With the demise in this legislative session of a bill to reform the state’s construction-defects law, the campaign to provide builders some protection from lawsuits filed by aggrieved homeowners is heating up at the local level.
That might be the best place for those who blame state law for the dramatic slowdown in condominium construction in Colorado to push their cause, given the fact that there’s no legislative election this year that would reconfigure the balance of power in the state Capitol.
“We’re certainly going to be encouraging local governments to look at ordinances,” said Tom Clark, CEO of the Metro Denver Economic Development Corporation and a vocal supporter of the ill-fated Senate Bill 177. “We’re going to have their backs.”
Lakewood started the movement last fall with a first-of-its-kind ordinance making it harder for homeowners to sue for defects, like mold contamination and cracking foundations. Lone Tree passed a similar measure a few months later.
But the campaign at the local level has picked up even more steam after SB 177’s defeat on April 27 in the House State, Veterans and Military Affairs Committee. Littleton is poised to pass a construction-defects reform measure Tuesday, and city councils in Brighton and Wheat Ridge are taking up the issue this week.
Denver Mayor Michael Hancock has been one of the loudest voices in favor of an overhaul of the state law, which critics blame for raising insurance premiums on condo construction and effectively chasing builders out of the state.
SB 177 would have made mediation or arbitration the preferred method of dispute resolution while also requiring majority consent of all homeowners before legal action could be filed against a builder.
Assistant city attorney David Broadwell said Monday the issue is “very high on the list” for Hancock to tackle, but Broadwell wouldn’t put a probability or timetable on whether or when an ordinance is drafted.
“As another year has gone by and there hasn’t been a solution at the legislative level, it intensifies our determination to find a local solution,” Broadwell said.
Clark said members of the pro-reform coalition — including mayors, builders and affordable housing advocates — will hold a “postmortem” meeting in the next few days to figure out strategies going forward. One way to get around the legislative logjam, he said, is a statewide ballot measure on the issue next year.
The recent fight over SB 177 was the legislature’s third stab at the issue in as many years.
Senate Majority Leader Mark Scheffel, R-Douglas County and a co-sponsor of the bill, said he would “continue to work on this effort” given the bipartisan coalition that got behind the bill in 2015.
His colleague across the aisle, Democratic Rep. Jonathan Singer, is hopeful that a bill next session would make a more convincing link between construction-defects reform and more affordable housing. Singer, who co-sponsored SB 177 in the House, said he had “no doubt it would have passed” had it been allowed to reach the full floor.
But House Speaker Dickey Lee Hullinghorst, D-Boulder, who doomed the bill by sending it to the House State, Veterans and Military Affairs Committee, isn’t hopeful another try in 2016 will yield a positive vote without significant restructuring.
“Colorado’s construction-defects law may be a part of the problem, but SB 177’s attempted ‘fix’ was to steamroll the rights of Coloradans who in most cases have invested their life’s savings in their home,” she said.
As a result of the bill’s failure this session, some housing experts think home prices in Colorado will accelerate, leaving young families with few affordable choices in the market.
“I see the same situation a year from now, but intensified,” said John Covert, director of the Colorado and New Mexico office of the housing market research firm Metrostudy.
According to his firm, of the 1,674 home starts recorded in the Denver area during the first three months of the year, only 18 were condos — a 1.1 percent start rate. On an annualized basis ending in March, Metrostudy reported that condos were 3.8 percent of housing starts, compared with more than 20 percent a decade ago.
That means, Covert said, that the only condos that will get built are higher-end units — ones that carry enough of a price premium to absorb the risk of potential litigation.
Chris Waggett, CEO of development company D4 Urban, is behind a 275-unit multifamily apartment and townhome development at Alameda Station in the South Broadway neighborhood. Construction-defects law directly affected the type of housing stock he was able to provide, he said.
“Condos would be a key feature of that, but they simply won’t be,” Waggett said, citing fear of protracted litigation.
Molly Foley-Healy, an attorney who serves as legislative liaison for the Community Associations Institute’s Legislative Action Committee, said reforms are possible but not at the expense of homeowner rights. She said if insurance coverage for builders was triggered at the time a defects claim is filed, years-long litigation could be avoided.
“That’s the 800-pound gorilla in the room,” Foley-Healy said of insurance coverage, which wasn’t addressed by SB 177.
