Affordable Home Ownership Program

Second Regular Session
Seventy-fifth General Assembly
STATE OF COLORADO
REENGROSSED
This Version Includes All Amendments
Adopted in the House of Introduction
LLS NO. 26-0622.01 Jed Franklin x5484 SENATE BILL 26-040
Senate Committees House Committees
Local Government & Housing
A BILL FOR AN ACT
CONCERNING THE AFFORDABLE HOME OWNERSHIP PROGRAM.101
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov.)
The division of housing in the department of local affairs
(division) administers an affordable home ownership program (program)
that makes grants to nonprofit organizations, local governments, tribal
governments, community development financial institutions, and
community land trusts (eligible organizations) to support affordable home
ownership, including the development of residential housing units that are
described in an eligible organization's funding request (project). Current
law specifies that only a household with an income less than or equal to
SENATE
3rd Reading Unamended
March 31, 2026
SENATE
Amended 2nd Reading
March 30, 2026
SENATE SPONSORSHIP
Simpson and Amabile, Ball, Benavidez, Bridges, Catlin, Coleman, Cutter, Daugherty,
Exum, Frizell, Gonzales J., Jodeh, Kipp, Kirkmeyer, Kolker, Lindstedt, Marchman, Mullica,
Pelton R., Roberts, Snyder, Wallace, Weissman
HOUSE SPONSORSHIP
Stewart K. and Smith,
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing law.
Dashes through the words or numbers indicate deletions from existing law.
120% of the area median income is eligible for assistance through the
program, but it is unclear whether this requirement applies to housing
units constructed by an eligible organization through one of its projects.
The bill clarifies that only a household with an income less than or equal
to 120% of the statewide area median income is eligible for housing
constructed by an eligible organization through one of its projects.
In addition, the program requires that housing offered through the
program, including all taxes and fees, costs not more than 35% of a
household's monthly income. The bill allows the division to modify this
percentage as applied to a residential unit constructed by an eligible
organization as part of an affordable housing project pursuant to a waiver
process initiated by an eligible organization if a substantial need for
housing the project's target population exists, the unit has been adequately
marketed to eligible buyers for purchase for at least 6 months after the
issuance of a certificate of occupancy, and the unit has not been
purchased by an eligible buyer within that 6-month period. In lieu of this
process, the division may approve an eligible organization's process for
determining when to exceed the maximum monthly household income for
a unit funded by the program.
The division may issue a waiver with a different housing cost limit
from the limit requested by the eligible organization if a different limit
would better serve needs identified in a housing assessment and the
project remains financially feasible in the division's discretion.
For an eligible organization, the bill specifies that the division is
required to accept a local affordability mechanism in lieu of any
state-prescribed use covenant if the division determines that the local
affordability mechanism allows the state to maintain its obligations for
compliance and compliance monitoring and is substantially equivalent to
or more protective of long-term affordability and primary occupancy than
a state-prescribed use covenant or the local affordability mechanism is
necessary to access financing for disproportionately impacted
communities.
The division may allow an eligible organization to rent residential
units constructed as part of the project. On or before December 31, 2026,
the division is required to issue guidance for when units within a project
may be rented.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. In Colorado Revised Statutes, 29-32-103, amend2
(1)(a) as follows:3
29-32-103. Transfers of money - permitted uses of the fund -4
