Colorado's Housing Affordability Crisis: Causes and State-Level Solutions

Colorado faces a significant housing affordability crisis, characterized by a severe shortage of homes relative to demand, which has driven median listing prices to $599,104. A recent industry report card gave the state a mediocre score of 51.1, highlighting a critical imbalance where economic growth has dramatically outpaced new construction. This article analyzes the data behind the shortfall and examines the policy measures being implemented to increase supply.

What is Causing Colorado's Housing Shortage?

The core issue is a simple equation of supply and demand. Colorado's strong economy continues to attract new residents, but the pace of new construction has not kept up. In 2024, the state accounted for 2.2% of the nation's housing permits, which is only slightly higher than its 1.8% share of the U.S. population. This results in a permit-to-population ratio of about 1.2, indicating that building activity is barely matching baseline growth needs, not closing the existing deficit. The problem is exacerbated in the Western U.S., where higher land costs, supply chain bottlenecks, and restrictive zoning regulations—rules that dictate how land can be used—make it difficult to build at the necessary scale.

How Does the Affordability Gap Impact Homebuyers?

The affordability gap is the chasm between home prices and what typical households earn. With a median household income of $90,555, many Colorado families are priced out of the market. The state's Affordability Score—a metric comparing income to housing costs—was a low 0.55, meaning a significant portion of listed homes are financially out of reach. When the median home price is nearly seven times the median income, buyers are left with limited options, increased competition for fewer homes, and higher financial strain. This situation underscores the importance of title insurance, a form of indemnity insurance that protects homeowners and lenders from financial loss due to defects in a property's title, which is a critical step in any purchase.

What is Being Done to Increase Housing Supply in Colorado?

Governor Jared Polis has made housing a top priority, initiating several measures to accelerate construction. Based on our experience assessment, the most significant actions include:

• Executive Actions to Reduce Barriers: In 2025, the governor issued directives instructing state agencies to prioritize grants for communities that promote denser housing, particularly transit-oriented development (housing located near public transportation) and mixed-use projects.
• Legislative Changes: New laws have been signed to legalize Accessory Dwelling Units (ADUs)—smaller, independent residential units on the same lot as a primary home—statewide, expand allowed housing types, and reduce mandatory parking requirements. These changes are designed to lower construction costs and speed up development.
• Focus on Streamlining Permits: A key part of the plan is to reduce permitting delays, a common hurdle for builders that increases project costs and timelines.

Is New Construction the Key to Improving Affordability?

Yes, increasing the supply of homes is widely seen as the primary long-term solution. Nationally, newly built homes are helping to ease pressure; the median listing price for new homes was $450,797, showing almost no year-over-year increase, while prices for existing homes rose 2.4%. In Colorado, the new construction premium—the price difference between new and existing homes—is a modest 5.3%. This suggests that adding more new homes to the market could help stabilize prices overall. As one industry advocate noted, "America is short more than 4.7 million homes, and every new home built helps close that gap while fueling local economies."

Conclusion: A Market in Transition

Colorado's housing market is at a crossroads. While the challenges are significant, the state government is actively pursuing policies to stimulate construction. For potential buyers, the key takeaway is that relief is predicated on a sustained increase in housing supply. The success of these efforts to remove bureaucratic barriers and encourage smarter growth will be the determining factor in whether Colorado can rebuild its housing affordability and restore access to the market for its residents.