Building Affordable Rentals? You Might Finally Get a Property Tax Break.

What This Bill Actually Does

Under current Colorado law (updated back in 2011 and again in 2023), the state gives a pretty sweet deal to community land trusts and nonprofit housing developers: if they buy land to build affordable homes for people to buy, that property is exempt from property taxes. The state basically says, 'Since you are doing a charitable public good, we won't tax the dirt while you build.' But there has been a glaring omission—that exemption hasn't applied to nonprofits building affordable rentals. If a nonprofit wanted to build an apartment complex for low-income families to lease, they were still on the hook for full property taxes.

House Bill 26-1066 changes that equation. It officially expands the definition of 'charitable purposes' in the state constitution's tax code (specifically Sections 39-3-113.5 and 39-3-127.7 of the Colorado Revised Statutes) to include properties developed for low-income residential rental property. This means if a 501(c)(3) nonprofit buys a vacant lot with the specific intent to build or rehab an apartment building for low-income renters, they won't have to pay property taxes on that property while they get the project together, or while they lease the land long-term to an affordable operator.

To qualify, the renters have to fall into the low-income applicant bucket. In plain math, that means the household must make 100% or less of the Area Median Income (AMI) for standard counties, or 120% of the AMI if the project is in a rural resort county where the cost of living is heavily skewed. The bill also allows the state property tax administrator to look at 'indicators of intent'—like a formal board resolution—to grant the exemption even before shovels hit the dirt. Essentially, the state wants to put rental developers on the exact same financial playing field as for-sale developers to tackle the ongoing housing crisis.

What It Means for You

If you are an everyday Coloradan feeling the squeeze of the housing market, this bill is a direct attempt to get more affordable rental units built in your neighborhood. Right now, high property taxes on vacant land or developmental properties add massive overhead for nonprofits trying to build apartments. When holding costs are too high, projects stall. By slashing those property tax burdens, HB26-1066 aims to make it financially viable for charitable organizations to actually finish these projects and get them on the market.

This doesn't mean your personal property taxes are going down. In fact, there is a slight ripple effect on local tax bases when property is pulled off the tax rolls to become tax-exempt. But if you, your adult kids, or someone you know is looking for affordable rent, this legislation removes a major roadblock. Previously, state tax incentives heavily favored the Low-Income Housing Tax Credit (LIHTC) and for-sale housing, leaving a gap for affordable rentals. Now, community land trusts can hold land long-term and lease it to affordable rental operators without getting penalized by the local assessor.

Here is what you can do right now:

• Watch your local zoning board: More nonprofit developers might start scoping out vacant lots in your area if this tax burden is lifted. Keep an eye on local planning and zoning meetings to see what might be coming to your neighborhood.
• Contact the House Finance Committee: If you have strong feelings about affordable housing incentives—whether you support them or worry about the impact on local tax revenues—shoot an email to the committee members before they schedule their first hearing.

What It Means for Your Business

For real estate developers, general contractors, and property managers, this is a major green light for a specific slice of the market. If you partner with 501(c)(3) nonprofits, community land trusts, or nonprofit affordable rental developers, expect to see your project pipelines open up. By exempting the property tax phase of development—which the state allows for up to 10 years or until the property no longer qualifies—these organizations will have more capital to actually pay for construction, materials, and labor. Your bids on these projects just became much more viable because the developer's pro forma just got a lot healthier.

There is a critical compliance piece to watch, though. The state isn't handing out free passes without strings attached. If a nonprofit claims this exemption and then sells, donates, or changes the lease so it is no longer an affordable rental property, a strict clawback provision kicks in. The developer becomes legally liable for all the back property taxes they skipped during the years the property didn't strictly qualify. Assessors are going to be watching this closely. You will also need to submit the land lease to the county assessor within 25 days of signing it to get the exemption in the first place.

Action items for business owners THIS WEEK:

• Call your nonprofit partners: If you regularly bid on affordable housing contracts, give your nonprofit clients a heads-up. This bill takes effect January 1, 2027, which means they should start factoring this tax exemption into their land acquisition strategies right now.
• Review your joint venture structures: Ensure your partnerships strictly meet the 501(c)(3) requirements outlined in the bill. For-profit developers only benefit from this if they are contracted by or leasing from the qualifying nonprofit entity holding the land.

Follow the Money

Here is the part that matters for the state ledger: this bill shifts money around in a classic 'save here, pay there' maneuver. At the state level, the Division of Property Taxation will actually make a tiny bit of money—about $10,600 in FY 2026-27 and $8,800 in FY 2027-28—from the $200 initial application fees and $110 annual review fees that nonprofits have to pay to prove they qualify for the exemption.

But the real cost hits the state's School Finance budget. When local property taxes drop because land becomes tax-exempt, the state is legally required to backfill funding to public schools to make up the difference. The fiscal note estimates that pulling roughly 53 eligible properties off the tax rolls will require the state to cough up an estimated $432,100 in FY 2027-28 to make schools whole.

For local governments—counties, municipalities, and special districts—this is a net loss of tax revenue. The state estimates that local governments will lose roughly $1.6 million in property tax revenue in 2027 alone. Even after the state's school backfill, local districts are looking at a net loss of $1.2 million. Front Range communities (like Jefferson and Larimer counties), Grand Junction, and Colorado Springs are expected to take the biggest local revenue hits, as that is where most of these affordable rental projects are currently concentrated.

Where This Bill Stands

HB26-1066 was introduced in the House on January 21, 2026, by Representatives Rebekah Stewart and Katie Stewart, along with Senator Matt Ball as the Senate sponsor. It has been assigned to the House Finance Committee, which is the standard proving ground for anything that messes with tax revenues or the state constitution's tax code.

Right now, we are waiting for the committee to calendar the bill for its first hearing. Because affordable housing is a massive, bipartisan priority at the Capitol right now—but local property tax revenues are fiercely guarded by county commissioners and mayors—expect some very lively debate in committee over the local revenue hit. However, since the state's direct financial obligation is relatively low (under half a million dollars), this bill has a very solid chance of making it through the legislative gauntlet. Keep an eye out for the committee schedule over the next few weeks. If passed, the law officially takes effect on January 1, 2027.