040-2-
continuous appropriation.1
(1) (a) The affordable housing support fund is hereby created in2
the state treasury. The support fund consists of money deposited into it3
under subsections (1)(b)(II) and (3) of this section. The division of4
housing shall administer the support fund and expend the money in the5
support fund only for the purposes set forth in section 29-32-104 (3)(a)6
and (3)(b). The division of local government in the department of local7
affairs created in section 24-32-103 shall expend the money in the support8
fund only for the purposes set forth in section 29-32-104 (3)(c). Except9
as otherwise provided in subsection (1)(b) of this section, all money not10
expended or encumbered, and all interest earned on the investment or11
deposit of money in th e support fund, remains in the support fund and12
does not revert to the general fund or any other fund at the end of any13
fiscal year. Except as otherwise provided in subsections (1)(b) and (1)(c)14
of this section and section 29-32-104 (3)(b)(II), all money transferred to15
the support fund pursuant to subsection (3) of this section is continuously16
appropriated to the division of housing for the purposes set forth in17
section 29-32-104 (3)(a) and (3)(b) and, to the extent allocated by the18
division of housing, to the division of local government for the purposes19
set forth in section 29-32-104 (3)(c).20
SECTION 2. In Colorado Revised Statutes, 29-32-104, amend21
(1)(a) and (3)(a) as follows:22
29-32-104. Permissible expenditures - affordable housing23
programs - report - definitions.24
(1) The office shall contract with the administrator. The office25
may select an administrator without a competitive procurement process26
but shall announce the contract opening publicly and select the27
040-3-
administrator in a meeting that is open to the public, no less than1
seventy-two hours after notice of such meeting is publicly available. No2
single contract may exceed five years in duration. Upon the expiration of3
any contract term, the office may renew the contract with the same4
administrator or may select another administrator. The administrator5
selected by the office shall expend the money transferred to the financing6
fund in section 29-32-103 (2) that the administrator receives from the7
office to support the following programs only:8
(a) A land banking program to be administered by the9
administrator. The program shall provide grants to local governments and10
tribal governments and loans to non-profit organizations with a11
demonstrated history of providing affordable housing to acquire and12
preserve land for the development of affordable housing. For purposes of13
this subsection (1)(a), "affordable housing" means rental housing that has14
a designated imputed income limit by household size not to exceed sixty15
percent of the area median income as established by the United States16
Department of Housing and Urban Development and published by the17
department or a statewide political subdivision or authority on housing,18
and regulated units in the project must have a gross rent limit that does19
not exceed thirty percent of the imputed income limitation applicable to20
the units and for-sale housing that could be purchased by a household21
with an annual income of at or below one hundred TWENTY percent of the22
area median income. Mixed use development is an allowable use of land23
purchased under this program if the predominant use of the land is24
affordable housing. Loans made by the program shall be forgiven if land25
acquired with the assistance of the program is properly zoned with an26
active plan for the development of affordable housing within 5 years of27
040-4-
date the loan is made and if the development is permitted and funded1
within 10 years. The lender and borrower may establish additional terms2
if needed. If land acquired with the assistance of the program is not3
developed within the timeline above, the loan must be repaid, with4
interest, as soon as practical, but not more than six months after5
