During the 2024 legislative session in Colorado, there is a notable focus on construction liability reform. The effort is driven in large part by a lack of condo construction and availability as an important component of the broader housing availability mix.
- Condominium development between 2018 and 2022 is 76% lower than between 2002 and 2008. This has resulted in 14 new apartments for every 1 new condo in recent years, while there was 1 new condo for every 1.25 apartments in the 6 years prior to 2009, according to the Common Sense Institute.
The high frequency and high cost of construction liability litigation has driven insurance companies to raise insurance rates for developers.
- Insurance costs for condominiums surged to 5.5% of a project’s hard costs, which was more than 233% higher than multifamily rental home projects
- The number of active condo developers in Colorado has fallen due to high costs. Over the 15-year span from 2007 to 2022, the number of unique condominium developers engaged in condominium development plummeted by 84%, dropping from 146 to 23 1.
Policy Matters…in Construction Liability Reform
To fill the market demand for affordable condominiums, Colorado needs policy reform that balances homeowner and developer risk. Specifically, a bi-partisan effort is in motion as NCLA and others advocate for changes to the state’s construction defects law, which governs builder liability for condominium construction. Here are the key points:
- Reforming Liability Rules: The proposed legislation aims to address the current rules that have led to insurance companies exiting the market and have made condo prices unaffordable for many first-time homebuyers.
- Right-to-Cure Provision: A significant part of the reform effort is the inclusion of a right-to-cure provision for builders. This provision would allow builders to address defects before legal action is taken, potentially reducing litigation costs and streamlining the resolution process.
- Affordability Impact: By reforming construction defect laws, lawmakers hope to encourage more condo development, which could help drive down housing prices and make homeownership more accessible for Coloradans.
Following on the heels of years of failed policy on construction liability reform, the 2024 legislative session aims to strike a balance between protecting consumers and promoting housing affordability by addressing construction defect laws and fostering a more sustainable real estate market.