Three bills passed by the Colorado Legislature — and a clear directive from Gov. Jared Polis — could reshape the landscape for housing construction in the state. But while the 2024 session focused on easing local restrictions on denser development, 2025 may be remembered for attempting to give builders the legal and financial tools to actually start building.

On Monday, Gov. Polis signed House Bill 1272, the first significant construction-defects reform to pass in Colorado in eight years. The bipartisan bill is designed to revive the stalled condominium market — a once-common option for first-time homebuyers that now represents just 3% of new housing due to concerns over lawsuits and rising insurance costs.

HB 1272 sets up a voluntary incentive program for condo developers who agree to higher quality standards and third-party inspections in exchange for reduced legal liability. Builders who enroll must offer warranties of at least six years and hire outside inspectors to oversee construction at various stages.

The goal, said Rep. Shannon Bird, D–Westminster, is to "spur new housing options that Coloradans can afford and offer more Coloradans a fair shot at the American Dream.”

Yet despite widespread support for the bill — it passed the House 61-3 — industry leaders have raised concerns that the reforms may fall short of truly restarting condo construction. Gov. Polis acknowledged those worries by including a directive that state agencies track participation and housing output under the new program.

While Polis said the law “will unlock opportunities for more housing now,” he also asked the Department of Local Affairs and state demographer to analyze the results. The data will help determine if HB 1272 truly increases supply — or simply falls flat.

Ted Leighty, CEO of the Colorado Association of Home Builders, has voiced skepticism. He warned the bill could be “too obtuse and too prescriptive” to attract developers, especially if insurers don’t reduce premiums.

“Effectively defining what is and what isn’t a defect should be the foundation of all reforms,” Leighty told lawmakers. “Claims should be reserved for actual damages and life and safety issues.”

Builders still face the possibility of lawsuits for issues that significantly impair a system’s function, result in injury or death, or pose unreasonable risks — and they could still be on the hook for attorney’s fees. That, Leighty said, may not be enough of a legal shield to shift the needle on development.

A competing proposal from Senate Minority Leader Paul Lundeen, SB 131, attempted to set stricter limits on what constitutes a defect. Lundeen called his bill a “major difference” from HB 1272 and argued that it would provide the legal clarity builders and insurers need to return to the condo market. But the bill was killed in committee on a party-line vote.

Leighty also questioned whether HB 1272’s inspection mandates might actually increase costs, noting that “builders may have to use multiple inspectors to cover its requirements and end up spending so much that it offsets much of the reductions in insurance costs.”

Even supporters of HB 1272 recognized its limitations. “While no policy is perfect, this is a policy that will put us in the right place,” said Rep. Ryan Gonzalez, R–Greeley. “It is not the answer to the affordable-housing crisis. But it is a step in the right direction.”

The new law arrives as the median home price in Colorado has soared to $550,000 and the average age of first-time buyers has risen from 35 to 38. With a housing shortage exceeding 100,000 units, legislators pursued multiple strategies beyond construction-defects reform to spark development.

Another bill signed by Polis, SB 2, directs the state housing board to draft regional building codes for factory-built housing, with the goal of providing regulatory certainty and speeding up lower-cost construction. And SB 6, which awaits his signature, allows the state treasurer to invest $50 million in bonds for permanently affordable, owner-occupied housing.

Senate President James Coleman, a sponsor of HB 1272, said the legislation reflects a broader shift in state priorities. “This law is a proactive solution that incentivizes responsible development, making it a win-win for homeowners and builders alike,” he said. “It is intended to meet the demands of our communities, respond to changing demographics and provide housing that is adaptable to different housing sizes and needs.”

Still, Polis’ directive to “collect, analyze and make public the impact of these reforms” may prove to be the most important element. If data shows that builders remain on the sidelines, state lawmakers could be forced to revisit the issue — and consider deeper reforms.

Originally reported by ED Sealover in TSS Colorado.