expiration of said timeline, unless the office agrees to extend all or a6
portion of the timeline in its reasonable discretion. Land acquired with the7
assistance of the program that is not developed within the timeline above8
may be used by the owner for any purpose upon payment of the loan with9
interest or, in exchange for a waiver of interest, conveyed to a state10
agency or other entity for the development of affordable housing with the11
approval of the administrator. All principal and interest payments on12
loans made under this paragraph (a) SUBSECTION (1)(a) shall be paid to13
the administrator and used by the administrator for the purposes set forth14
in this subsection (1). As determined by the administrator, a minimum of15
15% and a maximum of 25% of monies transferred to the financing fund16
annually may be used for the program. The administrator may utilize the17
funds it receives from the office for the program to pay for the costs of18
administering the program; except that the total combined annual19
administrative expenditures of money from the financing fund by the20
administrator and the office shall not exceed two percent of the funds the21
administrator receives from the office for the program for the state fiscal22
year.23
(3) The division of housing and the division of local government24
shall expend the money transferred to the support fund in section25
29-32-103 (1) to support the following programs only:26
(a) (I) An affordable home ownership program administered by27
040-5-
the division or one or more contractors of the division. The program shall1
offer home ownership down-payment assistance to first-time homebuyers2
and shall prioritize assistance, to the extent practicable, to first-generation3
homebuyers. The assistance shall be provided to households with income4
less than or equal to one hundred twenty percent of the area median5
income of households of that size in the territory or jurisdiction of local6
government or tribal government in which the housing is located, as7
calculated and published for a given year by the United States department8
of housing and urban development, and the cost of the monthly housing9
payment toward mortgage principal, mortgage interest, property taxes,10
mortgage and homeowner's insurance, homeowner association fees, land11
lease fees, and metropolitan district fees shall MUST not cost more than12
thirty-five percent of monthly household income. INCOME; EXCEPT THAT13
THE COST OF THE MONTHLY HOUSING PAYMENT MUST NOT BE CONSIDERED14
WHEN PROVIDING HOMEOWNERS WITH ASSISTANCE FOR HOME15
REHABILITATION. The program shall also make grants to nonprofit16
organizations, local governments, tribal governments, community17
development financial institutions, and community land trusts to support18
affordable home ownership FOR HOUSEHOLDS WITH INCOME LESS THAN OR19
EQUAL TO EITHER ONE HUNDRED TWENTY PERCENT OF THE AREA MEDIAN20
INCOME OF HOUSEHOLDS OF THAT SIZE IN THE TERRITORY OR JURISDICTION21
OF A LOCAL GOVERNMENT OR TRIBAL GOVERNMENT IN WHICH THE22
HOUSEHOLDS ARE LOCATED, OR ONE HUNDRED TWENTY PERCENT OF THE23
STATEWIDE AREA MEDIAN INCOME OF HOUSEHOLDS OF THAT SIZE , AS24
CALCULATED AND PUBLISHED FOR A GIVEN YEAR BY THE UNITED STATES25
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, AND THE COST OF26
THE MONTHLY HOUSING PAYMENT TOWARD MORTGAGE PRINCIPAL ,27
040-6-
MORTGAGE INTEREST, PROPERTY TAXES, MORTGAGE AND HOMEOWNER'S1
INSURANCE, HOMEOWNERS' ASSOCIATION FEES , LAND LEASE FEES , AND2
METROPOLITAN DISTRICT FEES MUST NOT COST MORE THAN THIRTY-FIVE3
PERCENT OF MONTHLY HOUSEHOLD INCOME. THE AREA MEDIAN INCOME4
ELECTION DESCRIBED IN THIS SUBSECTION (3)(a)(I) MUST BE MADE AT THE5
BEGINNING OF THE ASSISTANCE AGREEMENT AND MUST NOT BE REVOKED6
OR CHANGED UNTIL THE END OF THE ASSISTANCE AGREEMENT . The7
program shall also make grants or loans to groups or associations of8
mobile home owners and their assignees to assist them with the purchase9
of a mobile home park pursuant to section 38-12-217. Said grants and10
