Governor Jared Polis’ wide-reaching plan to tackle Colorado’s housing affordability crisis cleared some major hurdles in the state legislature this week but faces an uncertain future nearly a year after lawmakers rejected a similar proposal.
“It's about how we live as a people, as a state,” Polis said. “From the statewide picture, this is part of our work to make housing lower cost for people, and that includes allowing more housing to be built.”
Increasing housing inventory and lowering housing costs has been a top priority for the Polis administration this term, and was highlighted in his State of the State address in January. His proposals, which center on increasing housing density—especially around public transportation, have the support of many Democratic lawmakers.
“On the individual level, people can't afford their rent or can't afford to buy a new home, the mortgage and down payment. But also, our economy: For employers to attract and retain the people they need, where will people be able to live?” Polis said. “The answer shouldn't need to be further and further out—more traffic on our roads, more congestion, worse air quality. We want more housing now, close to job centers and on convenient transit lines.”
The conflict between state and local control of housing policy is at the center of the debate over the governor’s approach, and his proposals have faced significant pushback from counties, municipalities and lawmakers who say they amount to state overreach.
Last year, Polis and Democratic lawmakers packed multiple, statewide housing reforms into one sweeping bill, which drew vehement opposition from local governments. Requirements included increasing density around transit hubs, up-zoning single-family neighborhoods in big cities, and implementing state-prescribed housing plans for mountain towns.
Polis was handed a major defeat when the bill ultimately died in the Senate just hours before the legislative session ended. The failure came after Democrats, who hold a strong majority in both chambers, could not agree on how much the state should override local housing policy.
This year, lawmakers split up the elements of last year’s bill into several measures that separately address issues like housing density around public transportation, residential occupancy limits, accessory dwelling units or ADUs, parking requirements and short-term rentals.
“The bills, broken out into individual policy topic areas, have allowed for deeper dives, better explanation and understanding,” Democratic House Speaker Julie McCluskie said. “There’s still some tension with local governments. I anticipate that continues, but I think the way the policies have been crafted do address a lot of the concerns that we saw last year.”
Transit-oriented communities
One of the flagship housing measures would force certain local governments to increase housing density around public transit or risk losing state highway funding. It passed the House over the weekend despite opposition from both sides of the aisle. It now moves over to the Senate, where it could undergo some significant changes.
The bill would apply to local governments within metropolitan planning organizations that have populations of more than 4,000 people and at least 75 acres of transit-related areas. It would also include portions of counties that are near commuter or light rail stations. About 30 local governments fall under the bill, mostly on the Front Range along the I-25 corridor and around Grand Junction on the Western Slope.
“We have structured the bill really around how we can have more housing around fixed rail and bus, that allows people to live, work and age in the communities that they want to, because it is more sustainable,” Bill sponsor Rep. Iman Jodeh told KUNC. “We are planning for sustainable growth that is healthy and safe, and again, addresses our climate issues, but can move us towards a model, a practice and an overall way of life that builds in public transit. That this becomes normalized, that this becomes a way of everyone's life.”
Lawmakers who opposed the bill on the House floor Sunday said the state-level mandates won’t work for every community.
“If you build density in the little downtown area of Golden you’re gonna ruin the charm of Golden,” Democratic Rep. Brianna Titone, who voted against the bill, said. “You can’t do that. I won’t have that happen.”
The measure uses financial incentives to encourage and assist communities in developing higher density housing around transit, including a new $35 million grant program and affordable housing tax credits. At the same time, one particularly contentious provision in the bill would also punish local governments that don’t comply with the new requirements by withholding state highway funding.
“We're trying to strike that balance between providing incentives, and then also saying, ‘OK, for the communities that are truly not going to participate, what is the end result there?'” Bill sponsor Rep. Steven Woodrow said. “The bill does have, in its current form, some sticks to encourage compliance beyond just the carrots.”
Several Democratic lawmakers spoke against it specifically, and eight Democrats ultimately voted against the bill alongside Republicans. Some Democrats who voted to pass the bill called on the Senate to remove the provision to withhold funding.
Sen. Chris Hansen is sponsoring the bill in the chamber, and said he is considering amending the bill to take out the threat of withholding highway funding along with some other tweaks to make it more flexible for local governments.
