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

The Bottom Line

This bill gives cities and counties the green light to create a brand-new tax on empty residential homes, provided local voters approve it. If your house sits unoccupied for a large chunk of the year and isn't a licensed short-term rental, you could be hit with an extra tax bill specifically designed to fund local affordable housing projects.

What This Bill Actually Does

Colorado is dealing with a serious affordable housing crunch, and some lawmakers believe part of the problem stems from homes sitting completely empty—think second homes, investment properties waiting for a flip, or seasonal mountain cabins. To nudge owners into renting or selling these properties, and to raise money for local housing initiatives, this bill creates a legal pathway for local governments to impose a targeted "empty house" tax.

The mechanics are straightforward but powerful. The bill allows counties and municipalities to levy either an excise tax (which could be a flat fee, or a charge based on square footage or the number of bedrooms) or an additional ad valorem property tax (based on the home's financial value) on "vacant residential properties." But there are strict guardrails. First, a city or council can't just mandate this behind closed doors; they have to get voter approval through a formal ballot measure, adhering strictly to Colorado's TABOR rules. Second, the revenue collected is legally ring-fenced. Every dime raised must be spent strictly on affordable, attainable, or workforce housing.

Interestingly, the state isn't setting a rigid, statewide definition of what makes a property "vacant." The local government gets to decide exactly how long a property must sit unoccupied before it triggers the penalty. However, the bill does explicitly carve out short-term rentals. If a property is licensed as a short-term rental (like an active Airbnb or Vrbo), it is entirely exempt from this specific vacancy tax. The bill also allows neighboring towns and counties to team up through intergovernmental agreements to form a Local Housing Tax Authority so they can jointly manage, assess, and collect the tax across their combined borders.

What It Means for You

If you own a primary residence and live in it full-time, you can breathe easy—this bill won't directly hit your wallet. The target here is strictly the secondary market: vacation homes, inherited houses sitting in extended probate, or investment properties you're holding onto but leaving completely dark. If you own a second property in a mountain town or a highly sought-after suburb, you'll need to pay very close attention to what your local city council or county commission decides. Because the state leaves the definition of "vacant" up to local governments, your property might be considered legally vacant after three months in one county, but six months in another.

The specific exclusion for short-term rentals is a massive detail for property owners. If you're currently letting a property sit empty because you don't want the hassle of long-term tenants, you might find yourself doing the math on whether it's cheaper to pay the new vacancy tax or to get the place officially licensed and listed on a short-term rental platform. This could drastically change the financial calculus for second-home owners who occasionally visit for ski season but leave the property dark for ten months out of the year.

For renters and working professionals struggling to buy a home, the flip side is that this could generate serious, dedicated funding for your community. By legally restricting the collected funds to affordable, attainable, or workforce housing, a local government could use this new tax revenue to subsidize large housing developments, offer down-payment assistance to locals, or build infrastructure that directly supports the local workforce. And remember, because this requires a formal ballot measure, you will ultimately have a say at the voting booth before any new tax takes effect in your specific area.

What It Means for Your Business

For real estate developers and general contractors, this bill represents a potential windfall of publicly funded contracts. If a town suddenly creates a robust new revenue stream strictly dedicated to workforce and affordable housing, they are going to need private partners to build those units. You could see an influx of requests for proposals (RFPs) from local governments and newly formed Local Housing Tax Authorities looking to deploy this fresh capital quickly to ease their local housing crunches.

If you're in the property management or short-term rental space, expect your phone to start ringing. Property owners facing a hefty new vacancy tax will actively look for legal ways to avoid it. Since licensed short-term rentals are specifically exempt under this bill, local property managers could see a massive surge in demand from out-of-town owners who suddenly want their empty homes actively managed and rented out. It creates a very strong financial incentive to move inventory from "sitting empty" to "generating income," which means more doors for management companies to operate.

For real estate investors and "fix and flip" operators, the administrative side is going to require careful navigation. If you operate across multiple jurisdictions, you will have to deal with a patchwork of local rules. A property you're gut-renovating in Denver might face completely different vacancy timelines and tax rates than one in Summit County. If your renovation takes eight months and the city defines a property as vacant after six months, you might accidentally trigger the tax. Furthermore, local governments will be building their own enforcement and collection systems from scratch, which almost certainly means new local compliance paperwork and reporting requirements for anyone managing or holding vacant real estate.

Follow the Money

According to the nonpartisan fiscal note, the financial impact at the state level is essentially zero—this is entirely a local play. The state's Department of Local Affairs will see a minimal bump in workload to update training materials, but it won't require new state funding. For local governments, however, this could become a massive new revenue engine. The exact dollar amounts are impossible to forecast right now because they depend entirely on which cities choose to pitch the tax to voters, what specific rates those voters approve, and how many properties actually meet the local definition of "vacant."

Implementing this won't be a free ride for cities and counties, either. The bill explicitly states that the Department of Revenue and county assessors are not required to help municipalities track and collect this tax. Local governments will have to spend their own administrative dollars to set up the infrastructure to identify vacant homes, mail out the tax bills, and enforce collections. The bill does allow municipalities to contract with county assessors to get property data, but the local governments will have to compensate the county for that extra work. Additionally, if property owners refuse to pay the new tax, towns can certify those delinquent charges to the county treasurer to be collected alongside regular property taxes—another administrative step that will require local coordination and funding.

Where This Bill Stands

HB26-1036 is currently In Committee. The latest official action came on 02/09/2026: House Committee on Finance Postpone Indefinitely.

That means the bill is still in the committee stage, and it is currently sitting in the Finance. To keep moving, it would need to clear committee and then survive floor votes in both chambers.