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SB26-040 would modernize the Prop 123 Affordable Homeownership Program to better meet the needs of hardworking Coloradans
DENVER, CO – The House Transportation, Housing and Local Government Committee today passed legislation to update the Affordable Homeownership Program that was created by voter-approved Proposition 123. SB26-040, sponsored by Representatives Katie Stewart and Lesley Smith, passed by a vote of 10-3.
“This bipartisan bill makes the Prop 123 Affordable Homeownership Program more responsive to the needs of our communities, especially in Colorado mountain towns like mine, where working people struggle to find affordable housing,” said Rep. Katie Stewart, D-Durango. “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 bill would 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 Rep. Lesley Smith, D-Boulder. “The Affordable Homeownership Program was created to help first-time homebuyers, especially to secure down payments. Unfortunately, interest rates and construction costs are higher than they were when the program was created. Our bill would make necessary adjustments to the program so it can support Coloradans as intended and make homeownership a reality for more hardworking people.”
SB26-040 would 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 bill would increase the allowable income threshold to qualify for the program to less than or equal to 120 percent of either the statewide Area Median Income (AMI) or the local AMI. This would 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. This bill would create a process to allow some homeowners to spend more than 35 percent of their income on housing when a qualified buyer is not found after six months of advertising, further expanding the availability of the program for Colorado families.
Additionally, the bill would 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 would provide the flexibility for the Affordable Home Ownership Program to adapt to the needs of communities across Colorado, and help ensure that the program is working as intended and serving as many Coloradans as possible.