Could New Local Taxes Fix Colorado's Housing Crisis?

The Bottom Line

This bill gives local housing authorities the power to ask voters for their own dedicated sales or property taxes to fund affordable housing projects. It also lets urban renewal authorities require real estate developers to personally cover any funding shortfalls on public-private developments. Bottom line: expect to see new housing tax questions on your local ballot and major shifts in how real estate projects are funded.

What This Bill Actually Does

Colorado is currently short about 106,000 housing units, a deficit that has driven rents and home prices out of reach for many working families. Right now, local housing authorities—the public entities tasked with building and managing affordable housing—have to piece together complex financing packages using federal tax credits, state grants, and municipal loans. HB26-1206 changes the game by treating housing authorities more like school or fire districts, allowing them to directly levy their own taxes to fund development.

They can't just impose these taxes unilaterally, however. First, the local city council or county commission has to pass a resolution confirming the tax will fairly distribute costs and won't place an "undue burden" on any specific group. Then, the question goes to the voters. If approved, the bill caps a new sales and use tax at 1% and a new property tax at 5 mills. All of that money goes straight into the housing authority's fund. To help get big projects off the ground faster, the bill also allows county housing authorities to issue general obligation bonds backed by these new tax revenues.

There is another major provision tucked into this bill targeting Urban Renewal Authorities (URAs). When URAs partner with private developers to revitalize blighted areas, they often use Tax Increment Financing (TIF)—borrowing money based on the assumption that the new development will generate higher future tax revenues. This bill allows URAs to require developers to sign a shortfall guaranty contract. If the project underperforms and the new tax revenues aren't enough to cover the URA's debt, the developer is legally on the hook to pay the difference directly. Crucially, this contract acts as a permanent lien on the property, carrying the exact same priority as a government tax lien.

What It Means for You

For the average Coloradan, the most visible impact of this bill will be at the ballot box. Starting in January 2027, you should expect to see new local ballot measures asking you to approve funding for your local housing authority. Because the bill allows for either a 1% sales tax or a 5 mill property tax, the exact hit to your wallet will depend on what your specific city or county decides to propose.

To put those limits in perspective:

• A 1% sales tax means paying an extra penny on every dollar spent on taxable goods locally.
• A 5 mill property tax on a home valued at $500,000 (using Colorado's current residential assessment rates) would add roughly $170 to your annual property tax bill.

Beyond taxes, the ultimate goal is to visibly change your local housing market. If your community approves these measures, housing authorities will finally have a predictable, dedicated revenue stream to aggressively build homes for teachers, nurses, and working families who are currently priced out of the market. However, you'll want to pay close attention to the specific ballot language when these measures pop up. Thanks to the Taxpayer's Bill of Rights (TABOR), any ballot measure must clearly state exactly how much money the housing authority plans to collect and precisely how they intend to spend it. If you rent, keep an eye on how new property taxes might be passed down through rent increases, but also weigh that against the potential for an expanded supply of affordable rental units in your neighborhood.

What It Means for Your Business

If you own a retail business, a restaurant, or sell taxable goods, this bill means you might need to update your point-of-sale systems and accounting practices starting in 2027. If your local voters approve a housing authority sales tax, you'll be responsible for collecting and remitting an extra tax of up to 1% on transactions. The bill requires the housing authority to designate a liaison to work with the Department of Revenue to help businesses identify exactly what needs to be collected, but it's still an extra layer of local tax compliance to keep on your radar.

For real estate developers, general contractors, and commercial lenders, this bill is a double-edged sword. On one hand, newly funded housing authorities will likely become major clients. With the ability to issue bonds and collect reliable tax revenue, they will have the capital to ink substantial contracts for new affordable housing developments. If you build multi-family housing or handle large-scale site work, this could unlock a massive, publicly funded project pipeline in your own backyard.

The catch for developers involves the new shortfall guaranty contracts for urban renewal projects. If you partner with a URA using Tax Increment Financing, the city can now ask you to personally guarantee the debt if the property doesn't generate the expected tax revenue.

• This guaranty creates a perpetual lien on your property, equal in priority to a property tax lien.
• It has priority over any existing mortgage or other encumbrances—something your commercial lender will care deeply about.
• It "runs with the land," meaning if you sell the project, the new buyer inherits that financial risk.

If you work in urban renewal or commercial real estate finance, you'll need to closely review your pro formas and loop in your legal counsel before signing these agreements, as the financial risk of a struggling TIF project now lands squarely on the developer's balance sheet.

Follow the Money

At the state level, the fiscal impact of this bill is nearly zero. The Department of Revenue will experience a minor workload increase to update their tax collection systems and administer the new local sales and use taxes, but this can be absorbed within their existing budget. No new state appropriations are required to make this work.

The real financial action happens at the local level. Municipalities and counties will face initial administrative costs to run the local elections required to get these taxes approved. If voters give the green light, local housing authorities could see a massive influx of conditional revenue—potentially millions of dollars annually, depending on the size of the local tax base. County housing authorities will also take on new long-term debt service costs if they choose to issue bonds against these new revenues. Ultimately, this bill is a shift toward decentralizing affordable housing funding, placing the taxing power (and the financial burden) directly into the hands of local communities.

Where This Bill Stands

HB26-1206 is currently In Committee. The latest official action came on 05/13/2026: House Consideration of First Conference Committee Report result was to Other.

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.