Neoclassical building with a golden dome

For the second year in a row, Colorado’s legislative session was dominated by a gaping state budget shortfall. The session’s tenor was further marked by several powerful legislators either terming out or campaigning for statewide office after this year, and by Gov. Jared Polis’ final year in office. Notably, the Governor vetoed a record 12 bills following the session’s May 13 close.

Affordable housing providers and advocates largely played defense amid a deeply challenging budget environment and policymakers largely unwilling to take on other major policy changes. With a few notable exceptions, bills addressing affordable housing and housing stability mostly died or were significantly pared back to pass the legislature and avoid a veto.

Enterprise collaborated with legislative champions, state officials, and advocacy partners to help shape many of the outcomes below.

Lost: Direct Funding for Affordable Housing

State policymakers had to fill a $1.5 billion hole in the budget through painful cuts to critical programs. This was driven by several factors, including the Taxpayer’s Bill of Rights (TABOR) and state-level reductions in tax revenue tied to federal taxes cuts in H.R. 1. 
 
Among those cuts was a $160 million hit to affordable housing grants and loans:

  • A one-time diversion of $130 million from the State Affordable Housing Financing Fund, created by voters’ approval of Proposition 123 in 2022 (HB 1360). This fund invests only in multifamily affordable and mixed-income housing and land banking.
    • Importantly, language in a related bill (HB 1313) spread this $130 million loss over the coming three fiscal years (cutting about $50 million in FY2026-2027 and $40 million in each of the next two), avoiding the blow of a single one-year reduction.
  • A sweep of $30 million slated to go from the state’s Unclaimed Property Trust Fund to the Housing Development Grant Fund (HDGF), Colorado’s most flexible funding source for affordable housing, especially for people living on very and extremely low incomes (HB1401). A 2019 law enabling this transfer was also rescinded, precluding future HDGF infusions.
  • Finally, while not really a housing cut, HB 1223 increased overall state sales tax revenue to offset a modest tax credit for lower-income families, and then decreased the percentage of state sales tax revenue directed annually to HDGF to keep that transfer’s amount consistent with previous years.

Updated: Guidelines for Administering Proposition 123 dollars

Relatedly, two bills reshaped how Proposition 123 funds will be allocated and administered.

  • HB 1313 significantly impacts local governments that opted into the program, as well as their local developers and constituents, by:
    • Adjusting the formula used to determine the number of affordable homes a jurisdiction must create to remain eligible for Proposition 123 funding to establish more realistic goals.
    • Incentivizing the creation of specific types of housing, including: affordable for-sale homes; multifamily rental housing serving Coloradans living at or below 40% of their area’s median income (AMI), explicitly including permanent supportive housing; projects funded by multiple jurisdictions; and projects on land donated by a local government.
  • SB 040 modifies DOH’s administration of Proposition 123’s affordable homeownership program by clarifying income eligibility, allowing waivers of the 35% affordability threshold under certain circumstances, and requiring guidance on temporarily renting for-sale units.

Largely Rejected: Proposals for New and Local Resources

With ideas that would cost state dollars going nowhere fast, numerous bills sought to creatively increase resources for housing. Ultimately, only three of nine such proposals passed — two were priorities of the legislature or administration and one was significantly pared down.

  • HB 1065: Creates a new State Affordable Housing Transit Investment Zones Tax Credit administered by Colorado Housing and Finance Authority (CHFA), allowing awards up to $8.3 million annually through 2033. Qualified projects will serve low- and middle-income households in geographies identified by the Colorado Office of Economic Development.
  • SB 001: Expands counties’ housing options, including enabling them to sell county-owned land or property for housing that meets demonstrated community needs and to direct tax revenue to housing authorities and other housing programs. Also makes needed technical changes to support CHFA’s successful administration of the Middle-Income Housing Tax Credit.
  • SB 116: Facilitates future administration of the state’s senior homestead tax exemption and adjusts business property exemptions; an allowance for municipalities to seek voter approval of lodging taxes to fund new housing was negotiated out.

Failed proposals included:

  • Enabling counties and non-home rule municipalities to seek voter approval to tax vacant rental units and use the revenue for affordable housing (HB 1036).
  • Extending an existing property tax exemption for land held by a nonprofit for affordable homeownership to also benefit land banked for affordable rental housing (HB 1066).
  • Facilitating city and county public housing authorities’ ability to ask voters for increased tax revenue to fund their work delivering and maintaining affordable housing (HB 1206).
  • Constructing financing and operating mechanisms by which public school districts could create rental housing for district employees (SB 139)

Pared Back: Land Use and Zoning Reform Efforts

Following years of contention around statewide land use and zoning reforms, long a priority of Gov. Polis, this year saw only one successful measure and overall less intense debate. Two zoning bills that failed (HB 1114, HB 1308) together would have facilitated the development of additional units on single-family zoned lots. Both were voted down at the request of their own legislative sponsors in the face of opposition from local governments and a fairly moderate Senate housing committee.

The third, known as the Housing Opportunities Made Easier (HOME) Act (HB 1001), was passed and signed into law quickly. It expanded use-by-right development rights on certain parcels owned by experienced nonprofit affordable housing developers, other nonprofits (including but not limited to faith-based organizations) if they partner with nonprofit affordable housers, housing authorities, school districts, public colleges and universities, and transit agencies. Affordable housing advocates believe the HOME Act can achieve meaningful affordability through these qualified entities and because development on these parcels will often require public funding that comes with long-term affordability requirements.

In our companion piece, we turn to the session’s outcomes on housing stability—covering tenant protections, affordable housing providers, mobile homeowners, and homelessness response.