Traditionally seen as the “third rail” of housing policy, legislators have been hesitant to address the challenges surrounding building affordable condos. This year, however, a new bill aims to change that, focusing on preventing construction defects from the outset rather than dealing with costly litigation after the fact. The bill, which will be introduced this week, seeks to navigate the long-standing conflict between homebuilders and trial lawyers. Trial lawyers argue that higher-quality construction would eliminate the need for lawsuits, while homebuilders have long pointed to litigation as the primary driver of higher costs.

The proposed legislation, backed by a diverse coalition of lawmakers, requires an independent third-party inspector to assess construction at various stages. Builders would be responsible for addressing and fixing any issues flagged by inspectors, creating a system that encourages higher-quality workmanship. Supporters believe this approach would not only improve standards but also provide builders with a stronger legal defense in the event of disputes. Rep. Shannon Bird, one of the bill’s sponsors, noted that best practices already exist but are inconsistently applied. By making them standard practice across the industry, she believes the legislation could offer a long-term solution.

One of the major cost drivers in affordable condo development is the rising expense of litigation insurance, which can add tens of thousands of dollars to the price of a unit. Years of legal battles over defective construction have led to skyrocketing premiums, making it nearly impossible for developers to build affordable condos. Bird stated that insurers see the bill as a step in the right direction, as it promotes early problem resolution before claims escalate. However, insurers have not yet committed to lowering costs in response to the proposed changes. Bird emphasized the need for a system that prioritizes quality over rapid construction, saying, “We need a better system. It can't be where we're just throwing up homes without regard to quality.”

Governor Jared Polis appears to support the effort, referencing the need for construction defect reform during his State of the State address. At a business roundtable, Polis stressed that condos could serve as crucial starter homes, helping individuals build equity toward single-family homeownership. "Condo construction has crawled, slowed to a near halt in our state," Polis said, reinforcing the urgency of the issue.

Beyond construction quality and litigation costs, the broader goal of the legislation is to address the lack of affordable housing for first-time buyers. Colorado has largely focused on expanding rental housing and strengthening tenant protections in recent years, but Bird argues that this approach only offers temporary relief. She believes that increasing homeownership opportunities is essential for long-term financial stability. "And it's no way to build wealth. It's no way to build financial security," she said, referring to the limitations of a rental-based housing market.

The push for homeownership has intensified as communities voice concerns over the overwhelming emphasis on rental developments. Bird pointed out that young professionals in her district, despite earning good salaries, find it impossible to buy a home. She warned that this growing frustration is contributing to a brain drain, where talented workers leave Colorado in search of better housing options elsewhere. "People want their kids to be able to grow up here and to stay in our community, and we're not a place where that's happening anymore," she said.

The proposed legislation is the latest attempt to break the legislative gridlock on construction defects. In 2024, competing bills from homebuilders and trial lawyers both failed, leaving the issue unresolved. Colorado’s existing Construction Defect Action Reform Act, enacted in 2001, allows homeowners to sue for a broad range of defects, from structural issues to minor cosmetic flaws. A recent report from the Common Sense Institute highlighted the financial impact of these lawsuits, revealing that insurance costs for condos are now 233% higher than for comparable rental developments.

With bipartisan support and a growing sense of urgency, lawmakers believe this year’s effort has a stronger chance of success. House Minority Leader Rose Pugliese acknowledged that while the bill may not be perfect, it represents a necessary step toward addressing the housing crisis. “There is a desire by lawmakers on both sides of the aisle to address this issue because it's the No. 1 issue affecting affordable and attainable housing in Colorado. It's time we find a solution. It won't be perfect, but it moves us down the path to resolution.”

Originally reported by Marianne Goodland in Colorado Politics.