Unlocking Property Taxes for Housing: What SB26-001 Means for Your Business and Your Wallet

The Bottom Line

This new law gives local governments more power to tackle the housing crisis by using county property taxes and public land to build affordable and workforce housing. It also opens up a lucrative state housing tax credit so that any taxpayer can buy it, creating a new way for businesses and individuals to lower their tax bills while funding local housing projects.

What This Bill Actually Does

For years, Colorado counties have been tied up by a web of statutory restrictions on how they can spend certain funds and manage public land. Specifically, counties were legally prohibited from taking ad valorem taxes—the property taxes that make up the bulk of a county's general fund—and funneling that money directly to housing authorities. This bill completely removes that prohibition. County commissioners now have the green light to appropriate general fund property tax dollars to support workforce housing, local housing programs, and multijurisdictional housing authorities.

The law also changes how local governments handle their physical assets. Previously, selling off municipal or county-owned buildings and land involved a rigid set of rules designed for general government operations. Now, local governments can bypass some of those hurdles to sell or dispose of public property (excluding parks) specifically if the land will be used to develop affordable housing or housing identified in a local needs assessment. To back this up, the bill grants municipalities the authority to enter into long-term lease agreements—up to 30 years—for affordable housing developments.

Finally, the bill fundamentally changes the mechanics of the middle-income housing tax credit. Under current law, a government entity developing a project can transfer its allocated tax credits to a private taxpayer, but only if that taxpayer has an actual ownership stake in the housing development. This severely limited the pool of potential investors. Starting January 1, 2027, the bill allows these credits to be transferred to any taxpayer subject to state income tax. You no longer need to be an owner of the building to buy the tax credit, effectively creating an open secondary market for these credits.

What It Means for You

The most visible change for residents will be in how your local community physically develops and where your tax dollars go. Because county commissioners now have the authority to use general fund property taxes for workforce housing, you might see your local government taking a much more active, financially backed role in building homes for teachers, nurses, and first responders. While this doesn't automatically raise your taxes, it does mean your county can legally shift existing funds away from other priorities to get housing projects off the ground.

You should also keep an eye on underutilized public property in your neighborhood. Because the state has removed red tape surrounding the sale of government buildings and land, that vacant county lot or aging municipal building down the street could soon be sold to a private developer and converted into townhomes or an apartment complex. The only catch is that the property must be used for affordable housing or housing specifically identified in your local government's housing needs assessment. Parks are explicitly protected and cannot be sold off for this purpose.

On a personal financial level, the changes to the middle-income housing tax credit could offer a unique tax strategy starting in 2027. Because the law removes the requirement that you must have an ownership stake in a housing project to claim a transferred credit, regular high-earning professionals or local investors could theoretically purchase these tax credits from a housing authority—often at a discount—to offset their own Colorado state income tax liability. If you usually face a hefty state tax bill, this creates a brand new avenue to reduce what you owe while keeping your dollars local.

What It Means for Your Business

If you are in real estate development, architecture, or construction, this legislation is a major unlock for public-private partnerships. First, the law creates a specific sales tax exemption for construction and building materials used by contractors and subcontractors on county workforce housing projects. If you are bidding on these jobs, you can now strip the sales tax off your material costs, making your bids more competitive and the projects more financially viable. Furthermore, municipalities can now legally commit to long-term lease agreements (up to 30 years) for affordable housing, giving developers the long-term site control needed to secure financing.

The most lucrative shift for the broader business community revolves around the middle-income housing tax credit. Before this law, your company could only buy a housing tax credit from a local government if you went through the complex legal and financial brain damage of becoming a part-owner of the housing development itself. Effective January 1, 2027, any business subject to Colorado income tax can become a "transferee." This means your corporation or firm can simply buy tax credits directly from a local housing authority to wipe out a chunk of your state tax liability. Local governments get the cash they need to build, and your business gets a tax break without having to actually get into the real estate business.

However, you need to consult your CPA about the recapture rules before diving in. The bill states that if the local government's "qualified basis" in the project drops—meaning they fail to maintain the property's affordable housing compliance standards—the Department of Revenue can recapture the tax credit. If that happens, your business (as the transferee) is on the hook to increase your state income tax liability to pay it back. You will want rock-solid indemnification clauses in any contract where you purchase these credits to protect your firm if the housing authority drops the ball.

Follow the Money

According to the nonpartisan fiscal note, this bill costs the state effectively nothing, projecting a $0 impact on state revenue and expenditures. While the legislation opens up the middle-income housing tax credit to a vastly larger pool of taxpayers, it does not increase the total dollar amount of credits that the Colorado Housing and Finance Authority (CHFA) is allowed to allocate. It simply changes who can claim the credits that are already budgeted.

The real financial impact will be felt at the local level. The bill grants counties the discretionary authority to redirect existing ad valorem (property) tax revenues toward housing authorities and workforce housing. This does not mandate a tax increase, but it allows local officials to slice the existing financial pie differently. Additionally, the expanded tax credit market is expected to drive a surge of private investment into local government housing projects, as housing authorities can now monetize their tax credits much faster by selling them to any willing corporate or individual taxpayer in Colorado.

Where This Bill Stands

SB26-001 is currently Signed Into Law. The latest official action came on 03/25/2026: Governor Signed.

That means the legislative process is complete and the bill is now law. The remaining questions are about implementation timing and how agencies, businesses, or local governments respond.