Why We Track the Capitols
As housing policy experts, our teams at ECOnorthwest track legislative sessions across the West to help our clients navigate rapidly shifting regulatory and funding landscapes. In Colorado, where state action to create new funding and financing tools intersects with increasing state expectations around local planning for housing and constrained state budget decisions, understanding these legislative pivots is essential to unlocking housing production. The 2026 session policy updates below outline the new tools, shifts, and funding mechanisms that will shape our urban planning and economic development work in the coming years.
2026 Colorado Legislative Update
The 2026 session for the Colorado General Assembly wrapped up mid-May.
Solving the state budget captured the time and attention of many policymakers. If they weren’t working directly on budget solutions, they had to be aware that any bill requiring state funding would slow down in an appropriations committee, even if they achieved early momentum. With a contentious budget to negotiate, that meant the calendar was working against a whole category of bills.
Legislators were still able to find ways to fund new policy directions to try to solve Colorado’s housing affordability crisis or equip others with new tools and options.
- HB26-1065 will create a new state sales tax increment mechanism to fund transit investments in designated areas for up to three projects at no more than $75 million per year. The bill will also create an affordable housing tax credit to go with those areas for $50 million total from 2027 to 2033. Both mechanisms rely on diversions of revenue rather than appropriations from the General Fund, making them more durable as the legislature faces TABOR spending caps in future budgets.
- HB26-1202 will direct state staff to create a strategy around homelessness, allow for local governments to create a multijurisdictional homelessness response authority that can bring sales and use tax measures to the ballot for voter consideration, and allow a portion of real estate conveyance document filing fees to be used for affordable housing.
- Among other provisions, SB26-001 will allow counties that only have powers as outlined in state statute to use their property tax revenue on housing. The bill will also allow governments to transfer a middle-income housing tax credit to an entity with an income tax burden.
In recent sessions, state legislators built a new framework around local housing planning. This session, they entertained limited changes to local planning, zoning, and building authority.
- The HOME (Housing Options Made Easier) Act, HB26-1001, was the successor to last year’s failed YIGBY or Yes in God’s Backyard” Bill. It will allow certain qualifying organizations to build more housing under certain conditions, regardless of whether the residential zoning is in place to allow it.
- Competing lot size (HB26-1114) and lot splitting (HB26-1308) bills would have enabled more home production by allowing smaller lots. Both passed in the House but did not advance out of committee in the Senate.
Colorado voters created the State Affordable Housing Fund by passing Proposition 123 in 2022, dedicating about $300 million in state income tax annually.
- HB26-1360 will transfer $130 million out of the fund into the General Fund to help with the budget, formalizing a proposal made by Governor Polis after the special session in August 2025.
- HB26-1313 will adjust the local government commitment formula under which communities opted in so that projects in their jurisdiction would be eligible for funding. Where previous commitments were tied to a percentage increase over existing regulated and naturally occurring affordable housing, the statute now recognizes the role of job growth and offers alternative ways to demonstrate good faith effort.