Coming up on the November 2023 election in Colorado is a ballot measure concerning a reduction in property taxes across the state. Proposition HH is much more than a simple tax reduction measure, however. Among other issues, it creates new subclasses of property, changes the state’s revenue cap, and directs funds toward public education which might previously have been returned as TABOR rebates.

It’s a complex measure with many factors for voters to consider. Given that complexity, Colorado Center on Law and Policy has taken a neutral position on Prop HH. However, because the measure is highly relevant, in different ways, to those experiencing poverty in Colorado, we are providing this evaluation of the proposition and the factors which might be taken into consideration before Coloradans head to the polls.

How did proposition HH come about?

The value of housing and property increased at a dramatic rate during the pandemic. In Colorado, the value of real property is reassessed every other year, but the valuation for residential properties is typically based on sales of comparable housing in the surrounding neighborhood. (The specific process is spelled out in state statute.) Higher assessed values, assessed at the peak of property values, reflected the dramatic increase in the value of those assets, reflecting growing wealth.

Often, property owners welcome an increase in the value of their house or other property. The increase in equity improves an owner’s financial standing, and can be tapped for loans. However, this growth does also portend higher property taxes to come. For most homeowners, this growth in value does not translate to an increase in income until the asset is sold. So, homeowners, particularly those on fixed incomes, are left concerned about how to pay an increasing property tax bill.

How would Prop HH address this issue?

In short, it is difficult to say how much Prop HH will lower property taxes for property owners. In some cases, homeowners might still see their taxes go up.

In terms of property taxes, there are three factors that determine how much is owed: the property value, the assessment rate, and the mill levy. The property value is multiplied by the assessment rate (which varies based on the type of property it is). The product is known as the “assessed value”, which is then multiplied by the mill levy rate to find the final amount of taxes owed.

Prop HH makes changes to the first two factors. It would provide most homeowners with a $50,000, then a $40,000 reduction in their home’s property value when calculating property taxes owed through 2032, with an even larger reduction for older adults between 2025 and 2032 ($140,000). In other words, a $500,000 home would be treated as if its value was $450,000 when calculating its assessed value.

It also lowers the assessment rates and creates new categories of property, most notably distinguishing between owner-occupied primary residences (I.e., the owner lives in their home full-time) and those who own property but do not live there full-time.

However, Prop HH does not change mill levies, which are set by local government and other taxing districts, and which change year to year based on the total assessed value of property. These are set in December, after the November election. So, it is conceivable that a property owner could still see their property taxes go up despite the changes made by Prop HH.

Prop HH attempts to limit local governments’ ability to set mill levies by capping the amount of property tax revenue they can raise each year. Elected officials may choose to lift this cap after a public hearing. Furthermore, school districts receive around half of the property tax revenue raised in most jurisdictions, and are required by state law to maintain their mill levies—state law also requires school districts to raise their mill levies in the coming years.

What is the main thing Prop HH does?

The bigger story for HH is the second half of this proposition’s title. Prop HH would raise the TABOR revenue limit, allowing the state to keep more tax dollars of many kinds–sales, income, excise–then use these general fund dollars to backfill schools and local government on a portion of the property tax revenue they will not receive as a result of Prop HH.

The new revenues above the existing TABOR spending limit are solely dedicated to the funding of K-12 schools and backfilling of local governments. $20 million of these funds would also be set aside for rental assistance programs.

The increase in the existing revenue cap to the Prop HH cap would reduce potential TABOR rebates to individuals but its impact depends on which approach is used to refund taxpayers. Prop HH would create a flat TABOR rebate for one year only, with the normal refund mechanisms used in following years unless the legislature passes a bill next year or in the years thereafter. So while Prop HH could reduce TABOR rebates to individuals in the future, the impact it would have will depend on the amount to be refunded and how those refunds are distributed.

While CCLP is remaining neutral on Prop HH, the following are factors which might cause an individual to vote one way or another on the proposition:

