Housing prices have been on the rise for a couple of years now, and while that’s good news for a robust and growing economy, first-time homebuyers are having a harder time finding affordable places to live.
But thanks to a couple of Senate bills winding their way through the General Assembly, homebuilders and developers might once again consider condominiums — something that isn’t popular in Colorado right now because of the way construction defects are litigated. The threat of lawsuits continually drives up both the cost of building and insurance for the complexes.
Two bipartisan construction-defects bills — something that legislators failed to pass last session — seek to solve legal issues that developers claim is hampering their ability to build condominiums in Colorado, frequently the entry point for young couples and new homeowners.
Senate Bill 156 requires homeowners first to go through mandatory arbitration and mediation before filing suits based on faulty construction. Mediation would come first, and would be handled by an outside third party. The bill would also require homeowners associations to obtain written consent from a majority of owners in the development in order to pursue litigation- — and would allow the association to put in super-majority requirements in their covenants.
Senate Bill 45 addresses defense costs of litigation once lawsuits are filed. Essentially, the bill gives courts the ability to evaluate the level of contractors’ responsibility and decide their portion of litigation costs. It removes requirements for developers to pay for attorneys from the time the suit is filed through the settlement process. This bill has bipartisan support, but must work hand-in-hand with SB 156, developers say, for it to have a lasting impact on the construction industry. The goal is to ease insurance requirements and costs for construction companies.
Thanks to a couple of Senate bills winding their way through the General Assembly, developers might once again consider condominiums.
At least four more bills are expected to address the construction-defect issue in the legislature. House Speaker Crisanta Duran told the Denver Post earlier this year that precision bills might be passed more easily than a broad catch-all approach to the legislation.
And as more people pour into the state, the legislation is needed to revive affordable housing construction throughout Colorado.
Why are these bills necessary?
As it stands, a single suit from one homeowner affects every owner in a condominium complex — even buildings without construction issues. Mortgage lenders won’t allow people to buy in the complex until litigation is complete, and that sometimes takes years. As more people opt for renting, it further pushes down the number of buyers available for the condos, because lenders also are hesitant to lend money when there are large numbers of renters in a development.
Many affordable housing proponents believe tort reform in the condo market is vital to making sure people can afford their first homes.
As housing rates rise — the average price in Colorado Springs is more than $260,000 — condos could be a viable option for people who can’t afford the more expensive options available right now.
More than 17 communities with a combined 2.5 million residents have passed local ordinances promoting owner-occupied condo development. Colorado Springs, Denver, Aurora and Fort Collins are on that list. And while action at the local level is important, the difference in ordinances makes it difficult for builders to ensure they are complying with laws that vary from district to district, town to town.
Currently, the only condo construction is in the high-end, luxury developments — not in the affordable housing range.
These bills could solve a pressing problem in Colorado Springs.
Economists forecast that the city needs upwards of 5,000 new homes a year to keep up with growth. According to the 2016 numbers from the Pikes Peak Regional Building Department, there were 3,237 single-family homes, 277 new townhomes, three condominium developments and 50 multi-family developments. There’s room at the lower end of the spectrum for condominiums, which are a way to attract Millennials to the city’s core.
These two bills are a way to protect owners while also keeping costs down for builders. And both have passed the first hurdle of the General Assembly. As both are bipartisan efforts, hopes remain high that the legislature will act to address the construction industry’s concerns.
While the legislation might not be the perfect solution, it seems to be a viable start to fixing a long-standing problem.