Colorado ADU Owner-Occupancy and Rental Rules

Section 29-35-403 sets the ADU rules for a subject jurisdiction. Section 29-35-402(21) defines that term two ways: a municipality with a population of one thousand or more, as reported by the state demography office, that is within a metropolitan planning organization, or the portion of a county that is both within a census designated place with a population of forty thousand or more and within a metropolitan planning organization. Under subsection (1), on or after June 30, 2025 such a jurisdiction shall allow, subject to an administrative approval process, one accessory dwelling unit as an accessory use to a single-unit detached dwelling in any part of the jurisdiction where single-unit detached dwellings are allowed.

Owner-occupancy is addressed in subsection (2)(b). From June 30, 2025 a subject jurisdiction shall not require an ADU, or any other dwelling on the same lot as an ADU, to be owner-occupied. The bar therefore covers the main house as well as the ADU. The statute keeps two exceptions. A jurisdiction can require the owner to demonstrate residence on the parcel when an application is submitted to construct or convert an ADU, but not when the ADU is being constructed simultaneously with a new primary dwelling unit. It can also require that showing when an application is submitted for a license or permit for a short-term rental on the parcel through a local law or program.

Short-term rental stays with local government. Subsection (3)(g) says nothing in the section prevents a subject jurisdiction or other local government from enacting or applying a local law concerning the short-term rental of an ADU or any other dwelling on the same lot. Section 29-35-402(19) defines a short-term rental as the rental of a lodging unit for less than thirty days and lets a local government apply its own definition for purposes of the part.

The same subsection (2) also bars a new off-street parking requirement, except as subsections (3)(a) and (3)(b) allow, and bars any restrictive design or dimension standard as defined in § 29-35-402(18). Subsection (3)(f) keeps impact fees under section 29-20-104.5. Subsection (4) limits the section to parcels that are not exempt parcels: parcels without a domestic water and sewage treatment system or a well that can supply an additional dwelling unit, historic properties outside a historic district, and parcels in a floodway or a one hundred year floodplain. Section 29-35-404 separately lists, as one strategy for supportive-jurisdiction certification, a program to regulate the use of accessory dwelling units for short-term rentals. The part was added by HB 24-1152, ch. 167, effective May 13.

Sections 29-35-402 and 29-35-403 print no penalty, fine or enforcement procedure. What they print is a prohibition: a subject jurisdiction shall not require owner-occupancy outside the two application-stage exceptions in subsection (2)(b). Any penalty for breaking a short-term rental rule comes from the city's or county's own local law, which subsection (3)(g) leaves in place. Section 29-35-404 involves the department of local affairs only through voluntary supportive jurisdiction certification.