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How two proposed bills by Colorado lawmakers could destroy affordable housing in Denver

In Condo Trackerby Andrew DodsonLeave a Comment

“I can’t afford to live in Denver anymore.”

It’s a comment we could hear more renters say in the near future — especially our young professionals — as they work to save their money for a house down payment.

And it’s all because of some short-sighted legislation that’s currently making its way through the Colorado Legislature.

Earlier this month, state Sen. Robert Rodriguez, D-Denver, introduced Senate Bill 20-138, called, “A Bill for an Act Concerning Increased Consumer Protection for Homeowners Seeking Relief for Construction Defects.”

The bill, however, will ultimately hurt consumers hoping to buy more attainable housing in Denver. That’s why it’s important you voice your opinion to your representative and tell them to vote no on SB 20-093.

What will this bill do?

Simply put, this proposed piece of legislation extends the time that homeowners — let’s say in a condominium development — can file claims against a developer. This also applies to homeowners statewide in new single-family homes and commercial projects.

Today, that number stands at six years. The legislation would increase it to 10 years. An accompanying bill, SB 20-093, could extend that timeline even further. Rodriguez argues consumers simply need more time to realize defects in construction.

If approved, though, it would dramatically increase the amount of risk developers and contractors take on, resulting in one of two things to happen:

One, the developer still pursues the project, but passes on the increased cost of construction insurance to the homebuyers. We’ve talked to at least one developer who said insurance policies for a future project he’s working on have already increased more than 30%. Industry experts expect those policies to more than double if the changes pass.

Or two, the developer decides it’s not worth the risk and pursues projects elsewhere in the country.

If they choose the latter, that means less supply in a city that’s expected to continue adding population. And when there’s more demand than supply, you can guess what happens: prices go up.

What does this mean for homebuyers?

Denver residents have watched home prices and values skyrocket over the past decade. It really hasn’t been until this year where we are finally starting to see those increases taper off. That’s a good thing, because it gives renters time to save money and hit their down payment target, something that has been difficult in recent years.

But if developers don’t pursue projects here that would add to our for-purchase supply, the complete opposite is going to happen.

Matt Rork

Matthew Rork, with Fairfield and Woods, speaks during a special Denver High-Rise Living roundtable with developers over proposed changes to Colorado’s construction defect laws.

Our supply for affordable and entry-level housing is already extremely low. One study shows that Denver is behind similar-sized cities by 18,000 condo units.

Additionally, the most recent housing report from the Denver Metro Association of Realtors still shows an extremely tight supply, which puts sellers in the driving seats. In other words: prices will go up.

At the same time, Denver’s population is expected to increase to 1 million people, according to the Downtown Denver Partnership.

But let’s say this legislation passes and a condo developer does pursue a new for-sale project. The extra costs from increased insurance policies developers would need to take on would be passed directly down to the homebuyer.

“This will present further obstacles to the development of affordable housing in the Denver metro area,” said Matthew Rork, an attorney with Fairfield & Woods who focuses on the construction industry.

So, while this bill is described as a “consumer protection,” it’s not going to protect consumers from unaffordable home prices.

We reached out to state Sen. Pete Lee with our concerns on this issue. He told Denver High-Rise Living that he still supports the measure and that if home prices continue to skyrocket and developers leave town in search of a more competitive market, we should reach back out to him.

“As of now, I have been convinced the consumer protections outweighs the builder harms,” he said in an email, “though I recognize the immense value of keeping building projects growing to help with the affordable housing crisis.”

Why is Denver’s condo supply so low?

As mentioned, Denver is about 18,000 condo units behind comparable cities. A large reason for that was our state’s construction defect laws.

Before 2017, it only required a majority of a homeowners association board — not a majority of residents — to sue a developer for a perceived construction defect. Attorneys were essentially contacting HOAs and assuring them that they could find some defects.

That change in 2017, though, when Gov. John Hickenlooper signed legislation to make it more difficult for a lawsuit to be filed. The legislation required a majority of residents approve the pursuit — and subsequent costs — of a lawsuit. Lawmakers on both sides of the aisle unanimously praised the legislation, arguing it would open the door for more affordable condominium options.

Now, it feels lawmakers are going backwards.

And this could have further economic ripple effects down the road if it passes. Denver economic development officials continue to recruit large companies to town with hefty tax incentives. Those companies are interested in the Mile High City because of its talent. If that talent doesn’t have attainable housing options, though, that makes Colorado less competitive.

You can help. Use this link to find your representative and voice your concerns about SB 20-138 and SB 20-093.

Additionally, let Sen. Rodriguez know your concerns via email at robert.rodriguez.senate@state.co.us or by calling his office at 303-866-4852.

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