ADU and Occupancy Limit Laws Aim to Ease Colorado’s Housing Crunch
The Common Sense Institute Colorado (CSI Colorado) recently released its Homebuyers Misery Index, and the results were hardly surprising. The seven-county Denver metro area continues to wrestle with a severe housing shortage, keeping home prices high and affordability out of reach for many buyers and renters.
According to the report, the Denver area’s housing deficit in 2024 was estimated between 64,095 and 135,139 units—a gap the state is now attempting to close.
Two New Laws Aim to Boost Housing Supply
In response, Colorado lawmakers passed House Bill 24-1152 (the ADU Law) and House Bill 24-1007 (the Occupancy Limit Law). Together, they’re designed to make it easier for property owners to build and rent Accessory Dwelling Units (ADUs), adding much-needed housing to the market.
The ADU Law speeds up permitting by replacing public hearings, board reviews, and rezoning requirements with a simpler administrative approval process. It also eliminates some of the common hurdles—like mandatory off-street parking—that have slowed ADU construction in the past.
The Occupancy Limit Law removes city and county authority to dictate who may live in a private rental. This change could open the door to more shared housing arrangements, increasing affordability.
Both laws took effect July 1, 2025.
Key Provisions at a Glance
- Owner-occupancy rules are eliminated
Cities can no longer require an owner to live in the main home or the ADU. Exceptions exist if you’re applying for a permit or using the ADU as a short-term rental (STR).
- Local governments can’t set occupancy limits
While owners and HOAs can still set rules, cities and counties can no longer limit how many unrelated people may live in a single home.
- Short-term rental rules stay the same
STRs remain under local control. These new laws target long-term rental supply, not vacation rentals.
- Design flexibility for ADUs
Homeowners control most aspects of ADU design, though cities can prohibit units under 500 sq ft or over 800 sq ft, larger than the main dwelling, or those affecting historic districts or safety codes.
- HOA restrictions may be overridden
If your HOA previously banned or heavily restricted ADUs, the new law could allow them—provided “reasonable restrictions” don’t make construction cost-prohibitive.
Local Pushback
Not everyone is on board. Several municipalities—including Aurora, Arvada, Glendale, Greenwood Village, Lafayette, and Westminster—are challenging the laws in court, seeking to protect their home rule authority and preserve local growth plans.
For example, Lafayette’s Comprehensive Plan, which outlines priorities like community character, environmental stewardship, and economic development through 2040, could be partially overridden by these state laws.
Balancing Affordability and Character
At the heart of this debate is a shared goal: creating communities that are affordable, livable, vibrant, and safe—without losing the unique qualities residents value.
These laws may help move Colorado toward that balance, but as always, the details will determine the outcome.