A proposal intended to tackle “construction defects” and jumpstart the affordable condo market has begun its journey through the General Assembly.

House Bill 1272 — introduced on Tuesday and first reported by Colorado Politics last week — would require a third-party, independent inspector to make periodic checks during the condo construction process. The builder would be tasked with responding to problems identified by the inspector and fixing them.

Backers of the bill said this would elevate the standards to a higher level of quality and impose a higher burden of proof for that quality.

Opponents of the bill, primarily the Colorado Trial Lawyers Association, argued it would create a two-tiered system that would benefit wealthier homebuyers. Assistant Majority Leader Jennifer Bacon, D-Denver, introduced a separate House Bill 1261 backed by the trial lawyers, who have sued condo developers on behalf of homeowners for “defective” condos.

In contrast to HB 1272, Bacon’s bill is sponsored only by progressive Democrats, including Senate Majority Leader Robert Rodriguez, D-Denver. It drew no Republican or moderate Democrat sponsorship.

Supporters officially rolled out HB 1272 during a press conference that included mayors from Parker, Castle Rock, Wheat Ridge, and Aurora, representatives of the Black community, and Gov. Jared Polis, who, during his January State of the State address, urged lawmakers to tackle the issue.

Polis said Wednesday that HB 1272 will help Coloradans recognize the dream of home ownership.

“This bill will help to build more housing that can be sold, build that nest egg, and build wealth over time,” he said.

Condo construction is at a near halt despite strong demand, Polis said. The only condos being built are at the high end of the market. In 2008, 20% of new housing started in condos, but that number is down to 5% now.

“I’m happy this conversation is underway and thrilled with the legislature taking up the mantle as part of a comprehensive agenda to reduce housing costs,” Polis said, adding that the bill is fair, “takes into account legitimate concerns from both sides and ultimately will result in more condos being built that people can afford and can start building wealth.”

HB 1272 would require the claimant — the homeowner — to mitigate a defect and specify how that issue would be satisfied and the consequences for not satisfying it.

A builder must provide the owner with an offer to settle the claims or a “written response that identifies the standards that apply to the claim and explains why the defect does not require repair.”

The 2001 Construction Defect Action Reform Act had set up a process for homeowners to sue builders when they find defects, which can range from serious issues, such as cracks in the foundation or HVAC problems, to smaller problems, such as defective cabinetry and leaks.

Fast forward to today and the middle-market for condos has crawled to a stop. 

A report last September from the free-market think tank Common Sense Institute said that “insurance costs for condominiums surged to 5.5% of a project’s hard costs, more than 233% higher than multifamily rental home projects, which had insurance costs as low as 1.1% to 1.65% of project hard costs.” Insurance costs are tied to lawsuits over construction defects, supporters of changing the law have argued. 

Under HB 1272, the statute of limitations for filing claims would change to 10 years unless the builder provides a warranty that meets the revised law’s requirement. In that case, the statute of limitations is six years.

Under the bill, the approval for a homeowners’ association to pursue a claim will increase to 65% from its current 50% plus one.

Finally, the bill includes a “rebuttable presumption,” which can be used in a lawsuit, that a property has no construction defect when a state agency or local government has issued a certificate of occupancy.

Sam Cannon, president of the Colorado Trial Lawyers Association, criticized HB 1272.

“We all deserve an affordable and safe home, no matter our income. But, under this proposal, Colorado would create a two-tier system — where those with the least to spend are given fewer rights, while wealthier homebuyers enjoy stronger protections,” Cannon said in a statement. “That’s just plain wrong.”

Wednesday’s press conference in support of HB 1272 drew both Democratic and Republican lawmakers.

This bill has the “bold goal” of making homeownership a reality, according to Rep. Shannon Bird, D-Westminster, the architect of HB 1272 who has held more than 80 meetings since last May. She said she’s been trying to find the way to jump-start the affordable condo market.

Bird said this bill is for the 90% of renters who aspire to homeownership.

“Our state has too few housing opportunities for Coloradans who want the security of owning a home,” she added.

The benefits of ownership are many, she said. It means getting to lock in monthly payments without being subject to rent, fee increases, or other changes, she said, adding that a homeowner can borrow against the home’s equity for retirement or use it to buy a larger house.

She said home ownership allows Coloradans to establish roots.

“It means everything” for people who want a more secure life for their families, she said. 

Angela Hutton-Hall, a realtor and attorney, said the average age of a first-time homebuyer is up to 40 and that the state is short 100,000 homes. The bill ensures homes are built to last and will help create a lasting legacy of financial security, she said.

The potential to help Coloradans build generational wealth has attracted the support of Senate President James Coleman, D-Denver, who is sponsoring the bill.

“I’m committed to supporting legislation that makes our state more affordable and allows Coloradans to build wealth,” he said. “I’m also committed to paving the way for equitable access to opportunity so all Coloradans have a chance to get ahead.”

Homeownership is one of the greatest ways to do that, Coleman said.

But for too long, he said, minority Coloradans have been locked out of the opportunity to buy a home.

HB 1272, he added, “introduces fair and balanced reforms to construction litigation, ensuring high-quality homes are built, problems are fixed, and excessive costs that deter development can be reined in.”

Mayors from Castle Rock and Parker said their communities are hungry for affordable homes. They allow middle-income families to buy homes, said Castle Rock Mayor Jason Gray.

“That’s gone away in the last 15 to 20 years,” he said.

Teachers, firefighters, police officers, and others in the middle-income bracket are the people who want to live in Castle Rock, he said.

Parker Mayor Joshua Rivero said he is looking at the big picture. Without condos in the market, people stay in the rental market too long, which drives up prices, or they buy too high, which results in being “house-poor.”

“We need condos to free up rentals,” he said.

Rivero said he is happy to see bipartisan support for the bill and “incredibly happy” to see the governor on board.

Aurora Mayor Mike Coffman said the bill is desperately needed. The lower and middle end for condos doesn’t happen because of the litigation environment, he said.

“We have so many people who want to be homeowners and can’t, and instead of a 30-year fixed-rate mortgage, they’re on a treadmill on rent and can’t save to buy that starter home,” he said.

Build Our Homes Right, which is aligned with the trial lawyers, said HB 1261 — the measure backed by the trial lawyers — will prevent builders from inserting language in purchase agreements, contracts, and HOA declarations that would limit homeowners’ rights to reject adequate repair offers, organize neighbors experiencing similar problems, and hire experts to inspect problems.

The organization said the alternative bill, HB 1261, would “change the trigger” on the two-year statute of limitations to when a homeowner discovers the cause of a serious construction problem and “authorize the Department of Regulatory Agencies to collect information on the construction liability insurance market, including the cost, quality, number of providers, rating factors and number of claims to better understand builders’ insurance issues.”

Polis was asked Wednesday if he would sign HB 1261 if it appeared on his desk. He did not directly answer the question. He said he is excited about HB 1272.