loans shall be used to support affordable home ownership for households11
with income less than or equal to one hundred TWENTY percent of the area12
median income of households of that size in the territory or jurisdiction13
of local government or tribal government in which the households are14
located, as calculated and published for a given year by the United States15
department of housing and urban development, and the cost of the16
monthly housing payment toward mortgage principal, mortgage interest,17
property taxes, mortgage and homeowner's insurance, homeowner18
association fees, land lease fees, and metropolitan district fees shall MUST19
not cost more than thirty-five percent of monthly household income. All20
principal and interest payments on loans made under this subsection21
(3)(a) shall be paid to the division and used by the division for the22
purposes set forth in this subsection (3). Up to fifty percent of money23
transferred to the support fund annually may be used for the program. The24
division shall determine how much of the available funding shall be25
allocated to each aspect of the program. The division may utilize up to26
five percent of the funds it receives from the fund for the program to pay27
040-7-
for the direct and indirect costs of administering the program.1
(II) FOR PROJECTS UNDERTAKEN BY AN ELIGIBLE ORGANIZATION,2
AS DEFINED IN SECTION 29-32-105.7 (2)(a), THE DIVISION MAY INCREASE3
OR WAIVE THE MAXIMUM PERCENTAGE OF INCOME THAT A HOUSEHOLD4
MAY ALLOCATE FOR MONTHLY HOUSING COSTS OTHERWISE REQUIRED BY5
SUBSECTION (3)(a)(I) OF THIS SECTION PURSUANT TO THE PROCESS SET6
FORTH IN SECTION 29-32-105.7. IF A WAIVER IS GRANTED, THE DIVISION IS7
AUTHORIZED TO AMEND EXISTING CONTRACTS ENTERED INTO AFTER JULY8
1, 2026, EVEN IF THE PROJECT WAS ORIGINALLY AWARDED UNDER A9
SOLICITATION ISSUED PRIOR TO JULY 1, 2026.10
SECTION 3. In Colorado Revised Statutes, add 29-32-105.7 as11
follows:12
29-32-105.7. Home ownership program flexibility - waiver -13
affordability mechanisms - legislative declaration - definitions.14
(1) (a) THE GENERAL ASSEMBLY FINDS AND DECLARES THAT:15
(I) P ROPOSITION 123, APPROVED BY A MAJORITY OF ELIGIBLE16
ELECTORS DURING THE NOVEMBER 2022 GENERAL ELECTION , WAS17
INTENDED TO REACH ALL COMMUNITIES IN THE STATE;18
(II) AFFORDABLE HOME OWNERSHIP OPPORTUNITIES ARE LIMITED19
BY CHANGING ECONOMIC CONDITIONS THROUGHOUT THE STATE;20
(III) T HE FUNDING PROVIDED PURSUANT TO PROPOSITION 12321
SHOULD BE ALLOCATED TO BUILDING HOUSING THAT WOULD NOT22
OTHERWISE BE BUILT WITHOUT FINANCIAL ASSISTANCE; AND23
(IV) STATUTORY RESTRICTIONS ON ELIGIBILITY FOR ASSISTANCE24
USING PROPOSITION 123 FUNDING , INCLUDING LIMITATIONS ON25
HOUSEHOLD INCOME AND MAXIMUM ALLOWABLE MONTHLY HOUSING26
COSTS, COUPLED WITH INCREASED INTEREST RATES , LAND COSTS , AND27
040-8-
BUILDING MATERIAL COSTS, ARE PREVENTING THE PROPOSITION 123 HOME1
OWNERSHIP PROGRAM FROM BEING USED IN SOME COMMUNITIES.2
(b) THE GENERAL ASSEMBLY FURTHER FINDS AND DECLARES THAT3
IT IS THE GENERAL ASSEMBLY 'S INTENT THAT THE WAIVER PROCESS SET4
FORTH IN THIS SECTION WILL ALLOW THE DIVISION MORE FLEXIBILITY TO5
ALLOCATE FUNDING FOR AFFORDABLE HOME OWNERSHIP PROJECTS IN6
COMMUNITIES ACROSS THE STATE.7
(2) AS USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE8
REQUIRES:9
(a) "E LIGIBLE ORGANIZATION " MEANS A NON -PROFIT10
ORGANIZATION, LOCAL GOVERNMENT , COMMUNITY DEVELOPMENT11
FINANCIAL INSTITUTION , TRIBAL GOVERNMENT , OR COMMUNITY LAND12
TRUST THAT IS ELIGIBLE FOR FUNDING PURSUANT TO SECTION 29-32-10413
(3)(a).14
(b) "PROJECT" MEANS A RESIDENTIAL HOUSING UNIT OR GROUP OF15
UNITS DESCRIBED WITHIN AN ELIGIBLE ORGANIZATION 'S REQUEST FOR16
FUNDING PURSUANT TO SECTION 29-32-104 (3)(a)(I).17
(3) NOTWITHSTANDING THE PROVISIONS OF SECTION 29-32-10418
(3)(a) THAT SPECIFY THAT MONTHLY HOUSING COSTS SHALL NOT EXCEED19
THIRTY-FIVE PERCENT OF MONTHLY HOUSEHOLD INCOME, ORGANIZATION20
THAT WAS AWARDED MONEY FOR AN AFFORDABLE HOME OWNERSHIP21
PROJECT PURSUANT TO SECTION 29-32-104 (3)(a) AND THAT22