Reasons you might vote “Yes” on Prop HH

1. Increasing funding of K-12 education is one of your highest held values, regardless of how Prop HH would affect you personally. With its ten-year formula of inflation plus 1% growth each year, the portion of HH dedicated to school funding will grow from $125 million in 2024-25 to $2.16 billion in 2031-32. By increasing the TABOR revenue cap by an additional 1% per year, Prop HH would create an additional revenue source to fund K-12 public education in Colorado. In total, the state Legislative Council Staff forecast this higher cap will allow the state to retain an additional $2.2 billion in state fiscal year 2031-32 than it would be able to if Prop HH does not pass.
2. You are 65 years or older and receiving the Senior Homestead Exemption because you have lived in your home for 10 or more years. You would like to move, but don’t want to lose your homestead exemption. This proposal would make it portable and expand the assistance available to older adults who own their home. Those who receive this exemption currently can deduct up to 50% of the first $200,000 of their home value from the amount that is used to calculate their assessed value. Prop HH would make this benefit portable starting in 2025, and provide homeowners who qualify as a senior primary residence with a property value reduction of $140,000 ($100,000 from the exemption plus the $40,000 available to other primary homeowners).
3. You live full-time in the home that you own and would benefit from the $50,000 or $40,000 reduction in the value of your home when calculating its assessed value. Prop HH’s approach also makes the benefits of this reduction in home value progressive, as the reduction, per value of the home, would be larger for those with lower home values. This would help to rebalance the burden of property taxation in the state. According to the Institute on Taxation and Economic Policy, property tax in Colorado is regressive, as the lowest 20% of households by income paid 2.5% of their income on property taxes in 2020, compared to 1.9% of income for the top 1%.
4. You believe that limiting tax breaks for second homes versus owner occupied homes is good affordable housing policy and/or that it is fair to ask those who own more than one home (especially if they are collecting rental income from the property) to pay more in property taxes. If Prop HH passes, it will create a separate assessment class for residential property that is owned by the primary resident of the home and property that is not (I.e., second homes, rental properties, short-term rental properties that are exclusively used as rentals, etc.). After a couple of years, the measure would reduce the property tax benefits provided by Prop HH for non-primary residential property owners while maintaining those provided to homeowners who live in their homes full-time.
5. You are a renter struggling to keep up with rent payments. Prop HH designates up to $20 million per year for renter assistance which could help a number of renters at risk for eviction. There is not a clear alternative source of $20 million that might be appropriated to rental assistance next year, and the Common Sense Institute estimates this funding could serve up to 4,000 renters who might have otherwise faced eviction without such assistance.
6. You are set to earn under $99,000 in adjusted gross income in 2023. Prop HH would change the TABOR rebate to a uniform amount for each tax filer for the 2023 tax year only. This change would provide Coloradans earning up to $50,000 with an additional $233, or double that for a couple filing jointly and an additional $37/$74 for households with incomes between $50,001 and $99,000. Without Prop HH, TABOR rebates will be distributed through the normal process, in which higher-income Coloradans receive larger TABOR rebates. If Prop HH does not pass, Coloradans earning $278,001 and up would receive $1,854/$3,708 compared to $587/$1,174 for households with incomes up to $50,000. Flat TABOR rebates for tax year 2023 would provide low-income households in our state with additional financial support to help them and their families meet their basic needs and better manage the increasing cost of living we’ve seen in our state over the past few years.
7. You prefer Prop HH to other measures being discussed to provide property tax relief. While not perfect, Prop HH is a better alternative than less desirable approaches and ballot measures that will likely go before voters next year, such as Initiative 50, which also do little for renters and may hurt schools and local governments since they do not create additional funding sources to help offset the loss in property tax revenue collected by local governments and other taxing districts.
8. You are a homeowner experiencing poverty. Just over one-third of Colorado households experiencing poverty owned their home, an important asset that helps households build wealth and increase their financial security. Between 2018 and 2021, the U.S. Census Bureau estimates the median homeowner below the poverty threshold saw their home value increase by $100,000. By providing property tax relief to these homeowners, close to three-quarters of whom were housing cost-burdened in 2021, may help them stay in their homes and continue building wealth.
9. You believe any and all efforts to chip away at TABOR are good, particularly the cap on the amount of tax revenue the state can keep. You may also be interested in voting yes on Prop HH if you generally like the aspects of TABOR that require voters to approve tax increases, but don’t like that it restricts the amount of revenue the state can collect and spend each year. And Prop HH would not eliminate TABOR refunds as others claim. Projections from the state estimate that Coloradans of all income levels will still see TABOR refunds in 2024 and 2025. Households earning $52,000 or less would see their refund in 2024 decrease by $31 if single or $62 if filing jointly, but would still see refunds of $326 or $652 if Prop HH passes.