“We’re actively looking at that option,” Hansen said. “We always knew we were going to have changes that we need to make along the way. That will certainly come up in the Senate debate.”
A Senate committee hearing on the bill has not been scheduled yet, and Hansen says one of his concerns is the short time left in the legislative session—only three weeks. Gov. Polis has not indicated whether he would support an amended version, but he told KUNC this week that he is “pleased with the very strong version that passed the House.”
Lawmakers have engaged significantly with housing stakeholders, like counties and municipalities, in the months since last year’s housing bill failed, but Colorado Counties Inc, the Colorado Municipal League and dozens of local governments sent a letter last month to the legislature urging better collaboration.
“Colorado municipal leaders pledged to work as partners with Gov. Polis and proponents of affordable housing legislation toward common goals. Unfortunately, 2023 represented a missed opportunity with legislation focused on land use preemption instead of collaborative outcomes,” the Colorado Municipal League said in the statement. “We urge you to treat municipal leaders as partners, not adversaries, and pass meaningful legislation.”
The measure is under consideration alongside several related bills intended to improve existing public transportation, spur development of new transit services and roll back residential parking requirements.
Occupancy limits, ADUs and short-term rentals
Another core piece of housing policy focuses on getting more use out of existing units by removing local restrictions on how many people can live in a house as well as regulations around accessory dwelling units, or ADUs.
Gov. Polis signed a bill into law Monday banning residential occupancy limits. When it goes into effect July 1, counties and municipalities in Colorado will no longer be able to enforce existing occupancy limits or enact new ones. The new law does allow limits if they’re based on health and safety codes.
“The government shouldn't be determining who you live with. It's a basic common core value,” Polis told KUNC ahead of the bill signing on Monday. “I'm happy that that will end in Colorado. It will also help make sure that people can be on leases and build credit and help get their lives underway successfully.”
About a dozen Colorado communities currently limit the number of unrelated people who can live together. In Fort Collins, just three people can live in the same dwelling unit under the city’s U+2 ordinance. Denver and Boulder limit occupancy to five. Those restrictions have to be lifted by July 1.
Chase Cromwell, a senior at the University of Colorado Boulder who lives in a five-bedroom house, spoke at Monday's bill signing in support of the new law
"Only three people are legally allowed to be on the lease, which meant the two of us are just hanging out quietly. This is extremely stressful. We're afforded none of the legal protections that come with being on a lease. I'm entirely at the mercy of my roommates to pay rent on time, to be nice to each other, and to live safely," Cromwell said. "Thanks to this new law, we will no longer have to worry every day that our neighbors will record us or the city will show up to count toothbrushes and pillows."
Another bill under consideration proposes making use of existing property to expand housing options. It would require some local governments to allow residents to build accessory dwelling units, or ADUs. It passed the House Sunday alongside the transit-oriented housing bill and is awaiting debate in the Senate.
ADUs are small residences either attached to or on the property of a single-family home and are often used as short-term rentals or housing for family members. Local governments often don’t allow them or only allow them based on certain criteria, like lot size.
The measure would only apply to the most populous parts of the state: communities within metropolitan planning organizations, which are concentrated on the Front Range and around Grand Junction.
This session’s housing bills largely avoid impacting Colorado’s mountain communities, which opposed last year’s land-use bill. Mountain communities would be exempt from the ADU bill in part because of concerns ADUs in mountain towns and cities would be used as vacation rentals instead of for local housing.
Another bill would reform how the state taxes vacation rentals, and therefore would impact mountain towns. The measure would significantly raise taxes on the thousands of short-term rental properties across the state that are rented out for more than 90 days per year.
However, the Senate sponsors of the short-term rental bill said they plan to heavily amend the bill after resistance from vacation rental companies like AirBnB and VRBO. The stripped-down version would simply implement a study of the state’s short-term rental market and prevent hotels from turning their rooms into short-term rentals to avoid the state lodging tax.
Another short-term rental bill under consideration would not tax short-term rentals that are someone’s first or second home, but would apply the lodging tax rate to short-term rentals that are a person’s third property or beyond.
Like the transit-oriented housing bill, state-level preemption of local government control of housing policy is at the core of opposition to the occupancy limits ban, ADU bill, and short-term rental measures.
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