Construction Defects Reform Bill Aid to Affordable Housing

Colorado has passed a law to break down barriers to building more condominiums, which could boost construction of more affordable housing across the state.

Gov. Jared Polis signed House Bill 25-1272, which reboots the construction of condos and townhomes in Colorado by reforming construction defects rules and aims to increase construction of middle-market housing, the Denver Business Journal and the Democratic governor reported.

The law, dubbed Construction Defects and Middle Market Housing, was inked by the president of the state Senate and the speaker of the state House before receiving the Hancock by the Colorado governor.

Lawmakers had worked for two years to pass a reform bill changing Colorado’s Construction Defect Action Reform Act, enacted in 2003, which created a framework to solve disputes over construction defects outside of a courtroom.

The law had a major side effect: condominium construction in Colorado withered, adding to a housing affordability gap.

Since then, a key concern from developers has been the high cost of litigation stemming from alleged defects in lower-priced housing. Construction defects reform has been demanded by business leaders concerned about the fewer number of affordable homes.

Beginning Jan. 1, the bill establishes a multifamily construction incentive program.

Participating developers must offer warranties covering defects and damages, at no cost to homeowners.

Buyers of properties built under the program would receive a one-year workmanship and materials warranty, a two-year plumbing and electrical warranty and a six-year major structural components warranty.

Participating builders must undergo third-party inspections during construction to address issues before obtaining a certificate of occupancy.

The bill also increases the threshold for homeowners associations suing developers over defects, requiring at least 65 percent of unit owners to approve, up from a simple majority.

The bill aims to promote homeownership, particularly for first-time buyers in Colorado, by incentivizing quality construction and simplifying defect resolution. Rep. Shannon Bird, a Democrat representing Westminster, stated that the bill would foster a better environment for affordable housing construction.

Condos and townhomes are considered affordable starter options, but their development has significantly decreased.

Before 2009, there were 1.25 new apartments per condo; recently, that ratio has shifted to 14 apartments per condo. The decline aligns with a housing shortage of at least 100,000 homes in the state.

— Dana Bartholomew