Lawmakers in Colorado construct bill to incentivize developers to build more affordable condos

COLORADO SPRINGS, Colo. (KRDO) - A possible solution to a decades-old problem is in the hands of state lawmakers.

The building of condominiums, one of the most affordable housing options, has come to a halt in the Pikes Peak Region.

"There's no cost benefit to go to a condo because they're so first risky to build and the cost is so astronomical," said Doug Woody, Vice President of Bryan Construction.

If you take a quick drive around Colorado Springs you'll run across construction crews, hard at work building new apartment complexes across the city. Something you're unlikely to see are construction projects involving condos.

"Because of class action lawsuits brought against the condo market, some of it justified, certainly, but certainly getting taken advantage of in certain situations. In these class action lawsuits it makes it very cost prohibitive and very difficult for developers and contractors, for that matter, to engage in those opportunities to build them cost-effectively," said Woody.

Here's the issue. Under Colorado law, builders have to carry insurance, so that any construction defects that come up after a home is completed will be covered, but the insurance policies for condominium projects are vastly more expensive causing builders to avoid them altogether.

"A typical construction insurance policy is approximately 1 to 1.1% of the total cost of the project. For a condo, it's 5.5% of the total cost. So that's almost a 500% increase," said Sen. Rachel Zenzinger, a sponsor of the bill.

According to the Pikes Peak Regional Building Department (PPRBD), in 2021, 56 condos were built. The next two years that number went down to zero. To give you some context, the industry wasn’t slow during the years when there were zero condos.  For example, in 2022, PPRDB permitted 4,963 new apartments.  That’s the busiest year for apartments they have ever seen, yet they permitted zero condos.

This new proposed legislation seeks to limit the type of lawsuits that caused insurance policies to spike by reducing the window for filing a claim and giving homeowners a way to get repairs without having to go through court.

"This provision would give the property owner the choice to either have the original contractor make the repair or work with the contractor to find a third party to fix it and and to perform this remedial work without having to go to court," said Zenzinger.

The Housing and Building Association of Colorado Springs believes there is no silver bullet that will solve this complex housing crisis but, they do think this is a start.

"What this bill is attempting to do is take away a lot of the inconvenience that can happen through a construction defects lawsuit and really get to the finish line much quicker and still make sure that we're maintaining the rights for homeowners and property owners to have their problems corrected," said Scott Smith, Housing and Building Association of Colorado Springs.

This bill has been assigned to to the local government and housing committee where it will come up for review in the next couple of weeks.

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