A new law in Colorado is expected to help address the state’s severe housing shortage by encouraging the development of more condominiums and townhomes—types of housing that have been largely absent in recent years due to legal risks associated with construction defect claims.

The legislation, recently signed into law, seeks to strike a balance between ensuring high-quality construction and reducing the legal exposure that has long deterred developers from building multifamily for-sale housing.

The new measure “has kept developers from construction of an entire category of entry-level housing—condominiums and town homes,” according to a report by Ark Valley Voice. Lawmakers believe that the fear of litigation, particularly from homeowners' associations citing construction defects, has significantly contributed to the dearth of attainable housing for first-time and lower-income buyers.

To address this, the law introduces the Multifamily Construction Incentive Program, which will take effect on January 1, 2026. Under the program, builders who choose to participate must provide warranties covering defects and damages. They are also required to hire a third-party inspector to periodically evaluate the quality and progress of construction. In return, developers will benefit from enhanced legal protections, offering them a layer of shield against potential lawsuits.

By fostering a more stable and predictable legal environment, the legislation aims to lower barriers for developers and ultimately deliver more attainable housing options.

The state currently faces a shortage of over 100,000 homes, leaving many potential homeowners—particularly first-time buyers—without viable options in an increasingly unaffordable market.

Legislators hope that the incentive program will not only lead to a resurgence in condo construction but also promote greater accountability and transparency in the building process through its mandatory inspection and warranty requirements.

Supporters of the measure say it is a critical step toward expanding housing access and revitalizing the condominium sector in a way that protects both buyers and builders.

Originally reported by BDC Network.