While condos on the slopes of Colorado’s mountains can cost millions of dollars, they’re often an important way for people to buy their first home — at least in the comparatively cheaper market of the Front Range.
But construction of condos in Colorado, and across the country, has decreased significantly.
Peter LiFari, executive director at Maiker Housing Partners, a public housing authority based in Adams County, told lawmakers at a committee hearing that for every 14 new apartments constructed in the state, only one condo is constructed.
“Before 2009, that ratio was just 1.25 to one,” LiFari said. “This collapse has removed a critical bridge to homeownership, leaving families trapped in scarce affordable renting units unable to move up.”
Nikolaus Remus, advocacy engagement director for the Colorado chapter of the American Institute of Architects, said at a committee hearing that several factors made condo construction difficult in the state.
“Architecture firms, even those with a solid record of quality design in multifamily residential projects, get dragged into condo lawsuits,” Remus said. “Our insurance rates are higher when we take on these projects. We have limits on how many of our projects can be in this risky area of work. Our fees have to be higher as a result, and even though we don’t want to be, that means we’re part of the reason the condo projects that do come to market are nowhere near affordable offerings.”
The problem extends beyond architects. Jason Brown, president of Ascent Builders, told legislators that every single condo project he’s worked on has been involved in litigation for defects.
Lawmakers in the General Assembly want to reverse this trend and incentivize more condo and multifamily housing construction, and House Bill 25-1272 is a focal point of that effort.
The measure’s co-prime sponsors include Senate President James Coleman and span the legislature’s political range, with House Minority Leader Rose Pugliese also signed on as a sponsor.
Democratic Rep. Shannon Bird, one of the bill’s prime sponsors, said in the bill’s initial committee hearing that condos were the target because they have historically been the most affordable home ownership opportunity.
She and her co-prime sponsor, Democratic Rep. Andrew Boesenecker, said that the bill introduced to the legislature was the result of more than 100 stakeholder meetings across the state, and that it aimed to help both sides of the homeowner and homebuilder equation.
“The bill before you incentivizes construction of higher quality homes with warranties and creates a faster, less expensive process for homeowners to resolve problems that might occur so that people can spend more time enjoying their lives and less time fighting and in an expensive process to resolve challenges they’ve had,” Bird said.
Boesenecker explained that the bill establishes clear standards for construction defects claims, requiring third party inspections and reasonable mitigation efforts, and adjusts statutes of limitation and clarifies responsibilities in a defect resolution process.
“This bill ensures that homeowners receive timely, high quality repairs while fostering a more sustainable housing market,” Boesenecker said.
Part of the bill outlines a process that includes a warranty and a dispute resolution pathway for new condo development, but Bird noted that the process was optional for builders.
“They do not have to participate in the program if they don’t want to,” Bird said. “But if they would like to take advantage of some of the protections and pathways that we have created in the bill, then there are two requirements. First, they need to hire an independent third-party inspector who will be coming in and inspecting throughout the course of the home’s construction. And also, the homebuilder needs to warranty the work.”
That warranty varies depending on the part of the build. Bird noted that the warranty extended one year for workmanship; two for plumbing, heating, electrical and HVAC; and six for major structural components. If an issue arises outside of that framework, the bill then provides a path for resolution.
“The mantra in our bill is, ‘Let’s fix it before this gets more expensive and before things get worse,’” Bird said.
Support for the bill was wide ranging, and it included Colorado Counties, the Colorado Association of Realtors, the American Institute of Architects and Colorado’s state insurance commissioner.
Remus said AIA supported the effort to change the current litigation climate in Colorado for condominium projects.
Remus said the bill helps architects by expanding the existing certificate of review system, and that AIA also supported the broader set of protections in the bill.
Colorado Insurance Commissioner Michael Conway noted the insurance market has been strained on the liability side of construction defects. “We think that this bill will have the ability to increase competition in the state in one of two ways with our insurance companies,” Conway said.
He explained that insurance companies already in the state would compete more robustly on insurance premiums they’re offering, or, ideally, more insurance companies would come into the state’s marketplace.
LiFari also supported the bill at the hearing. He said the bill both preserves consumer protections through warranties and independent inspections and makes it possible for builders to build condos again.
But some fear the bill goes too far in protecting builders.
One group of homeowners appeared before the committee to recount their personal stories of problems created by construction defects, and they asked lawmakers to strengthen homeowner protections in the bill.
“As House Bill 1272 is currently written, it allows builders to bring in their own inspectors to sign off on homes in order to give themselves immunity from having to repair defects,” Kathy Eckert, one of the homeowners, said. She asked the legislators to amend the bill to ensure that third-party inspectors were both qualified and independent, narrow builder immunity and make sure that warranties in the bill were meaningful.
Several other homeowners who followed her testimony echoed her call for the changes.
Scott Wilkinson, a partner at Davis & Ceriani, told the committee that while he was thankful for the thorough process that the bill sponsors went through, that there was still work to do. He noted he represented construction professionals of all varieties in connection with the insurance aspects of construction defect claims.
He said he looked at the bill from a perspective of whether it would induce more building of condos and if it would address the frequency and severity of litigation. “The bill and the program, if one were to participate in it, unfortunately in this circumstance makes matters worse, not better,” Wilkinson said.
“I think the top level for us, right now, we understand that most of this bill is intended to be an opt in,” Wilkinson said. “And from our perspective, in order to at least preserve the existing framework, we need to make that opt in much, much clearer so that builders cannot be co-opted into the program and therefore exposed to, at least under the current draft and L001, the introduced draft, some of the ill effects.”
The bill went through a heavy round of amendments before going to a vote. The bill’s first amendment, L001, provided a new short title for the bill, deleted language that was requested by homebuilders, replaced the concept of a middle market approach to a voluntary multifamily construction incentive program, changed the language on third-party inspections and made several technical changes to the bill.
Other amendments were passed by the committee, including amendments to the first amendment. Amendments passed included one that changed the affirmative defense pieces of the bill to be clearer about the meaning of the word “immunity,” an amendment on documents requests that homebuilders asked for and an amendment related to an insurance company’s ability to deny coverage under certain circumstances.
The bill passed through committee with near unanimity, with the sole vote of dissent coming from Democratic Rep. Steven Woodrow.
While Woodrow said he supported the mission of increasing the availability of affordable housing, he said that a previous attempt at reform, in tort, made justice less attainable. He said he thought that the bill in committee went too far in that direction, and he wanted to see more evidence on how many units the legislation, if passed, would actually bring online.