How State Laws Have Crippled Condominium and Townhome Development, Making Housing Unaffordable for Many Coloradoans: A Call to Action for Realtors, Buyers, and Legislators.
On January 9th of this year, I received an email from Brett Tanner of the Colorado Association of Realtors:
| Dear CAR Members – Happy New Year and welcome to the first days of the 120-day Colorado legislative session for 2025. Linked below is a Colorado Association of REALTORS® (CAR) press release highlighting our expectations for this year’s Colorado General Assembly and our focus on defining sensible policies and implementing meaningful solutions that support the creation of housing options that meet the needs of a wide range of Coloradans. These issues and potential solutions were echoed earlier today by Governor Polis in his annual State of the State address where he touched on several of these topics including his bulleted quotes below: “To unlock housing supply, we need to allow more housing Coloradans want. This includes condos, which often start at a lower price point, providing more affordable homeownership, and with it, the foundation for wealth building, and building a nest egg for financial security. “…in Colorado, we’ve had a major decline in condo construction. Before 2008, condos made up nearly 20% of new home starts in Colorado, dropping to 5% now. In 2005 there were nearly 3,000 condos on the market under $400,000, and last year, there were only 22. “In the past, this conversation about meaningful condo liability reforms that balance homeowner protections, de-risk the market, and allow for more condos to be built and sold has been stifled on both sides. Let’s turn the page and have a real dialogue about what is preventing condos from being built, and solve for it. I know we can get this done in a way that protects homeowners’ rights when there is a defect, but makes it less expensive and cumbersome for builders of all kinds to start projects and deliver housing. Like last year, we anticipate more than 600 bills to be introduced in the months ahead, and each will be reviewed to assess its potential impact on REALTORS® and our industry. Last year, CAR took positions on 97 bills. At least one CAR Government Affairs team member will be on site at the Capitol each day of the session – talking with legislators, monitoring legislation – allowing you to keep running your business back home In addition, more than 50 REALTORS® from nearly 20 local associations on the Legislative Policy Committee (LPC) will be reviewing and adopting official CAR positions on 2025 legislation. As you know, political math drives political strategy. If we cannot secure enough votes to kill harmful legislation, then we may have to “amend” a harmful bill to make it less harmful. We must remain pragmatic knowing state legislation could impact every one of the more than 25,000 REALTORS® across Colorado. As a member of the state’s largest professional trade association, you will periodically be asked to participate in our Association’s Calls for Action (CFA) or even to testify on a bill. In addition, we encourage you to build relationships with hometown legislators and take advantage of opportunities to educate them on the issues REALTORS® are facing in their market and across the state. One the easiest and most critical ways you can support political efforts is by simply investing in the REALTORS® Political Action Committee (RPAC). RPAC funding allows us to educate, and sometimes mobilize, the public about candidates and issues affecting real estate, property rights or other housing topics. These voluntary contributions are managed by REALTORS® – including 19 Colorado REALTORS® serving on the CAR Political Action Committee – who decide how best to utilize RPAC resources with most funding going to state and local issue advocacy campaigns to promote positions on public policies that impact REALTORS®. |
| Sincerely, Brian Tanner; Vice President of Public Policy for the Colorado Association of REALTORS® |
How Colorado’s Laws Have Crippled Affordable Housing Development
I would like to take a moment to express gratitude to Mr. Brian Tanner, Vice President of Public Policy for the Colorado Association of REALTORS® (CAR), for bringing attention to one of the most pressing issues facing Colorado today: the lack of affordable housing. His insights, along with Governor Polis’s remarks in the 2025 State of the State address, highlight the need for meaningful reform to address the state’s housing crisis. It is encouraging to see the governor and CAR place such importance on this topic, as affordable housing is a critical pillar of Colorado’s economy and the foundation of wealth-building for countless families.
That said, while these discussions are a step in the right direction, it is equally important to reflect on how Colorado’s current policies contributed to the very housing crisis we face today. The lack of foresight in addressing these issues sooner has only compounded the problem. As the saying goes, the best time to plant a tree was 20 years ago; the second-best time is now. We cannot delay action any longer if we hope to solve this crisis and ensure that homeownership is within reach for the average Coloradan.
