Colorado now counts HOA dues and metro-district fees against a 35% affordability cap
Colorado now counts HOA dues and metro-district fees against a 35% affordability cap
2026-09-10 · Colorado · Legislation
A high assessment can now disqualify a Colorado home from state affordable-home-ownership money. SB26-040, signed May 6, 2026 and effective July 1, 2026, rewrites the affordability test in Colorado's Proposition 123 home ownership program so that homeowners' association fees and metropolitan district fees are counted in the monthly housing payment that must stay under the cap.1
For anyone building attached housing inside an HOA or a metro district with an eye on that funding, dues have stopped being a line item the pro forma can ignore.
What the test now says
As amended, C.R.S. 29-32-104(3)(a) requires that the cost of the monthly housing payment toward “mortgage principal, mortgage interest, property taxes, mortgage and homeowner's insurance, homeowners' association fees, land lease fees, and metropolitan district fees” must not cost more than thirty-five percent of monthly household income for the grant track, with a thirty-eight percent figure applying on the other track the act amends. The monthly-payment cost is disregarded where the program is assisting a homeowner with home rehabilitation.
Income eligibility is a greater-of test: 120% of area median income for that household size in the local government's jurisdiction, or 120% of statewide AMI, with the election made at the start of the assistance agreement and not revocable during it.
A new waiver, and a rental question
New C.R.S. 29-32-105.7 creates an escape valve. An eligible organisation whose completed unit “has not been purchased within six months of the issuance of a certificate of occupancy” may ask the Division of Housing to waive the maximum monthly housing cost limit, on a showing of substantial need and adequate six-month marketing. The Division may instead set different limits or modify the funding amount, and it may allow rental of program units.
Why this is a real design constraint, not a paperwork change
The arithmetic runs the wrong way for exactly the product Colorado says it wants. Attached for-sale housing — condominiums and townhomes — carries the highest assessments, because the association maintains the roofs, the exteriors and the insurance. Detached homes in a metro district carry a district levy on top of an HOA assessment. Both are now inside the 35% cap, competing with principal, interest, taxes and insurance for the same room.
And the insurance side of that calculation has been moving fast in the wrong direction. The Colorado Division of Insurance's own market study, delivered under HB24-1108, found HOA property insurance written premium in Colorado rose 115% between 2020 and 2024. An association passing that through in assessments is, from July 1, 2026, also spending its members' Proposition 123 eligibility.
For a developer or a community land trust, the practical consequence is that assessment levels and district mill-levy-equivalent fees have to be modelled against the cap at design stage. A project that pencils on price and fails on dues is a project that does not qualify.
For a board of an existing association, the effect is indirect but real: the association's assessment level is now one of the inputs to whether a buyer of a unit in that community can use this particular state programme. It is one more reason owners will ask what the dues buy.
The mobile-home-park track survives
The act keeps and funds the resident-acquisition route: the program “shall also make grants or loans to groups or associations of mobile home owners and their assignees to assist them with the purchase of a mobile home park pursuant to section 38-12-217.”
That is the pipeline by which Colorado park residents form a cooperative and buy their park — becoming, in substance, a resident-governed common interest community. A cooperative is one of the three forms of common interest community under C.R.S. 38-33.3-103, so a successful resident purchase produces a new association, with all the governance duties that follow. Colorado also strengthened the due-diligence data park residents receive before such a sale in HB26-1224, which takes effect January 1, 2027.
What to watch next
The date to diary is December 31, 2026. New C.R.S. 29-32-105.7 provides that “on or before December 31, 2026, the division shall issue guidance for when an eligible organization may rent units within a project and develop a process by which rented units may return to the for-sale market.”
That guidance matters to associations more than its title suggests. A programme unit that is rented rather than sold is a rental unit inside a community whose declaration may cap rentals, and a process for returning rented units to the for-sale market is a process for changing the owner-occupancy mix of a Colorado community over time. Boards in communities with leasing restrictions should read it when it lands.
Note too what the act does not do. It does not cap assessments, does not regulate what an association may charge, and does not give the Division of Housing any authority over an association. It changes only who qualifies for one pot of state money.
Related Colorado HOA Topics
- SB26-040, "Affordable Home Ownership Program" — bill page, Colorado General Assembly ↩
- SB26-040 final act text, amendments to C.R.S. 29-32-103, 29-32-104 and new 29-32-105.7 (source of the quoted language) ↩
- HB24-1108 Final Report: Analysis of HOA & Lodging Facilities in Colorado, Lewis & Ellis for the Colorado Division of Insurance ↩
- HB26-1224, "Protections for Mobile Home Park Residents" — bill page, Colorado General Assembly ↩
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