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Renewed Construction Defects Reform Could Be Headed To Colorado Capitol

Colorado lawmakers may feel the need to get creative as the state's affordable housing crisis deepens.

Reforms to the state's construction defects laws, a familiar but thorny issue, could resurface this year at the Colorado State Assembly, which on Monday convened for the 2023 session.

Legislators may again take up the matter after passing a bill in 2017 that changed the threshold at which a condo developer can be sued, the Denver Business Journal reported.

For years, Colorado residents were able to file construction defect lawsuits against developers with just a majority of homeowners’ association board members. The 2017 law changed that rule to require a majority of residents, with the goal of enticing developers, who said that such suits were making the cost of condo projects untenable.

Lone Tree Mayor Jackie Millet, who chairs the Denver-area Metro Mayors Caucus, told the Denver Business Journal existing rules still have a chilling effect on condo development in the state. Other priorities may include measures that offer developers a “right-to-repair” option before facing litigation, or target the high costs of liability insurance.  

Legislators may feel the need to take action to address the factors contributing to a housing crisis in the Denver metro, with a significant shortfall of affordable for-sale homes and condos. Existing rules are thought to dissuade developers from building all but luxury condo projects, which factor in the cost of potential litigation into their pricing. But critics say that’s led to a dearth of affordable options. In March, Denverite reported that Denver had a 50,000-unit shortfall for residents making below 60% of the area median income. 

Condos represented only 4.3% of new-home starts in Q3 of 2022, the Business Journal reported. That’s down from a peak of 25.6% in Q1 of 2008 — a number that trended steadily downward throughout the 2010s. In other major U.S. cities, the number tends to be over 20%, according to a white paper from the Denver Metro Chamber of Commerce. 

More details on potential bills are expected to come as consumer and business lobbying groups get to work in the coming weeks and months, Colorado Competitive Council Executive Director Rachel Beck told the Business Journal.