The "Empty Homes Tax": Why Lawmakers Just Killed a New Tax on Vacant Colorado Property

What This Bill Actually Does

Right now, Colorado is wrestling with a severe housing shortage, and frustration is mounting over homes that sit empty for most of the year—whether they are mountain vacation homes, speculative investment properties, or units waiting for high-paying renters. HB26-1036 was designed to give local governments a new tool to address this. The bill would have authorized counties and municipalities to impose a local excise tax or an additional ad valorem property tax specifically on vacant residential properties. Because of Colorado's Taxpayer's Bill of Rights (TABOR), any new tax would still have required voter approval at the local ballot box, but this bill would have granted the state-level permission to put it on the ballot.

So, what actually counts as a "vacant" home? Under Section 1 (29-2-117) and Section 3 (39-1-104.8) of the bill, a property would trigger the tax if it was designed as a residence but left unoccupied for a specific amount of time. Crucially, the bill left the exact timeframe up to local city councils and county commissioners. A mountain town might have decided a house empty for six months is vacant, while Denver might have set the threshold at ten months. The bill also explicitly exempted short-term rental units (like active Airbnbs or VRBOs) from being classified as vacant, provided they were actively available for lease.

The mechanics of the bill offered serious flexibility for local governments. An excise tax could be levied as a flat rate, or calculated based on the unit type, number of bedrooms, or square footage. Furthermore, Section 2 allowed neighboring towns and counties to team up and form a Local Housing Tax Authority to administer the tax regionally. However, the bill let the Department of Revenue and local county assessors completely off the hook. The text explicitly stated that assessors had no duty to implement the tax unless they signed an Intergovernmental Agreement (IGA) to be compensated for their help. Every dime collected from these taxes was strictly ring-fenced to fund affordable, attainable, or workforce housing based on local housing needs assessments.

What It Means for You

For the average Coloradan living year-round in their primary home, this bill wouldn't have cost you a single dime. But if you own a second home, a mountain getaway, or an investment property that sits empty for long stretches, this legislation would have put a target on your property. Depending on how your local city council defined "vacant," you could have found yourself facing a hefty flat fee or an added percentage on your property tax bill. The administrative reality of proving your home wasn't vacant would likely have fallen on your shoulders, potentially requiring you to submit utility bills or affidavits to your local government every year to avoid the tax.

On the flip side, if you are a renter or a prospective homebuyer frustrated by being priced out of your own neighborhood, this bill was designed with you in mind. By taxing empty homes, local governments were hoping to achieve two things: first, financially pressure owners into renting out their empty units to locals (thereby increasing the housing supply), and second, generate a dedicated, massive pool of money to actually build subsidized workforce housing. Because the bill died in committee, your local government will now have to look elsewhere to fund affordable housing projects, likely turning back to standard sales taxes, impact fees, or state grants.

Even though this specific bill was postponed indefinitely, the concept of taxing non-primary residences is incredibly popular in resort communities and urban centers alike. Here is what you should do next:

• Watch your local city council: Towns in the high country are actively exploring ways to regulate or tax empty homes using their existing home-rule powers. Pay attention to local ballot initiatives this fall.
• Engage your state representative: If you have strong feelings about protecting second-home owners or, conversely, funding affordable housing, let your legislator know. This concept is highly likely to return in a future session in a different form.

What It Means for Your Business

If you are in the real estate, development, or property management sectors, the defeat of this bill is a massive sigh of relief. Developers and investors were deeply concerned about how a vacancy tax would be tracked and enforced. If a builder finished a subdivision but couldn't sell the homes immediately due to shifting interest rates, would those homes be taxed as vacant? The bill left the definition of the vacancy time limit entirely up to local governments, which could have created a patchwork of compliance nightmares across different city and county lines. Furthermore, because the bill explicitly exempted short-term rentals, property managers operating Airbnbs avoided a major bullet—though it might have incentivized more property owners to convert their empty homes into short-term rentals just to dodge the vacancy tax.

On the other hand, commercial builders and contractors specializing in affordable housing just lost a massive potential pipeline of dedicated public funding. The bill required all revenue to be earmarked for housing projects based on a local housing needs assessment. If multiple municipalities had used the bill's provisions to form a Local Housing Tax Authority, we could have seen massive, well-funded regional bids for new apartment complexes, subsidized workforce housing, and infrastructure projects. That money is now off the table for the foreseeable future.

Since the bill is dead, immediate tax compliance isn't an issue, but strategic planning for the housing market remains critical. Here is what you should do this week:

• Audit your holding costs: If you are a developer holding residential inventory, run the numbers on what a 1% to 2% vacancy tax would actually do to your margins. Use this data to prepare your business model in case a local municipality pushes a similar tax at the ballot box.
• Connect with existing housing authorities: With state-level vacancy taxes sidelined, local governments will rely heavily on public-private partnerships and state grants to solve housing shortages. Get on the vendor and bidding lists for your county's existing housing authority right now to catch upcoming development contracts.

Follow the Money

Because this was a local empowerment bill, the direct fiscal impact on the state budget was essentially zero. According to the Fiscal Note, the Department of Local Affairs and the Division of Property Taxation would have seen only minimal, absorbable workload increases to update manuals and process filings for new local housing authorities. The real financial stakes were entirely at the local level. Had it passed, the revenue generated would have depended completely on local voter approval, the specific tax rates proposed, and the number of homes classified as vacant.

However, the hidden story in the fiscal analysis is the administrative cost of enforcement. Tracking down which homes are actually empty—rather than just lived in part-time, undergoing renovations, or between tenants—is notoriously difficult and expensive. Because the bill explicitly stated that county assessors and the Department of Revenue didn't have to help without being compensated, cities would have had to build new administrative bureaucracies from scratch to bill, collect, and enforce the tax. County Treasurers also noted that their workloads would have spiked, as they are often required to collect delinquent municipal taxes. Ultimately, these hefty administrative costs would have eaten into the very funds meant to build affordable housing.

Where This Bill Stands

HB26-1036 was introduced in the House on January 14, 2026, and assigned to the House Committee on Finance. On February 9, 2026, the committee voted to Postpone Indefinitely (PI). In the casual language of the Capitol, a PI vote means the bill is officially dead for the remainder of the 2026 legislative session.

The bill likely stumbled over the complex, expensive logistics of defining and enforcing "vacancy," combined with heavy pushback from the real estate industry and property rights advocates who argued it would punish builders and second-home owners unfairly. While this specific iteration is off the table, Colorado's housing crisis is only getting tighter. Expect progressive lawmakers and housing advocates to regroup, study how similar taxes have worked in places like Vancouver or empty-homes policies in mountain towns, and potentially bring back a more refined version of this concept next year.