Kelly noted the bill had bipartisan support in the the Legislature. In the House, 12 Democrats voted to limit the tax credit, while in the Senate, five Democrats supported the bill. Douglas County’s delegation of Democratic lawmakers split on the measure. Most voted against the bill, but Rep. Barbara Ballard and Sen. Marci Francisco both voted to limit the tax credits. Francisco briefly explained her vote in a newsletter message to constituents.

“This was a much valued but unaffordable state tax credit,” Francisco said.

Krsnich said the Kansas Housing Association will lobby for a reversal of the bill in the next legislative session. As approved, the bill will entirely end the tax credit program after 2028, unless the Legislature takes specific action to extend the program.