The bill that backers hope will kickstart affordable condominium construction in Colorado passed its first major test on Tuesday, with strong bipartisan support from the House Transportation, Local Government, and Housing Committee.

House Bill 1272 did not emerge unchanged, however; the committee made substantial changes through seven amendments, including an eight-page amendment first reported by Colorado Politics on Monday.

Assistant Majority Leader Jennifer Bacon, D-Denver, offered a second bill, which was postponed indefinitely at her request. Much of what was in House Bill 1261 has been incorporated into House Bill 1272.

That includes defining who could be a third-party inspector on multifamily developments and adding a multifamily construction incentive program, which provides a warranty against defects or damage. That warranty is one year for workmanship and materials, two years for plumbing, electrical, and materials, and six years for significant structural changes inspected by a third-party inspector.

The program would be under the Department of Local Affairs.

Rep. Shannon Bird, D-Westminster, has conducted some 80 meetings on the effort to require builders to build condos right the first time in hopes that it will cut down on the number of construction defects lawsuits that supporters say have reduced the number of condos constructed from 20% of the market to about 3% of the market.

“The mantra in our bill is ‘let’s fix it before this gets more expensive and before things get worse,'” Bird told the committee. The bill creates a “reasonable duty” for a homeowner to mitigate damages. If a home has a leaking pipe that is leaking water under a hardwood floor, the homeowner’s responsibility is to shut off the water and then notify the builder that there’s a problem.

Co-sponsor Speaker Pro tem Rep. Andrew Boesenecker, D-Fort Collins, spoke about a town hall on affordable housing he held with young people in his district last year.

The hearing featured testimony from numerous municipalities, those who want homeownership but can’t afford it, builders, and insurers who hope HB 1272 will be the answer that has eluded lawmakers for at least the past 15 years.

Witnesses noted that liability insurance for condominium construction has driven up the cost of a condo unit by at least $30,000 and driven out of Colorado property and casualty insurers that provide affordable liability insurance.

Bird and backers have been leery of saying the bill will result in lower liability insurance, but Commissioner of Insurance Michael Conway was not as shy about that claim. He told the committee there’s little competition among insurance companies for construction defects liability insurance. That meant fewer multifamily homes were being built, Conway said.

“I firmly believe that House Bill 25-1272 will lead to increased competition in the construction defects liability insurance market,” Conway said. The market will be more attractive to insurance companies. It will increase competition among insurers in the Colorado market, which could put “downward pressure” on insurance premiums.

During Tuesday’s hearing, Bird said that if the bill creates a better pathway for dispute resolution, that could lead to less litigation and, hopefully, make those homes less expensive to the consumer.

There are limits on how many projects can be undertaken, said Nicholas Remus, an architect representing the Colorado chapter of the American Institute of Architects. “Our fees have to be higher as a result [of the liability insurance], and even though we don’t want to be, that means we’re part of the reason the condo projects that come to market are nowhere near affordable offerings,” he told the committee.

While the focus on construction defects has been on builders, HB 1272 will help architects, too. Remus said it will expand upon the existing certificate of review system and determine if there is evidence that a design professional’s work contributed to a construction defect.

Tyrone Adams, CEO for the Colorado Association of Realtors, said Colorado has a shortage of 100,000 affordable units. HB 1272 will help increase housing supply, homes that will offer viable options, particularly for working families, young professionals and empty nesters seeking to downsize.

More affordable condos “foster economic diversity within our neighborhoods, which also enhances community cohesion,” Adams said. Homeownership revitalizes local economies by attracting broader range of residents, thereby increasing demand for local goods and services. Adams also pointed to a Colorado Health Foundation poll that found that 90% of renters want to own a home, but only 53% believe they will ever achieve that goal.

Peter Lifari of the conservative Common Sense Institute pointed out that for every 14 new apartments constructed, only one condo is built. Before 2009 (and legislation on property and casualty insurance that drove out the insurers), the ratio was 1.25 to 1.

