Legislation to Create More Affordable Home Ownership Opportunities Signed Into Law

SB26-040 will modernize the Prop 123 Affordable Homeownership Program to better meet families’ needs

DENVER, CO – Bipartisan legislation to update the Affordable Homeownership Program created by voter-approved Proposition 123 was signed into law today.

SB26-040, sponsored by Senator Judy Amabile, D-Boulder, and Representatives Katie Stewart, D-Durango, and Lesley Smith, D-Boulder, will expand eligibility for qualified buyers and make practical updates to better serve every Colorado community and meet the reality of the 2026 housing market.

“The Affordable Homeownership Program was designed in 2022, for a 2022 market with low interest rates and lower construction costs than what we see today,” said Amabile. “This new law updates the program to reflect today’s reality and provide the flexibility that Coloradans need. We’re taking a practical approach to make sure this program works as intended so more Colorado families can put down roots and achieve their dream of homeownership.”

“This bipartisan law makes the Prop 123 Affordable Homeownership Program more responsive to the needs of our communities, especially in Colorado mountain towns like mine,” said Stewart. “When Colorado voters approved Prop 123, it created the Affordable Home Ownership Program to help first-time homebuyers with down payments and other financial assistance. This new law will make crucial updates to the program to help more low- and middle-income Coloradans in rural areas qualify for homebuying assistance.”

“We’re expanding eligibility and flexibility for this Prop 123 program to deliver more housing assistance for hardworking Coloradans,” said Smith. “The Affordable Homeownership Program was created to help first-time homebuyers secure down payments. Unfortunately, interest rates and construction costs are higher than they were when the program was created. Our law makes necessary adjustments to the program so it can support Coloradans as intended and make homeownership a reality for more hardworking people.”

The new law, also sponsored by Senate Minority Leader Cleave Simpson, R-Alamosa, will increase the allowable income threshold to qualify for the program to less than or equal to 120 percent of statewide Area Median Income (AMI) or the local AMI. This will allow more people to qualify for the program, particularly in rural communities.

Rising interest rates and insurance costs have also made it harder for Coloradans to meet the requirement that combined housing costs cannot exceed 35 percent of their income. The law raises that threshold to 38 percent for homebuyers receiving direct down-payment assistance, and also creates a process to allow eligible organizations to seek a waiver of the housing cost limit entirely when a qualified buyer is not found after six months of advertising. 

Additionally, the law will allow eligible organizations to temporarily rent units if they cannot be sold in a timely manner and create more flexibility in the program rules. These updates will help ensure that the program is working as intended and serving as many Coloradans as possible.