New Condos are Hard to Find in Colorado. Getting Developers to Build More will Roil the Capitol Next Year.

New Condos are Hard to Find in Colorado. Getting Developers to Build More will Roil the Capitol Next Year.

New Condos are Hard to Find in Colorado. Getting Developers to Build More will Roil the Capitol Next Year.
New Condos are Hard to Find in Colorado. Getting Developers to Build More will Roil the Capitol Next Year.                                                                  
by Elliott Wenzler, The Colorado Sun, October 2, 2023

New condominium construction in Colorado has plummeted over the past two decades, meaning people scouring real estate listings for a home they can afford are unlikely to find one of the most common types of entry-level housing.

Builders say the reason for the decline is simple: Colorado laws lack guardrails, leaving developers susceptible to costly lawsuits over things like leaks, concrete leveling and defective cabinetry, which in turn makes it too difficult and expensive to find insurers willing to underwrite condo projects. State law prevents builders from limiting buyers’ right to sue and spreads liability for any construction errors among all the contractors and subcontractors who work on a project, even if they didn’t cause the defect.

“It’s not that people don’t want to take responsibility for (their) product,” said Dave Lemnah, president of Lokal Homes, a Colorado developer that builds condos. “They really do want to take responsibility for their condo product. It’s just that we’ve got such an uneven playing field.”The attorneys filing the lawsuits say builders are just looking to maximize their profits.  “The building industry could easily put me out of a job,” said Chad Johnson, a Colorado lawyer who represents homeowners in lawsuits against builders. “All they have to do is not be negligent.”

Caught in the middle of that power struggle over so-called construction defects liability, playing out in the Capitol and the courts, are Coloradans struggling to find an affordable place to live. The legislature has been reluctant to take on reform because of how politically fraught the topic is. But the failure this year of Gov. Jared Polis’ signature land-use measure, which would have imposed higher residential density zoning rules on local governments, has reignited the push to take on the issue.

Now, a group of Colorado lawmakers is making moves to pass legislation next year aimed at jumpstarting condo construction and easing the housing affordability crisis. Some of their ideas include isolating liability for construction defects claims to the people who did the work and making it easier for builders to resolve a defect before it leads to a lawsuit. 

“Policy solutions I’d like to see would be ones that can cut down on litigation,” said state Rep. Shannon Bird, a Westminster Democrat who plans to sponsor a construction defects bill at the Capitol next year. Bird said she wants to do that while maintaining homeowners’ ability to hold builders accountable for mistakes and have the issues fixed promptly.

The big question is whether the Democratic majority at the Capitol, which has bristled at the idea of easing liability protections for homebuyers, will get on board. Some Democrats say construction liability changes are a distraction from policies that would be more effective at increasing the number of homes available to entry-level buyers.  

Then there’s the governor, who appears open to construction defects reform but can be difficult to pin down on his policy positions. Polis said at The Colorado Sun’s SunFest conference last week that he’s for “anything that will reduce housing costs” — and that reducing construction defects lawsuits would do just that.  “Of course we’re supportive of that,” he said. 

A constricted condo market 

In the early 2000s, condominium construction was booming in the Denver metro area. It even outpaced new apartment construction in some years. 

Condos are units in a multifamily building that are individually owned and occupied, letting people build equity as they pay off their mortgage and the value of the property increases. They can also serve as an option for people, like retirees, looking to downsize. By comparison, apartments are rented out, often by a property management company. The occupant gets no investment return.