Colorado is the second-worst state in the nation in opportunities to buy a starter home, according to Karen Kallenberg of Habitat for Humanity of Colorado. “We need more partners building starter homes and we need to create an environment to bring affordable condo development back to Colorado,” she told the committee.

Kallenberg was asked how her organization deals with construction defects, and the answer is “the same way for-profit builders would handle it.” But in order to build homes, they need the pricier “wrap” insurance policy, which adds up to $30,000 per home. Habitat doesn’t build condos but would like to, Kallenberg said.

Madison Lighty is a 21-year-old special education paraprofessional in Jefferson County who said she would like to build a future here, but “it feels impossible when the housing market is this high.” She noted a study that said a person has to earn $95,000 a year to be lower middle class in the Denver metro area, “and I definitely do not make that much.” Her friends are moving out of state because of high housing costs, and her grandparents recently sold their home and moved out of state because they couldn’t afford to live here.

“Why should we have to leave the communities we love just to survive?” Lighty said. “We need policies that allow more affordable housing to be built, especially condos and townhomes that give young people like me a chance at ownership.”

Jill Gaber, executive director of the Pikes Peak Housing Network, told the committee that only 42 permits were issued for condos in El Paso County in 2024. She said that’s less than 1% of the total dwelling units built that year. The average age of a first-time homebuyer is 38, up from 28 about 20 years ago. Gaber attributed the problem to the unaffordability and unavailability of homes younger residents can afford in El Paso County.

Builders in El Paso County have difficulty getting insurance to build condos due to the “ubiquitous condo litigation inflicted on almost every condo project in our region,” she added. “I know of many local builders who would love to build condos but know they will likely bankrupt them, putting their housing and other housing projects at risk and their families in jeopardy.”

That includes a $35 million construction defects class action lawsuit in southeastern Colorado Springs. Gaber said the condo development is in a part of the city that desperately needs starter homes. She claimed the lawsuit is forcing residential home builders to change their plans to build condos and build apartments instead, “as they can’t afford to lose everything, because trial lawyers prey on their projects for personal gain at the ongoing expense of the many families who are forced to continue renting…”

Most who testified were either in support or seeking amendments; few testified against it. Those who did were homeowners who have faced construction defects, although Build Our Homes Right, which represents many homeowners who have dealt with defects, is no longer opposed to the bill and is now in an “amend” position.

A representative of Stetson Hills Master HOA in Colorado Springs told the committee he opposes HB 1272 because it fails to provide proper consumer protections from substandard community development and preventable construction defects. His community has engaged in litigation to correct construction defects, resulting in special assessments and higher insurance rates. “Consumers and buyers will continue to bear the brunt of poor construction and risk special assessments” if HB 1272 passes, he said.

He also suggested that the homebuyers, not the builders, hire third-party inspectors as part of the warranty process.

Jeanine Musser of Westminster also asked for more consumer protection on the bill. She said the basement floor in her duplex cracked just before closing, and the ceiling started cracking immediately after she moved in. The door jam trim popped out of the door jam because of the stress of the house’s movement. The landscape drainage was built so poorly that water flowed back under her foundation and shot out of the sump pump.

She asked the committee to narrow the parts of the bill that she said give builders more immunity when they build homes.

Numerous municipal leaders also testified in favor of HB 1272, which is supported by the Colorado Municipal League and Colorado Counties, Inc.

Mayor Pro tem Karen Bigelow of Thornton said there were no condo permits issued in her city last year. What they’re getting instead is rental apartments, she said, and people are concerned about the lack of attainable housing for first time buyers or those who want to downsize, she explained.

Broomfield Mayor Guyleen Castriotta, who also chairs the the Metro Mayor’s Caucus, spoke to the bill’s warranty provision, which gives the contractor a right to repair any defect found in the construction. “Without this provision, contractors aren’t able to address any potential defect and owners, particularly condo HOAs [that are] incentivized by their lawyers, move quickly to litigation. If the contractor provides a warranty on the work, the owner should look to that warranty for the repair of any defect and not to litigation unless the contractor is not able to repair the defect,” she said.

The hearing wrapped up a 12-1 vote from the committee and now heads to the full House.