Will a new Colorado law help create affordable condos?
Colorado Gov. John Hickenlooper signed a bill last week aimed at increasing new construction on affordable condos in Denver. The big question is: Will it work?
The so-called construction defects law makes it more difficult for homeowners associations to sue builders. Before Hickenlooper signed the bill, as few as three people (the majority on a five-member HOA board) could vote to enter litigation against a builder. The new construction defects law requires a majority of condo owners in a building vote to proceed.
Supporters of this bill believe this will help jumpstart new condo construction that has lagged for years now. The thinking goes that when it was easy to sue, homeowners sued. (See the Beauvallon at 9th Avenue and Lincoln.) When they sued, insurance costs for condo builders spiked, causing new condo construction to be cost prohibitive.
The numbers don't lie. A decade ago, condos accounted for roughly 20 percent of new housing builds. Today, they're just 3 percent. Why? Well, as the Denver Business Journal points out, it's complicated. Some people think the low supply of condos is simply a market reaction to Millennials not buying. (If no one's buying what you're selling, then stop selling it, the thinking goes.) Others think the exploding rent prices in Denver made it more attractive to build apartments than condos.
Whether this new law will have any effect is yet to be determined. We will have to see if insurance companies come back into the market to provide coverage for condo builders. If they do, then maybe we start to see a rise in construction.
And that would be good for everyone.