Colorado is increasing its push to expand affordable housing through accessory dwelling units, announcing nearly $1 million in grant funding to help more local governments encourage ADU construction. The Colorado Department of Local Affairs (DOLA) said Wednesday that the grants were awarded to seven cities, each selected to help homeowners build secondary housing units on their properties with fewer financial and regulatory roadblocks.
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ADUs—often referred to as backyard cottages, basement apartments, or in-law suites—have become a central part of the state’s housing strategy. State officials say these smaller, secondary homes can support aging residents, multigenerational families, and renters priced out of the market, while making better use of existing neighborhood space. Under a 2024 law that took effect this summer, municipalities that allow single-family housing must also permit ADUs, marking a major shift in local housing policy.
Gov. Jared Polis hailed the funding as a tool for removing barriers that stop homeowners from building.
“Colorado is leading the way on the freedom to build an accessory dwelling unit on your own property, and these grants will cut through red tape to help more Coloradans build and access these opportunities,” Polis said in a statement.
DOLA’s first round of grants includes several targeted initiatives, such as $325,000 for Grand Junction’s ADU production program, $105,000 for a fee-waiver effort in Larimer County, and $37,500 for Longmont to modernize its pre-approved ADU design plans. State officials say these funding strategies will make it easier and cheaper to add new rental options in neighborhoods that traditionally lacked housing diversity.
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The state will open a second round of applications in February, with lawmakers expecting broader participation as municipalities align themselves with the 2024 ADU requirement. Sen. Kyle Mullica, a sponsor of the law, said the investment is badly needed for working families.
“Colorado families and communities are desperate for solutions to help address the housing crisis and build more homes for working Coloradans,” Mullica said. “These grants will help homeowners build an ADU on their property, making life more affordable and allowing more Coloradans to age in place.”
According to the governor’s office, more than 80% of local governments covered under the law are already compliant, allowing them full access to state housing-related grants. The 12 remaining cities lagging behind risk losing eligibility for a range of funding programs across multiple agencies, including housing, energy, economic development and transportation.
However, the rollout has not been without conflict. Six cities — Arvada, Aurora, Glendale, Lafayette, Greenwood Village and Westminster — filed suit in May, arguing that Colorado’s new requirements violate their authority as home-rule municipalities and could strip them of control over zoning decisions like parking rules and density near transit. That lawsuit remains unresolved, and could determine how far the state can go to mandate statewide housing reforms.
As the legal battle plays out, state leaders are moving full speed ahead on policies encouraging small-scale, neighborhood-based housing growth. For homeowners across Colorado, the ADU grants may offer a chance not only to add value to their property but to help address the statewide shortage of affordable homes.
Originally reported by Colorado Newsline in Pagosa Daily Post.