The Decline of Affordable Housing Options
For years, Colorado has faced a growing housing crisis that has left countless families priced out of homeownership. While much attention has been given to rising mortgage rates, increasing construction costs, and population trends, there is a quieter, more insidious force driving the lack of affordable housing: Colorado’s legislative framework.
The state’s laws, originally designed to protect homeowners, have unintentionally created a hostile environment for developers. These laws drive up costs, increase risks, and ultimately stall the construction of condominiums, townhomes, and other attached dwellings—housing types that traditionally serve as affordable entry points for first-time buyers and working families.
Once a significant portion of Colorado’s housing market, these options have dwindled to a mere fraction of what they once were. In 2005, condominiums accounted for nearly 20% of new home starts in the state. Today, that figure has plummeted to just 5%. Governor Polis recently highlighted this decline, noting that there were nearly 3,000 condominiums on the market priced under $400,000 in 2005. Last year, there were only 22.
This is not a coincidence. The decline in condominium and townhome construction is directly tied to policies that have made these projects financially unviable for developers. These policies include the Construction Defect Action Reform Act (CDARA), the Homeowner Protection Act (HPA), and the Colorado Common Interest Ownership Act (CCIOA).
Understanding the Developer’s Perspective
To fully grasp the challenges developers face, it is important to see the housing crisis through their eyes. Developers are often portrayed as faceless corporations, but the reality is far different. Most developers are small businesses that take on significant financial risks to design, plan, and build housing that meets community needs.
Developers employ countless people across various industries, including contractors, architects, engineers, and tradespeople. They also stimulate local economies by creating demand for materials, logistics, and real estate services. When developers succeed, the ripple effect benefits the entire community.
Yet Colorado’s legislative framework treats developers as adversaries rather than partners. The state’s laws have created an environment so risky and expensive that many developers are forced to abandon projects before they even begin.
For example, my team planned a 48-unit micro-condominium project in Westminster. The units, averaging 728 square feet, were carefully designed to be affordable, with prices under $380,000. This price point was intended to serve first-time buyers and working families—those who most need access to affordable housing.
However, the project faced insurmountable costs due to the state’s insurance and legal environment. The owner-controlled insurance policy (OCIP) for the project alone amounted to over $26,000 per unit, or $33.24 per square foot. This cost accounted for nearly 7% of the total unit price and had to be passed on to buyers, making the units unaffordable for many of the families we hoped to serve.
This example is not unique. Developers across the state face similar challenges, particularly when it comes to attached housing. Three key pieces of legislation are at the root of the problem:
Key Legislative Barriers to Development
- The Construction Defect Action Reform Act (CDARA):
CDARA was enacted with the intention of addressing construction defects before litigation. On the surface, this seems like a reasonable goal. However, the law has created a litigation-prone environment that disproportionately affects developers of attached dwellings. It has made it far too easy for defect claims to escalate into lawsuits, increasing litigation risks and driving up insurance premiums. This hostile legal environment discourages developers from taking on condominium and townhome projects, which are already challenging to finance and build. - The Homeowner Protection Act (HPA):
The HPA, passed in 2007, aimed to strengthen consumer protections by limiting builders’ ability to include clauses in contracts that waive homeowners’ rights to pursue defect claims. While protecting homeowners is a noble goal, the law has had unintended consequences. It has significantly increased legal exposure for developers, making many projects financially unviable. - The Colorado Common Interest Ownership Act (CCIOA):
CCIOA was amended in 2017 to require a majority vote from homeowners’ association (HOA) members before initiating construction defect litigation. While this was a step toward balancing homeowner rights with developer risks, it has not gone far enough. The lingering legal uncertainties continue to translate into higher costs for developers, which either stall projects or inflate prices for buyers.
The Ripple Effect: Impact on Buyers and the Economy
The consequences of these policies extend far beyond developers. They ripple out to buyers and the broader economy, creating systemic barriers to affordability and economic growth.
Barriers to Affordability
Condominiums and townhomes have historically been the most accessible entry point for first-time buyers, young professionals, and working families. These housing types allow buyers to build equity and achieve financial stability—benefits that are essential to the health of any economy.
However, the costs imposed by Colorado’s legislative framework disproportionately affect these buyers. The added expenses, such as exorbitant insurance premiums, are passed directly to consumers, pricing them out of the market. This creates a system of housing inequity, where those who most need affordable options are left with none.
