Colorado’s Affordable Housing Crisis: Why the Shortage Is Now a Statewide Problem

Is Colorado’s Affordable Housing Crisis a Denver Problem — or a Statewide One?

For years, housing affordability in Colorado was treated as a Denver-centric issue. But current data now underscores a broad, statewide imbalance impacting Front Range metros, resort communities, and rural towns alike — and policymakers are increasingly viewing Accessory Dwelling Units (ADUs) as a key piece of the solution.

According to the Colorado State Demography Office, the state faces a housing shortage of roughly 106,000 homes as of late 2025. Meanwhile, 98% of Coloradans live in a county with a housing supply deficit, and Colorado ranks 48th in the nation for homeownership affordability.

📍 The Housing Shortage Across Colorado

Denver Metro

Denver and surrounding counties remain the most visible front of the affordability challenge. Estimates place the Denver-Aurora metro’s deficit between 64,000 and 135,000 units, with affordability at three-decade lows and work hours required to afford a median mortgage nearly doubling since 2015. 

Front Range and Other Regions

• Colorado Springs (El Paso County): Needs an estimated 6,400–8,500 new units annually through 2028 just to meet demand.

• Larimer & Pueblo Counties: Both show clear chronic shortages, with Pueblo experiencing a 157% increase in work hours required to afford a mortgage since 2015.

• Mountain & Resort Towns: Areas like Aspen and Breckenridge face structural wage-to-cost gaps, where the majority of year-round workers cannot afford local housing even with deed restrictions in place. 

🛠️ Why a Shortage Is Not the Only Problem

It’s not just that Colorado lacks homes — it’s that the market is not building the right kinds of homes:

• Luxury inventory has grown, but there’s still a shortfall of roughly 80,000 owner-occupied homes priced between $150K and $500K.

• Single-family zoning remains dominant, limiting new affordable multifamily construction.

This mismatch has pushed policymakers to focus on tools that can expand housing supply quickly and at smaller scales. Enter: Accessory Dwelling Units (ADUs).

🏠 What ADUs Are and Why They Matter

Accessory Dwelling Units (ADUs) — granny flats, backyard cottages, in-law suites, carriage houses, garage apartments — are self-contained living units on the same lot as a single-family home. They have their own kitchen, bath, and sleeping space but typically cost less than building new multifamily structures. 

Recent legislative changes statewide — especially House Bill 24-1152 — now require many municipalities to allow at least one ADU by right through administrative approval in areas where single-family homes are already permitted. These laws began taking effect mid-2025 and strip away some of the most restrictive local barriers. 

Additionally, House Bill 24-1007 eliminated residential occupancy limits based on familial relationships, which together with ADU law creates more flexible living arrangements that can house unrelated households without extra restrictions.

📈 ADU Trends in the Denver Region and Beyond

Permit Increases Across the Front Range

Cities across the Front Range — Denver included — have seen ADU permits slowly rising as zoning barriers fall and residents take advantage of the new laws. Denver anticipates exceeding 100 ADU permits in 2026, a marked uptick after the city revised its rules to make ADUs easier to build. 

In fact, the shift to allow ADUs citywide in Denver’s residential areas — eliminating the need for special rezoning and reducing bureaucratic friction — could result in hundreds of new units built annually once builders and homeowners fully adapt to the new regime. 

Real-World Examples

One Denver homeowner interviewed by Denver7 is building a ~680-square-foot ADU at affordable rental rates, illustrating how ADUs are starting to deliver real infill supply at prices lower than typical market rentals.

📊 Policy Shifts Backed by the State

State law now preempts local ordinances that outright ban ADUs or impose onerous restrictions on them. Municipalities that are designated as “subject jurisdictions” — typically those with more than 1,000 residents within Metropolitan Planning Organization boundaries — must allow ADUs and can even qualify for state grants and reduced fee programs to encourage construction. 

This combination of state policy plus local implementation aims to unlock a distributed supply of smaller, more affordable housing options without waiting years for large multifamily projects to break ground.

🧩 The Big Takeaway

Colorado’s housing crisis is statewide — it impacts urban, suburban, resort, and rural communities alike. But emerging policy tools like Accessory Dwelling Units represent a pragmatic, locally adaptable lever that can:

• Increase housing supply quickly,

• Create affordable rental stock,

• Support workforce retention, and

• Preserve community character while adding gentle density.

If you want to dig deeper into how ADU policy will affect a specific neighborhood or county, or explore how to leverage ADUs in your real estate strategy, I’d be happy to tailor more data for your area.