Dive Brief:
- The Colorado Legislature has sent Gov. John Hickenlooper a bill that will reform the state's construction defects law, according to the Denver Business Journal. The governor is expected to sign the measure into law.
- The new bill requires that a majority of condominium owners approve filing a builder lawsuit for alleged defects, not just a majority of the homeowners' association board. It also requires that homeowners be informed about the drawbacks and benefits that could result from filing a lawsuit.
- Many state officials maintain that the current law has stymied condo construction at a time when there is a shortage of affordable entry-level housing. In 2005, according to The Gazette, condominiums made up 20% of the housing market but now represent only 2% to 3%.
Dive Insight:
The existing law, passed in 2005, was meant to protect homeowners from builders who provide a substandard product, but builders argue that it has increased their costs to the point where they can't make money on condominium projects.
The current regulations cost builders an extra $15,000 per unit, according to the city of Denver. This is partially due to expensive contractor insurance policies that require coverage for a wider variety of construction defects than necessary before the law. State lawmakers say, however, that the new law won't have an immediate effect on insurance premiums but that they should come down as there are fewer lawsuits filed over time.
Last month, Miami developer Renzo Renzi proposed building an 800-unit, $500 million condo project in downtown Denver. The two-high-rise complex would also feature retail space, parking and rooftop patios. Local real estate officials said the project could encourage additional development and help meet the city's current demand for more affordable housing.
Condominiums are often an affordable choice for first-time buyers, and their lack of availability in Denver has limited buyer options in a city that has seen significant rent and home-price growth.
