Congress just passed a housing law that rewards states for reform — here’s why Colorado has a head start

In Colorado, a full-time worker must earn US$36.44 an hour to afford a modest two-bedroom apartment without spending more than 30% of their income on rent, according to a recent report from the National Low Income Housing Coalition.

The state’s minimum wage is $15.16. Someone earning that would have to work 96 hours a week, more than two full-time jobs, to cover rent.

The report ranks Colorado as the 12th-least-affordable state in the country for renters.

In July 2026, Congress offered state and local leaders a new set of tools to expand housing supply when it passed the 21st Century ROAD to Housing Act, the most significant federal housing legislation in decades. It authorizes relatively little new spending. Instead it offers competitive grants and technical assistance to state and local governments that ease the local rules that slow housing construction and raise its cost, and it loosens federal restrictions on how existing housing dollars can be spent.

I direct the Center for Housing Research and Innovative Solutions at the University of Denver, where we study how Colorado and states across the Mountain West can expand housing supply and lower housing costs. Before that, I led the Office of Policy Development and Research at the U.S. Department of Housing and Urban Development, which evaluates proposed housing legislation, during the years when many of the ideas behind this new law were being developed and debated.

Housing costs are now central to Colorado politics. In a statewide poll in spring 2026, voters were more likely to call the cost of housing “a very big problem” than any other cost they were asked about. Whoever wins the governor’s race in November will inherit that problem along with a new federal law that could help address it. They will also take office just as federal agencies begin writing the rules that determine how much the law actually delivers and what states get out of it.

What the new law offers Colorado

Much of the federal act rewards changes that Colorado has already spent several years making. One provision authorizes competitive grants for local governments that revise parking mandates and minimum lot sizes or streamline permitting and environmental review for new construction. A 2024 Colorado state law eliminated parking requirements near transit, and Denver has since dropped them entirely.

Colorado also legalized accessory dwelling units statewide in 2024, letting homeowners build small backyard or garage apartments without needing a special hearing or approval. What that law could not supply was money. The federal act now lets Federal Housing Administration home improvement loans finance these units, pairing permission the state already granted with financing that has been hard to find.

The same pattern appears in construction rules. Colorado is one of four states that have legalized single-stair apartment buildings, a design that allows small apartment buildings to be served by one stairwell rather than the two that American building codes have long required, freeing up floor space and making it possible to build apartments on narrow lots. The new law directs federal officials to issue guidance for these buildings and authorizes grants to test their safety and cost.

Financing rules are shifting too. Banks are the main investors in the federal low-income housing tax credit, the largest subsidy for building affordable apartments. Developers sell those tax credits to banks in exchange for cash to build with. But federal regulators cap how much of a bank’s capital can go into such investments. The act raises that ceiling from 15% to 20%. Banks can now buy more credits, putting more equity into each deal, just as state housing subsidies shrink. The Colorado Housing and Finance Authority, the state agency that awards those credits to developers, lobbied Congress for the change.

What Colorado learned that other states can use

Colorado’s most useful contribution to other states may not be any single law but rather the machinery the state built to make those laws function.

Housing subsidy in the United States is fragmented, and assembling it consumes time and money that could otherwise go into buildings. The ROAD Act does not eliminate that fragmentation, but it trims some federal requirements that make stacking subsidies expensive, and it gives states a reason to make their own programs easier for developers to combine.

Colorado has been chipping away at this problem. In 2025 the state, its housing finance authority and the city of Denver launched Housing Hub Colorado, a single portal that aligns their application timelines and requirements. A shared application accepted by all three is expected later this year.

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The portal came out of the Colorado Housing Consortium, a coalition launched in 2025 that brings together more than 120 people from state and local government, developers, lenders, philanthropies and nonprofits. Its members surveyed the field, ranked the barriers driving up construction costs, and picked three to work on first: a shared funding application, a revolving loan fund, and pooling demand for modular construction.

The lesson for other states is practical. A project stalls if any one of these fails: land it can be built on, permits that arrive on time, financing that closes, and a builder who can deliver at a price that works. Fixing one at a time leaves the others to block the project, which is why states that coordinate across agencies can act quickly when federal money and guidance arrive.

Colorado’s experience is also a caution. Passing a reform and implementing it are different things. In 2025, six of Colorado’s 105 home-rule cities, which under the state constitution control their own zoning, sued the state over the 2024 laws and over Gov. Jared Polis’ move to withhold state grant money from cities that don’t comply. Bills to limit how large a lot cities can require for a single home, and to allow lot splitting, died in the state Senate in 2026 after local governments objected to the state overriding their zoning decisions.

This is where research and measurement matter. Colorado has been at this since 2022, when voters passed Proposition 123, dedicating a share of state income tax revenue to affordable housing. Its reforms are now far enough along to evaluate, and knowing which produced housing and which produced only paperwork can inform other states considering similar measures. This knowledge will also help federal officials assemble the model zoning and land-use practices the law directs them to publish for states and cities to adopt voluntarily. The HUD research office I used to lead is responsible for developing these guidelines.

What the law will not do

The new federal law is designed to make new housing cheaper and faster to build, not to help people pay for homes that already exist. Focusing on new production has limits. It does little for households whose incomes are too low to pay for housing at any price. Three in four eligible low-income renter households nationally receive no federal rental assistance because the programs are underfunded.

Colorado is testing that limit. To close a $1.5 billion budget shortfall this year, lawmakers moved $130 million out of Proposition 123, with most of the cut falling on programs that build rental housing for low-income families. Regulatory reform costs little and can do a great deal, but it does not replace subsidies. The likely result is less subsidized housing built in Colorado over the next few years, at the same time the new federal law is making it easier to build housing generally.

Some of the state’s own barriers also remain. Colorado law gives condominium owners up to eight years after a building is finished to sue over construction defects, and the insurance costs that follow have long pushed developers toward building apartments instead. Condominiums are one of the few paths to entry-level homeownership. State lawmakers did act: A 2025 law offers builders more protection from lawsuits if they agree to third-party inspections and warranties. But homebuilders expect it to take six to eight years to affect premiums. The federal law does not touch the issue.

Why the next year matters

Federal agencies must still write regulations, conduct studies and launch programs as part of the new federal law, work that could take years at HUD, whose staff has been sharply reduced. Despite that, analysts at the Pew Charitable Trusts argue that jurisdictions that update their zoning, building codes and permitting policies now will be best positioned to win the new grant funding.

Colorado already knows how to do this work. What it has not yet demonstrated – and what the next governor and the state’s mayors now have a chance to show – is whether reform on paper becomes homes people can afford.

Read more of our stories about Colorado.

This article is republished from The Conversation, a nonprofit, independent news organization bringing you facts and trustworthy analysis to help you make sense of our complex world. It was written by: Solomon Greene, University of Denver

Read more:

• Affordable housing often costs more to build than market‑rate housing – Colorado is closing the gap
• A rare bipartisan housing bill just became law – but Americans will still struggle with affordability
• Denver study shows removing parking requirements results in more affordable housing being built

Solomon Greene is affiliated with the National Housing Law Project (Vice President of Board of Directors).