(The Center Square) – Colorado businesses will be reimbursed for up to 20 percent of monthly operating expenses for manufacturing modular and kit homes under a new $40 million state program.

The Innovative Housing Incentive Program was established under House Bill 22-1282, which was passed during the last legislative session with bipartisan support. Under the program, eligible businesses can receive a reimbursement of up to $350,000, or up to $450,000 if located in Morgan County, Pueblo, the West End and the Yampa Valley.

Colorado is facing a housing shortage of between 25,077 and 116,907 units, according to an estimate by the Common Sense Institute. Colorado voters also passed a measure in November that will allocate 0.1 percent of state income tax revenue to cover affordable housing projects.

The Innovative Housing Incentive Program launched on Friday, according to an announcement from Democratic Governor Jared Polis and the state's Office of Economic Development and International Trade. 

“The Innovative Housing Incentive Program will help create up to 5,000 high-quality, low-cost housing units in Colorado over the next five-plus years, saving people money and creating new jobs,” Polis said in a statement. “Transformative programs like this ensure there is housing for every budget in our communities which is increasingly important as our state grows. This will support our teachers, healthcare providers, and other critical industry workers to access housing near where they work, helping ease workforce shortages.”

The funding targets Colorado-based manufacturers that build "innovative housing." They must have 500 employees or fewer and commit to increasing the state’s inventory of affordable housing.

“Colorado is already home to innovative housing manufacturers, including factories in urban centers like Denver, Grand Junction, and Pueblo, and rural areas like Buena Vista,” Eve Lieberman, executive director of OEDIT, said in a statement. “These companies, along with up-and-coming businesses looking to get a foothold, want to create jobs and develop housing in all types of Colorado communities: small, large, rural and urban.”

The program also includes per-unit incentives ranging between $1,500 and $6,000 for every unit built and installed in Colorado. Units designated as affordable and energy efficient will receive larger awards.

“The Innovative Housing Incentive Program is a critical step toward ensuring that Coloradans get the relief they need from the rising cost of living,” said House Minority Leader Mike Lynch, R-Wellington, who co-sponsored bill creating the program. “At a time when too many Coloradans are struggling to afford to live in this state, this program will deliver by creating good manufacturing jobs and better affordable housing options.”

Funding to implement the program is allocated from the state’s general fund. In addition to the state’s economic development team, the Department of Local Affairs, the Colorado Housing and Finance Authority and the Colorado Energy Office will join Polis's office in administering the program. OEDIT must annually provide a report of the program’s expenditures to the General Assembly.