On Monday, Colorado Governor Jared Polis signed House Bill 1272 into law, marking a major step in the state’s efforts to address its housing crisis and make homeownership more attainable. The bill aims to revive Colorado’s struggling condo market by reducing the barriers created by costly litigation over construction defects that have plagued the state for years.

This new law represents a significant departure from previous housing initiatives that focused primarily on rental housing and zoning reform. HB 1272 specifically targets the lack of affordable, middle-market homes, particularly condominiums and townhomes, which advocates say have been sidelined due to high insurance costs and lawsuits tied to construction defects.

Governor Polis, reflecting on the years of housing challenges in Colorado, emphasized the law’s importance in rebuilding the state’s condo market. “There’s no silver bullet” for dealing with Colorado’s housing crisis, he acknowledged. “But this law puts a critical piece in place.” Polis expressed his hope that in the coming years, the state will see the return of condos priced in the range of $250,000 to $300,000—an affordable option for many working families that could help them build long-term wealth.

Construction defects litigation has been a significant issue in Colorado, driving up insurance premiums for developers and leading to a drastic decline in condo construction. A 2023 report from the Common Sense Institute revealed that insurance costs for condos have increased by more than 230%, making it difficult for developers to afford building new units. “Insurance costs for condominiums surged to 5.5% of a project’s hard costs, more than 233% higher than multifamily rental home projects,” the report found.

The new law was the result of years of negotiation and compromise, spearheaded by Rep. Shannon Bird (D-Westminster), who worked tirelessly with industry stakeholders, including homebuilders, realtors, insurers, and trial lawyers. Over the past year, Bird held more than 90 meetings to bring all parties together and find common ground on the issue. “Homes build community, homes build people's participation in civics, and it makes people committed to our state,” Bird said, stressing that the new law is designed to help people who are ready to put down roots and start their homeownership journey.

The legislation also introduces the “Multifamily Construction Incentive Program,” which is designed to make it easier for builders to build affordable condos by offering protections against defects. The program includes a multi-tiered warranty system: one year for workmanship and materials, two years for plumbing and electrical, and six years for major structural elements that must pass third-party inspection. This change aims to balance the need for protecting homeowners from legitimate defects while reducing the risk for developers.

The bill also introduces significant changes to how defects can be claimed, including increasing the threshold for homeowners to initiate construction defect lawsuits from 50% to 65% of homeowners in an association. The law also ensures that any money paid out for defect claims is used directly for repairing the defect, rather than being diverted for other purposes.

Rep. Bird noted that this bill isn’t just for people currently facing construction defects—it's also for prospective homebuyers looking to invest in communities and establish roots. “This bill is for the new professional recruited to come to Colorado who now wants to put down roots in a community—and for the long-time resident who has never been able to think about buying a first home,” she said.

Senator Dylan Roberts (D-Frisco), who was also a key sponsor of the bill, highlighted the importance of affordable housing for mountain communities and remote areas. “The one issue that unites every community is housing,” he said, noting that more affordable condos would enable people such as teachers and police officers to live in the communities where they work.

Tyrone Adams, CEO of the Colorado Association of Realtors, called HB 1272 “a vision of hope” for many Coloradans. “This is a chance for families to cultivate roots,” he said, emphasizing that the law’s focus on affordable homeownership would create stronger, more connected communities.

HB 1272 also passed with strong support in both chambers of the Colorado legislature, winning a 61-3 vote in the House and a 31-4 vote in the Senate. However, the bill did face opposition from some progressive Democrats who expressed concerns about potential unintended consequences. Despite the opposition, the bill’s overwhelming support demonstrates a broad consensus on the need for action to solve Colorado’s housing challenges.

The legislation’s passage comes at a time when the demand for affordable housing in Colorado is at an all-time high. According to the Common Sense Institute, for every new condo built in the state, 14 new apartments have been constructed since 2018. Prior to 2009, that ratio was much closer to 1:1. With HB 1272, state leaders hope to reverse this trend and restore balance to the housing market.

While challenges remain—particularly around insurance costs and market conditions—there is optimism that this law will provide the framework for a resurgence in condo construction. Insurance Commissioner Michael Conway noted that HB 1272 would create a more competitive insurance market, helping to bring down premiums and make condo development more financially viable. “I firmly believe that House Bill 25-1272 will lead to increased competition in the construction defects liability insurance market,” he said.

The law’s enactment represents a step toward addressing one of the most persistent roadblocks to affordable housing in Colorado. By modernizing the legal framework for construction defect claims and providing incentives for builders, HB 1272 aims to lay the groundwork for a more affordable and sustainable housing future in the state.

Originally reported by Stephen Swofford in Colorado Politics.