Disparate Impact
While these laws do not explicitly target any group, their effects mirror those of historical redlining practices. The lack of affordable housing disproportionately harms lower-income buyers, minorities, and younger populations. This “disparate impact” perpetuates cycles of housing inequity and denies many Coloradans the opportunity to build wealth through homeownership.
Economic Consequences
The lack of affordable housing also has far-reaching economic implications. Colorado’s population growth has slowed, with recent data showing negative net migration. People are leaving the state, and one of the primary reasons is the prohibitive cost of living, including housing.
When families leave Colorado, they take with them their spending power, labor, and contributions to the community. This impacts industries across the board, from real estate and construction to warehousing, insurance, and mortgage brokerages.
Missed Opportunities for Economic Growth
Affordable housing is not just a moral imperative; it is an economic necessity. When developers build more condominiums and townhomes, the benefits extend beyond the buyers. Construction creates jobs, warehousing sees increased demand for materials, and trade industries flourish.
Real estate agents benefit from increased inventory, insurance brokers write more policies, and mortgage brokers close more loans. These ripple effects stimulate local economies and create a cycle of growth and opportunity.
By stalling development, Colorado is missing out on these economic opportunities. Solving the housing crisis would not only provide families with affordable options but also strengthen the state’s economy and create jobs.
The Path Forward: A Balanced Solution
Addressing Colorado’s housing crisis requires a balanced approach that supports both developers and buyers. Legislative reform is essential to creating an environment where developers can build without undue risk while ensuring homes remain affordable for buyers.
Potential solutions include:
- Amending CDARA to limit frivolous litigation and reduce insurance costs.
- Revisiting the HPA to allow developers to include reasonable waivers for defect claims.
- Expanding CCIOA reforms to further reduce legal uncertainties for developers.
- Introducing state-backed insurance programs or tax incentives to de-risk development projects.
- Offering grants or low-interest loans to developers building affordable attached housing.
These reforms would create a win-win scenario, enabling developers to produce more affordable housing while providing buyers with accessible options to enter the market.
A Call to Action
Realtors, developers, and taxpayers all have a role to play in advocating for change. Realtors, as trusted advisors, and community advocates, see firsthand the impact of these policies on buyers. Developers, as the builders of housing, need a framework that supports rather than hinders their efforts. Taxpayers, as voters, must hold legislators accountable for creating policies that address the housing crisis in a meaningful way.
As Mr. Tanner and Governor Polis have pointed out, now is the time to address this issue. But acknowledgment alone is not enough. Action is needed to create a housing market that works for everyone.
Let us work together to ensure that Colorado’s future includes affordable, attainable housing for all its residents. The time for change is now. If you would like to learn more about this topic. Please contact Kato@kw.com.
Author: Kato J. S. Mitchell – Operating Principal; Red Zebra Holdings, Westminster Asset Holdings, Operating Principal; Keller Williams Preferred Realty, LLC, & Lead Broker; The Mitchell Team @ Keller Williams Preferred Realty, LLC
Kato turned his top real estate sales team into a real estate empire. He has heavily invested in real estate in the Denver Metro Market and is Operating Principal of the largest real estate office north of I-70 in Colorado (Keller Williams Preferred Realty, LLC) Kato’s real estate team “The Mitchell Team @ Keller Williams” remains a strong competitor in the Denver Market where they specialize in complex distressed properties (divorces, foreclosures, REO, and probate/estate sales) as well as investment properties. “We help people manage wealth through real estate. Our first goal with clients is to increase their net worth past one million dollars quickly,” states Mitchell. Kato serves as a multi-year member of the Colorado Real Estate Commission’s Forms Committee assisting in the drafting of the contracts used by all Colorado Real Estate Agents. He was awarded the Dudley Award in 2004 for his national speaking tour. Kato was also awarded the Denver Business Journal’s “40 Under 40” in 2006. His real estate team: The Mitchell Team has been awarded the “5280 Magazine “Five Star Award for Excellence Winner” ten Years in a Row (2012 – 2021) for “Outstanding Customer Service” and Superior Quality as voted by their clients!” They are one of three companies in the state to receive that award more than six times. Most importantly, he is a husband & a father to three amazing children.
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