CONSTRUCTED A RESIDENTIAL UNIT AS PART OF THE PROJECT THAT HAS23
NOT BEEN PURCHASED WITHIN SIX MONTHS OF THE ISSUANCE OF A24
CERTIFICATE OF OCCUPANCY , MAY SUBMIT A REQUEST TO THE DIVISION25
FOR A WAIVER OF THE MAXIMUM MONTHLY HOUSING COST LIMIT FOR THAT26
RESIDENTIAL UNIT.27
040-9-
1
(b) THE DIVISION MAY APPROVE A WAIVER REQUEST IF AN ELIGIBLE2
ORGANIZATION AWARDED MONEY FOR AN AFFORDABLE HOME OWNERSHIP3
PROGRAM PURSUANT TO SECTION 29-32-104 (3)(a) ESTABLISHES THAT:4
(I) A SUBSTANTIAL NEED FOR HOUSING THE PROJECT 'S TARGET5
POPULATION EXISTS; AND6
(II) T HE UNIT HAS BEEN ADEQUATELY MARKETED TO ELIGIBLE7
BUYERS FOR PURCHASE FOR AT LEAST SIX MONTHS AFTER FINAL8
COMPLETION OF THE UNIT, AND THE UNIT HAS NOT BEEN PURCHASED BY9
AN ELIGIBLE BUYER WITHIN THAT SIX-MONTH PERIOD.10
(c) THE DIVISION MAY:11
(I) I SSUE A WAIVER WITH HOUSING COST LIMITS THAT ARE12
DIFFERENT FROM THOSE REQUESTED BY THE ELIGIBLE ORGANIZATION IN13
THE WAIVER REQUEST IF DIFFERENT HOUSING COST LIMITS WOULD BETTER14
SERVE NEEDS IDENTIFIED IN THE COMMUNITY , THE PROJECT REMAINS15
FINANCIALLY FEASIBLE IN THE DIVISION 'S DISCRETION, AND THERE ARE16
ELIGIBLE BUYERS THAT MEET THE PARAMETERS SET BY THE DIVISION17
PURSUANT TO THIS SUBSECTION (3)(c)(I); OR18
(II) M ODIFY THE TOTAL AMOUNT OF F UNDING PROVIDED19
PURSUANT TO SECTION 29-32-104 (3)(a) TO ACCOUNT FOR AN INCREASE IN20
THE SALE PRICE OF THE UNIT.21
(4) IN LIEU OF THE PROCESS DESCRIBED IN SUBSECTION (3) OF THIS22
SECTION, THE DIVISION MAY APPROVE AN ELIGIBLE ORGANIZATION 'S23
PROCESS FOR DETERMINING WHEN TO EXCEED THE MAXIMUM MONTHLY24
HOUSEHOLD INCOME FOR A UNIT FUNDED PURSUANT TO SECTION25
29-32-104 (3)(a). A N ELIGIBLE ORGANIZATION 'S PROCESS APPROVED26
UNDER THIS SUBSECTION (4) SHALL NOT REQUIRE A SIX -MONTH27
040-10-
MARKETING PERIOD.1
29-32-104 (3)(a).2
(5) (a) FOR PROJECTS FUNDED PURSUANT TO SECTION 29-32-1043
(3)(a), THE DIVISION SHALL ACCEPT A LOCAL AFFORDABILITY MECHANISM,4
INCLUDING A DEED RESTRICTION , COMMUNITY LAND TRUST GROUND5
LEASE, SECURED RECAPTURE LIEN , OR COMPARABLE RECORDED6
INSTRUMENT IN LIEU OF ANY STATE -PRESCRIBED USE COVENANT IF THE7
DIVISION DETERMINES THAT:8
(I) THE LOCAL AFFORDABILITY MECHANISM ALLOWS THE STATE TO9
MAINTAIN ITS OBLIGATIONS FOR COMPLIANCE AND COMPLIANCE10
MONITORING; AND11
(II) (A) T HE LOCAL AFFORDABILITY MECHANISM IS12
SUBSTANTIALLY EQUIVALENT TO OR MORE PROTECTIVE OF LONG -TERM13
AFFORDABILITY AND PRIMARY OCCUPANCY THAN A STATE -PRESCRIBED14
USE COVENANT; OR15
(B) THE LOCAL AFFORDABILITY MECHANISM IS NECESSARY FOR16
ACCESS TO FINANCING FOR A DISPROPORTI ONATELY IMPACTED17
COMMUNITY, AS DEFINED IN SECTION 24-4-109 (2)(b)(II).18
(b) IF THE DIVISION ACCEPTS A LOCAL AFFORDABILITY MECHANISM19
IN LIEU OF A STATE-PRESCRIBED USE COVENANT, THE DIVISION SHALL NOT20
REQUIRE A STATE -PRESCRIBED USE COVENANT ON A UNIT , EXCEPT TO21
INCORPORATE NON-DUPLICATIVE FEDERAL OR STATE REQUIREMENTS NOT22
ADDRESSED IN THE LOCAL AFFORDABILITY MECHANISM.23
(6) (a) FOR PROJECTS FUNDED PURSUANT TO SECTION 29-32-10424
(3)(a), AN ELIGIBLE ORGANIZATION MAY REQUEST THAT THE DIVISION25
ALLOW IT TO RENT RESIDENTIAL UNITS CONSTRUCTED AS PART OF THE26
PROJECT. THE DIVISION HAS THE AUTHORITY TO RENT OR ALLOW THE27
040-11-
RENTAL OF A RESIDENTIAL UNIT CONSTRUCTED AS PART OF THE PROJECT.1
(b) ON OR BEFORE DECEMBER 31, 2026, THE DIVISION SHALL ISSUE2
GUIDANCE FOR WHEN AN ELIGIBLE ORGANIZATION MAY RENT UNITS3
WITHIN A PROJECT AND DEVELOP A PROCESS BY WHICH RENTED UNITS MAY4
RETURN TO THE FOR-SALE MARKET.5
(c) A HOMEOWNER MAY RENT A UNIT FUNDED PURSUANT TO6
SECTION 29-32-104 (3)(a) AS LONG AS THE UNIT REMAINS THEIR PRIMARY7
RESIDENCE.8
SECTION 4. Effective date - applicability. This act takes effect9
July 1, 2026, and applies to requests for waivers received by the division10
on or after said date.11
SECTION 5. Safety clause. The general assembly finds,12
determines, and declares that this act is necessary for the immediate13
preservation of the public peace, health, or safety or for appropriations for14
the support and maintenance of the departments of the state and state15
institutions.16
040-12-