Reasons to vote “no” on Prop HH

1. You are a renter and don’t own a home. The increase in housing costs Colorado has experienced over the past decade impacts both owners and renters. Yet Prop HH does not provide relief to renters, save the $20 million per year set aside for emergency rental assistance for a few thousand of those most at risk. Not only does it not provide relief to renters, but it also could result in renters receiving lower TABOR refunds in the future, if they receive them at all. While some proponents claim that any blunting of property taxes would likely show up as less rent in the future, increasing rent does not just reflect growing property tax bills. It reflects what the market will bear as well as operating and maintenance expenses their landlords most cover to maintain the property. In 2021, 32.9% of households in Colorado were renters. And while renters and homeowners had similar median monthly housing costs in 2021, the median renter household spent 30.2% of their income on housing compared to 18.0% for the median homeowner.
2. You don’t think Prop HH will have a significant impact on housing costs or affordability in Colorado. Property tax is just a small part of a homeowners housing costs. In 2021, the median homeowner in Colorado spent $1,563 per month or $18,756 per year on select housing costs. Property taxes accounted for around 11% of these costs. Given this, the loss in local government revenue is not worth the minor relief Prop HH would provide to homeowners. The state estimates that a homeowner with a home valued at $500,000 would see an average reduction in property tax between $186 and $276 in 2023 and $314 and $396 in 2024. While property taxes are paid annually or semi-annually, the relief provided to this household by Prop HH in 2024 would be equivalent to a savings of $26 and $33 each month. While this certainly would make it easier for struggling households to stay in their homes, many more who are not struggling would also receive relief under Prop HH.
3. You believe that Prop HH provides relief to households that may not need it. In 2021, 76.5% of homeowners, as well as 72.9% of households led by older adults (age 65 and over), reported paying less than 30% of their income on housing costs—in other words, three out of four homeowners in Colorado lived in housing that would be considered affordable to them based on their income. 56.0% of households spending more than 50% of their income on housing costs were renters, yet Prop HH provides all homeowners with relief. The $20 million for rental assistance that would come from passing Prop HH can provide support to a limited number of renters. Estimates from the Common Sense Institute suggest that this funding could help as many as 4,000 renter households, yet there were 187,818 renter households in 2021 spending 50% or more of their income on housing. This rental assistance would also only help renters in an emergency scenario, and does nothing to lower rents or reduce housing costs for renters. Lower property tax bills for landlord could mean tenants see their rents not grow by as much in the coming years—but there is no guarantee this will happen as landlords are still free to set their rental rates at whichever price they believe the market can bear and nothing in Prop HH requires the property tax relief to be passed on to tenants.
4. You value the discretionary cash provided by TABOR refunds more than increased funding for schools and subsidies for the tax bills of property owners (who have seen their wealth increase by $90,000 at the median since 2018 due to rising home values). This potentially would allow an individual to help meet their own most pressing need with the TABOR refund- be it rent or property tax.
5. You believe the state should direct resources in a new area — e.g. behavioral health, child care, transportation, etc. Voters should be aware the additional revenues are reserved for K-12 education and local government property tax backfill only. There are other pressing needs facing Coloradans that this ballot measure would not help us to address. And just because this measure creates a new funding stream for K-12 education does not mean that it also frees up a comparable amount in the general fund to be used for other priorities.
6. You believe a subsidy to property owners only is fundamentally unfair. While Prop HH may have some worthwhile policy ideas, the TABOR surplus — comprised of taxes everyone pays, including sales, excise, income etc. — would provide a subsidy to just those who own property. According to the 2022 Department of Revenue Tax Profile & Expenditure Report, page 200, despite our “flat” income tax, the lowest income Coloradans (below $15,000/yr) pay the highest percentage of their income in state taxes, at 7.6%. Middle income Coloradans pay 4.3- 4.4% of their income in state taxes. The wealthiest Coloradans — those earning above $200,000 — actually pay the lowest percentage of their income in taxes, just 4.1%.
7. You worry that households who are eligible for the new assessment categories may not actually access the relief proposed by Prop HH. The new assessment categories created by Prop HH (primary owner-occupied home and senior owner-occupied home) require property owners to apply with their county assessor in order to receive the property tax relief proposed by Prop HH starting in 2025. Primary homeowners or seniors who are not aware they need to submit an application to their county assessor may miss out on the relief promised by Prop HH. There are also language and other barriers that may exclude certain groups of homeowners. Will the state provide counties with funding for outreach? How will it get the word out that homeowners need to apply for these benefits in order to receive them? It’s also worth noting that the classification of a property into either of these subclasses will remain confidential, and Prop HH will not allow us to understand the extent of homeownership by corporate entities in Colorado despite these new assessment categories.

Learn more about how Prop HH might affect you and your family!

This calculator, provided by the Legislative Council Staff of the State of Colorado, allows you to explore how Prop HH could change your property tax bill and expected TABOR rebates if it passes in November:

Proposition HH Calculation Tool

Keep in mind: This estimate does not consider the property tax revenue limit that would be created by Prop HH. It assumes that mill levies in 2023 and 2024 will be the same as in 2022, which is very unlikely to be the case anywhere in Colorado. The actual property tax savings you will experience due to Prop HH could be higher than estimated by the calculator, while the actual amount you owe may be lower.