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

The Bottom Line

Right now, nonprofits get a property tax break if they build affordable homes to sell, but not if they build affordable apartments to rent. This bill levels the playing field by offering the exact same tax exemption for low-income rental developments. It's a move designed to incentivize more affordable apartment projects across Colorado, though it means a slight dip in local property tax collections.

What This Bill Actually Does

In Colorado, we already have a specialized tool to help lower the cost of housing: a property tax exemption for nonprofits, community land trusts, and affordable housing developers. Under current law, if a recognized 501(c)(3) buys land and builds affordable homes to sell to low-income buyers, they don't have to pay property taxes on that land while they develop it or hold it. But there's a major gap in that policy—historically, this exemption has only applied to properties built for homeownership. That leaves organizations building affordable rental units out in the cold, paying commercial property taxes that eat into their ability to keep rents low.

This legislation erases that distinction. It expands the existing tax exemption to include real property intended for low-income residential rental property. This means if a nonprofit housing provider acquires a vacant lot to build an affordable apartment complex, or buys an existing building to rehabilitate into low-income rentals, that property is deemed to be used for "strictly charitable purposes" and becomes exempt from property taxation. To qualify for the exemption before construction even finishes, the organization can show indicators of intent, such as a board resolution approving the purchase of the property specifically for land-banking or future rental development.

To keep everyone honest, the bill outlines strict definitions. The property must be rented to a low-income applicant, which the state defines as a household making at or below 100% of the Area Median Income (AMI), or up to 120% AMI if the project is located in a rural resort county. Organizations claiming the exemption must submit their long-term land leases to the county assessor within 25 days of execution and file annual reports. If a nonprofit ever sells or converts the property so that it's no longer used for affordable housing, a clawback provision kicks in, forcing them to pay back all the property taxes they skipped during the exemption period.

What It Means for You

If you’re a renter feeling the squeeze of Colorado’s unforgiving housing market, this bill is designed to directly increase the supply of housing you can actually afford. By eliminating property taxes for nonprofits that build and manage rental units, the state is significantly lowering the overhead costs for these projects. That makes it financially viable for community organizations to greenlight apartment complexes that might otherwise be scrapped due to high holding costs. More viable projects mean more units hitting the market, which is one of the only surefire ways to stabilize rent prices.

The real-world impact here comes down to how the state defines a low-income applicant through Area Median Income (AMI). Because the bill caps eligibility at 100% AMI for most of the state (and 120% in expensive resort towns like Aspen or Breckenridge), we aren't just talking about deep-poverty, heavily subsidized housing. We are talking about workforce housing—apartments for teachers, nurses, construction workers, and service industry professionals who are currently priced out of the communities where they work. If you fall into that middle-income bracket, you could see more targeted rental options opening up in your area after the targeted effective date of January 1, 2027.

For the everyday homeowner who isn't renting, the impact is a bit more indirect but still worth understanding. Property tax exemptions mean slightly less revenue flowing into your local county coffers. While the state steps in to cover the gap for K-12 schools, your local fire departments, libraries, and special districts might see a marginal dip in their annual budgets. However, housing advocates argue that the broader community benefit—having a stable, locally housed workforce that doesn't have to commute two hours to pour coffee or teach second grade—far outweighs the fraction of a percent drop in local tax collections.

What It Means for Your Business

If you operate a nonprofit affordable housing developer or a community land trust, this legislation fundamentally changes your project math. Up until now, state tax incentives heavily favored building for-sale units. By extending the property tax exemption to rental developments, you can now acquire land, build apartments, and manage long-term leases without the heavy drag of commercial property taxes eating into your operating budget. This allows you to diversify your portfolio to meet the massive demand for rental units without suffering a tax penalty for choosing to lease rather than sell.

For general contractors, architects, and trades businesses, this policy shift translates to a potential bump in your project pipelines. When development and holding costs drop for nonprofits, more projects get off the whiteboard and into the ground. Expect to see an uptick in requests for proposals (RFPs) from local housing authorities and 501(c)(3) organizations looking to build multi-family residential rentals. Partnering with these organizations could provide a steady stream of recession-resistant contract work, especially in metro areas like Denver, Jefferson, and Larimer counties, where land costs are otherwise a massive barrier to entry.

There is a strict compliance side you need to be prepared for, however. To secure and maintain the exemption, your properties must be meticulously tracked. You'll need to ensure your land leases are submitted to the local county assessor within exactly 25 days of execution. You will also be on the hook for an annual review fee (between $110 and $300, depending on if you file before or after April 15) to prove the units are still restricted to qualifying low-income renters. Most importantly, beware the clawback provision: if you eventually sell, donate, or convert the property so it no longer qualifies as affordable rentals, your organization will be held liable for all the back property taxes you avoided during the years you claimed the exemption.

Follow the Money

Expanding property tax exemptions always creates a ripple effect in public budgets. According to the state's fiscal analysts, this bill will reduce local government property tax revenue by roughly $1.6 million starting in property tax year 2027. Because Colorado law requires the state to backfill funding for K-12 schools when local property taxes drop, the state will have to spend an estimated $432,100 out of the General Fund (or State Education Fund) to keep school districts whole.

Even with the state covering the schools' share, local governments—like counties, municipalities, and special districts—will still absorb a net revenue loss of about $1.2 million. The state will collect a tiny bit of cash (around $10,600 in the first year) from the initial $200 application fees and ongoing annual reporting fees paid by the nonprofits to the Division of Property Taxation. Ultimately, the primary financial story here is a deliberate trade-off: local governments are giving up a slice of property tax revenue to subsidize the creation of lower-income rental housing.

Where This Bill Stands

HB26-1066 is currently In Committee. The latest official action came on 05/14/2026: House Committee on Appropriations Lay Over Unamended - Amendment(s) Failed.

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.