Few disagree that Colorado is facing a significant and serious shortage of housing. The lack of housing — in availability and affordability — has been a pressing policy issue for more than a decade and has clearly hit a tipping point as communities across our state do not have enough affordable and attainable housing to meet their needs.

That’s why Gov. Jared Polis, nearly every legislator, candidates for Colorado Springs mayor and council seats, statewide and local business groups, and nonprofits have identified housing as the No. 1 issue facing the state and their communities.

While there seem to be unlimited opinions about how to jump-start housing and fill the critical housing gaps, many proposals seem to circle back to the lack of for-sale multifamily housing — i.e., condominiums. At one point, Colorado condos represented about 25% of for-sale housing construction. But past economic slowdowns and state laws that incentivize lawsuits against builders and developers have left this type of new housing at less than 5% of statewide building permits now. The question that should be asked is, Why are condos not being constructed in Colorado?

The answer is risk. Every individual and business look to minimize risk. Unfortunately, Colorado’s construction-litigation laws have made the risk too great to construct condos. So why is the risk so high?

Construction defects lawsuits in Colorado have become a business unto itself. Law firms make millions by hiring forensic experts to “find” defects for up to six years after construction. When one defect is found in one unit, it is then assumed that the same defect is present in all units within the project. The price to fix the defect is then determined and multiplied by the number of units. This systematic approach to finding defects creates an unwieldy list of items that need repair.

The next step is to engage the insurance company of the general contractor, and potentially all subcontractors, and any architect or engineer on a project hoping to secure millions in settlement of the defects. Once a settlement is reached based upon the cost to “repair,” the law firm takes a percentage (30-40%) of the award, and the remainder goes to the HOA to resolve the defects. With only a portion of the settlement, many residents cannot actually complete the repairs. The only winners in this system are the trial lawyers.

Insurance companies that cover contractors and developers increase rates on condo projects. Given the experiences with ligation today, the cost for insurance has skyrocketed. Today, only luxury for-sale condos can afford the insurance because the premium cost is so great.

The numbers speak for themselves. Colorado has a housing shortage. Builders and developers seek to build more homes. Risk keeps them away from diversifying the housing options for all buyers.

One solution that the builders have requested for years is the right to repair. This would allow the contractor to fix the problems identified with the cooperation of the owners. These repairs would address the list identified and be paid for by the contractor. The owners win because the repairs are made. The contractor wins because they want a positive relationship with their buyers and can control the costs associated with the repairs. Fortunately, the trial lawyers cannot collect a large payday because there is no financial settlement.

Construction defects do occur. Homeowners have a right to have them repaired. The laws in the state of Colorado do not strike a balance and have created significant risk to builders. That has resulted in an exodus from an affordable housing option that had previously provided starter homes for many people.

So, considering your company or occupation, who would want to provide a product or service knowing at the outset that you will very likely be sued? If every profession had specialized lawyers chasing them for any misstep, typo, or misspelled word, most people would look for a way to reduce their risks or choose another career.

Construction is no different.

The construction of condos has been and will continue to be an essential missing element in our housing mix. The trial lawyers argue that builders are incapable of building quality homes—but that is simply not true.

The significant and rapid construction of apartments is the market response to fill the housing needs of the “missing middle.” There is no nefarious plot to avoid the construction of condos; the decision to build certain housing types is based on business risk and success.

Meaningful legislation that protects homebuyers from actual damages yet discourages the lucrative practice of pursuing frivolous and overblown litigation threats would provide welcome relief to households that need housing options—and help Colorado see more condos and townhomes to help address our housing shortage.

Johnna Reeder Kleymeyer is president & CEO of the Colorado Springs Chamber & EDC.

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