GHC HEAD regression involving TYPEs in type families

This program typechecks on GHC 8.2.2 and 8.4.1:

{-# LANGUAGE TypeFamilies #-}
{-# LANGUAGE TypeInType #-}
{-# LANGUAGE TypeOperators #-}
{-# LANGUAGE UndecidableInstances #-}
module Bug where

import Data.Kind

type family Promote (k :: Type) :: Type
type family PromoteX (a :: k) :: Promote k

type family Demote (k :: Type) :: Type
type family DemoteX (a :: k) :: Demote k

-----
-- Type
-----

type instance Demote Type = Type
type instance Promote Type = Type

type instance DemoteX (a :: Type) = Demote a
type instance PromoteX (a :: Type) = Promote a

-----
-- Arrows
-----

data TyFun :: Type -> Type -> Type
type a ~> b = TyFun a b -> Type
infixr 0 ~>

type instance Demote  (a ~> b) = DemoteX  a -> DemoteX  b
type instance Promote (a -> b) = PromoteX a ~> PromoteX b

However, it fails to typecheck on GHC HEAD:

$ ~/Software/ghc/inplace/bin/ghc-stage2 --interactive Bug.hs
GHCi, version 8.5.20180401: http://www.haskell.org/ghc/  :? for help
Loaded GHCi configuration from /home/rgscott/.ghci
[1 of 1] Compiling Bug              ( Bug.hs, interpreted )

Bug.hs:34:34: error:
    • Expected a type, but ‘PromoteX a’ has kind ‘Promote (TYPE t0)’
    • In the first argument of ‘(~>)’, namely ‘PromoteX a’
      In the type ‘PromoteX a ~> PromoteX b’
      In the type instance declaration for ‘Promote’
   |
34 | type instance Promote (a -> b) = PromoteX a ~> PromoteX b
   |                                  ^^^^^^^^^^

Bug.hs:34:48: error:
    • Expected a type, but ‘PromoteX b’ has kind ‘Promote (TYPE t1)’
    • In the second argument of ‘(~>)’, namely ‘PromoteX b’
      In the type ‘PromoteX a ~> PromoteX b’
      In the type instance declaration for ‘Promote’
   |
34 | type instance Promote (a -> b) = PromoteX a ~> PromoteX b
   |                                                ^^^^^^^^^^

Trac metadata

Trac field	Value
Version	8.5
Type	Bug
TypeOfFailure	OtherFailure
Priority	normal
Resolution	Unresolved
Component	Compiler (Type checker)
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