Colorado's House Bill 24-1152

Colorado’s housing landscape is about to undergo a major transformation. House Bill 24-1152, passed in 2024, introduces new guidelines for Accessory Dwelling Units (ADUs), also known as granny flats, backyard cottages, or in-law suites, which will come into effect in June 2025. This bill seeks to address the state’s housing crisis by making it easier for homeowners to build and rent out these additional units, thereby expanding affordable housing options, increasing density, and creating flexible living spaces. In this post, we will explore what the bill says, its implications for homeowners, and how it will reshape the housing market in Colorado.

What Are ADUs?

Before diving into the specifics of the bill, it’s important to understand what ADUs are. An Accessory Dwelling Unit is a secondary housing unit on a single-family residential lot. These units are smaller than the primary residence and can either be attached (like a basement or garage conversion) or detached (a small house in the backyard). ADUs provide independent living facilities, complete with a kitchen, bathroom, and sleeping area. Over the years, they have become popular in urban areas as a way to increase housing density without significantly altering the character of a neighborhood.

Current Barriers to ADU Construction

Under current Colorado law, building ADUs is challenging due to restrictive zoning laws that vary across municipalities. Many local governments impose rules that make it difficult for homeowners to build ADUs, including:

• Owner-occupancy requirements: Homeowners are often required to live on the property if they want to rent out an ADU, which limits rental opportunities.
• Parking requirements: Many areas mandate that properties with ADUs provide additional off-street parking, which can be costly or physically impossible for some homes.
• Zoning restrictions: Zoning laws in many areas prohibit ADUs altogether, especially in single-family residential zones.
• Cost and permit processes: Navigating the permit process for ADUs can be complicated and expensive, discouraging homeowners from building them.

House Bill 24-1152 seeks to change these barriers by providing a more streamlined and statewide approach to ADU construction and regulation.

Key Provisions of House Bill 24-1152

1. Statewide ADU Allowance: The bill mandates that all municipalities across Colorado, regardless of their current zoning laws, allow the construction of ADUs in single-family residential areas. This is a significant change, as it overrides local zoning laws that previously restricted or banned ADUs. Homeowners will have the legal right to build an ADU on their property, provided they meet the bill’s construction guidelines.

2. Removal of Owner-Occupancy Requirements: One of the biggest hurdles to ADU development has been the owner-occupancy requirement, which stipulates that the property owner must live on the property in order to rent out the ADU. This provision is being removed under House Bill 24-1152, giving homeowners the flexibility to rent out both the primary residence and the ADU without having to live on-site. This change opens up new opportunities for rental income and could encourage more homeowners to build ADUs.

3. Simplification of Parking Requirements: The bill also relaxes parking requirements for properties with ADUs. In many municipalities, homeowners were required to provide additional off-street parking spaces for ADU tenants. House Bill 24-1152 eliminates this requirement for properties located near public transit, making it easier for urban homeowners to add an ADU without the burden of building additional parking spaces. This change also encourages the use of public transportation and reduces the need for car ownership.

4. Streamlined Permitting Process: Building an ADU often involves a lengthy and costly permitting process. The new legislation requires municipalities to adopt a simplified, uniform permit process for ADUs. This includes setting a maximum timeline for permit approval to prevent delays and reduce bureaucracy. By making the permitting process more predictable and affordable, the bill aims to encourage more homeowners to pursue ADU construction.

5. Incentives for Affordable Housing: In an effort to address Colorado’s affordable housing crisis, the bill includes provisions that encourage homeowners to rent ADUs at below-market rates. Homeowners who agree to rent their ADUs as affordable housing can receive financial incentives from the state, such as tax breaks or grants to offset construction costs. This provision could help create more affordable rental options in areas that are currently experiencing housing shortages.

How Will These Changes Affect Colorado Homeowners?

For Colorado homeowners, House Bill 24-1152 presents several opportunities and challenges. On the one hand, the bill makes it easier to build and rent out ADUs, potentially creating a new source of income. On the other hand, homeowners will need to navigate the construction process and make sure their ADU meets the bill’s requirements.

1. Increased Rental Income: For homeowners with enough space and financial resources to build an ADU, the new law provides an opportunity to generate additional rental income. Whether renting the ADU long-term or as a short-term rental (such as through Airbnb), homeowners could see a significant financial benefit. The removal of the owner-occupancy requirement makes this option even more attractive, as homeowners can rent out both units and move elsewhere if desired.

2. Multigenerational Living: ADUs can also serve as a housing solution for families looking to accommodate elderly relatives, young adult children, or other family members. By providing a separate living space on the same property, ADUs offer an affordable and convenient option for multigenerational living without compromising privacy.

3. Property Value Increase: Properties with ADUs tend to have higher property values due to the added living space and rental potential. Homeowners who invest in ADUs may see their property values rise, especially in urban areas where housing demand is high. However, it’s important to consider that property tax assessments may also increase, potentially leading to higher property taxes.

4. Housing Supply Impact: On a broader scale, House Bill 24-1152 has the potential to increase Colorado’s housing supply significantly. By allowing more homeowners to build ADUs, the state can create thousands of new housing units without the need for large-scale developments. This incremental increase in housing supply can help alleviate the pressure on the housing market, particularly in cities like Denver where affordable housing is scarce.

Challenges and Concerns

While House Bill 24-1152 offers many benefits, there are also some challenges and concerns that need to be addressed.

1. Neighborhood Opposition: One potential challenge is opposition from homeowners in single-family residential neighborhoods who may be resistant to increased density. Some may argue that ADUs could change the character of their neighborhood by increasing traffic, noise, and demand for parking. Local governments will need to work with residents to address these concerns and ensure that ADUs are integrated into communities in a way that maintains the neighborhood’s character.

2. Construction Costs: Building an ADU can be expensive, with costs ranging from $100,000 to $300,000 depending on the size and location. While the bill simplifies the permitting process, it does not provide direct financial assistance for ADU construction (except in cases where homeowners commit to renting at affordable rates). Homeowners will need to weigh the potential rental income against the upfront costs of building an ADU.

3. Enforcement of Affordable Housing Provisions: The success of the bill’s affordable housing provisions will depend on how well they are enforced. It’s unclear how the state will ensure that homeowners who receive financial incentives for affordable ADUs actually rent them at below-market rates. Strong enforcement mechanisms will be necessary to prevent abuse of the system.

Conclusion

House Bill 24-1152 represents a bold step forward in addressing Colorado’s housing crisis by promoting the construction of Accessory Dwelling Units (ADUs). By removing restrictive zoning barriers and simplifying the permitting process, the bill makes it easier for homeowners to build and rent out ADUs, providing new housing options and potential rental income. However, the bill also presents challenges, including neighborhood opposition, high construction costs, and the need for effective enforcement of affordable housing provisions. As the law takes effect in June 2025, it will be crucial for policymakers, homeowners, and communities to work together to ensure that ADUs are integrated in a way that benefits all Coloradans. If you would like more information, our brokers would love to talk with you!