Colorado housing officials greeted Gov. Jared Polis’ recent plan to balance a significant part of the state’s budget deficit on the back of an affordable housing program with grim acceptance.
So long as another raid of housing money — amid deep affordability gaps in Colorado — doesn’t happen again anytime soon.
“Everyone has to eat their vegetables in this austerity restaurant,” said Peter LiFari, the executive director of , the housing authority in Adams County. “… Extreme times require extreme measures, so here we are.”
To cope with the budget hole created by this summer’s federal tax bill, Polis last week proposed taking $105 million next year from Proposition 123, the housing program approved by voters in 2022, and repurposing it for other state funding needs. The money, which is roughly a third of Prop 123’s annual funding, would otherwise go (known as land banking) and to help support low-income housing construction.
Housing officials said the diverted money would’ve been used essentially as gap financing, shoring up projects that were just short of their financial need. The proposed cuts apply only to next year and wouldn’t affect any money that’s already been awarded to local partners under the program, which has been funded by a small portion of income tax revenue.
The proposal would eliminate money for land banking next year. It would also mean that housing funding would be one of the largest stopgaps that Polis and state lawmakers have shoved into the $783 million budget hole created by the federal tax bill. Only the state’s reserve fund would account for a higher single-source share of the deficit reduction.
Of roughly $252 million in total cuts and budget moves announced by Polis last week, 42% is set to fall upon Prop 123’s shoulders, noted Jonathan Cappelli, the executive director of the Neighborhood Development Collaborative, a coalition of nonprofit housing groups.
The loss, even for a year, comes as the state continues to grapple with its housing shortage. Solving that deficit has been a core priority for voters — and for Polis during his second term as governor. The diversion of money also hits a program that local governments have clamored to participate in, just as 2026’s end-of-year deadline to produce results begins to come into full view.
But the alternative, Polis told the legislature’s Joint Budget Committee last week, would be reductions to core state services like education. Polis’ office also recommended preserving nearly $80 million in other Prop 123 funds, which are used to secure federal tax credits vital to building subsidized housing.
“This is an incredibly difficult situation that was created by H.R. 1,” said Tamara Pogue, a Summit County commissioner who’s prominently involved in housing policy, referring to the formal designation for the tax bill in Congress.
Building more housing “has been such a priority of the governor, I think (his proposed sweep) speaks volumes of how bad the situation really is,” she said.
Several other housing advocates and policymakers expressed a similar grudging acceptance of the plan. Gary Community Ventures, which was Prop 123’s primary supporter three years ago, said it understood Polis’ “goal to use some Prop 123 funds to cover budget gaps created by HR1.” Zach Martinez, the group’s advocacy and policy director, said it was discussing potential legislation to “reduce the impacts of the proposed cuts.”
Housing Colorado, which has supported Polis’ land-use reforms, said in an email to supporters that it, too, grasped “the need to make hard decisions to balance our state’s budget, but we are disappointed that Proposition 123 funds are being considered to help make that balance a reality.”
Despite understanding the need for the sweep, Pogue said it would hamper communities’ efforts to build more housing. LiFari said the impacts would be felt most in rural areas or counties without separate revenue sources dedicated to housing.
The governor’s plan, which needs legislative approval early next year, is allowed under the housing program’s ballot language. Should state revenue dip below the cap imposed by the Taxpayer’s Bill of Rights — as happened after the federal tax bill signed by President Donald Trump in early July wiped out this fiscal year’s TABOR surplus — the legislature can repurpose roughly half of the money that’s routed to Prop 123 programs.
Other parts of Prop 123 — including tens of millions of collars to combat homelessness — cannot be swept and are not part of Polis’ proposal.
Though the funding transfer may be allowed in certain circumstances, housing providers urged future governors and legislators not to balance their budgets by diverting Prop 123 money. That unenviable responsibility had previously fallen on Colorado’s schools, whose funding was reduced each year to pencil out the state’s accounts.
It took years for the legislature to support schools at the level required by the state constitution. Housing providers don’t want a repeat with Proposition 123.
“A one-year stopgap pause of this money is not the end of the world,” LiFari said. But he’d be more worried “if the legislature starts to see this now as an open cookie jar.”
suggest that state revenue will rise back after next year. As long as the economy doesn’t take a turn for the worse, that means the legislature wouldn’t be able to quickly dip into Prop 123, even if lawmakers wanted to. Pogue said she also wasn’t terribly concerned that Polis would come back to Prop 123, given his housing priorities.
In a statement, Polis underscored the temporary nature of his proposal.
“This was a one-time decision, enabled by the language in the ballot measure, to help close the budget gap and ensure that the state does not need to cut funding for our schools,” he said.
Still, Cappelli, of the nonprofit coalition, called on the legislature not to make any further housing cuts.
“Given that Colorado has the most inaccessible non-coastal housing market in the country,” he wrote in an email, “we will need every penny of Colorado’s voter-approved housing fund to make Colorado affordable for working families and our elders, and provide pathways out of homelessness for our highest-need neighbors, families and friends.”
