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Homeownership in Colorado blocked by ease of access to litigation without consumer protections

This week, we saw the death of a bill that increases the opportunity for young families and retirees to find attainable housing.  It was a sad day, especially because the bill was the result of over six months of exhaustive research on the part of a broad based coalition, comprised of Mayors, housing advocates, transit enthusiasts, planners and those interested in building diverse communities with a broad choice of housing.

After the failure of legislation last year to increase for-sale, attached housing (condos) around transit stations, the Metro Mayors Caucus, in conjunction with the Metro Denver EDC initiated a five month research effort to discover the reasons for the absence of condos in the Colorado housing market.

Would it surprise you to know that with all the construction underway around Union Station is “rental only”?  Would you be surprised to know that while over 20 percent of housing development projects in the U.S. are condos, only 2 percent of the Colorado housing market is condos?

About 40 associations and companies spent the summer looking for answers.

We learned through this process that it is far too easy to enter into litigation for defects in condo construction and consumers have little or no idea of the threats such litigation poses to the value of their largest single investment – their home.  There are simpler, faster and less damaging options that should be engaged prior to litigation.

Here’s what else we uncovered on our fact finding mission:

  1. Millenials do own homes. Despite what the popular news tells us, own more homes today than Baby Boomers did at the same time in their lives.
  2. If they don’t own now, they want to in the future. Millenials want to buy homes. In fact, 84 percent of Millenials tell us that home ownership is in their life’s plan.
  3. Liability insurance costs for condo units are through the roof. They are three times higher than apartment units.  Insurers told us that the threat of litigation is the reason for higher rates.
  4. HOA boards can act with little direction from other homeowners. HOA boards are not required to inform, poll or hold an election of property owners in their HOAs to initiate litigation. On a typical HOA board of five, only three votes are required to engage legal counsel that will sue builders on a contingency basis.
  5. Lenders are lending – for condos that cost more than $400,000. These units have profit margins high enough to absorb the cost of litigation. But attainable housing, within reach of most Coloradans ($175,000 to $255,000) is not being built and cannot be financed.
  6. Federal agencies that typically help first-time home buyers are not lending into this market. After the mortgage debacle, federal agencies are still under restrictions that keep them from resuming this type of help.
  7. “Attainable housing” is vital to all Colorado cities. Older communities need to help elderly citizens move out of their three bedroom, two bathroom single family homes to smaller, more manageable housing. Yet, today there is no place for those who want to “age in place.” Conversely these cities with a large number of elderly are seeking new, younger residents to revitalize their city’s economy. Without single family homes and condos, these young families cannot move into these types of cities.
  8. It is critical for transit-oriented development. Mayors with transit lines in their cities cannot find a single builder/developer to build condos in the “attainable price range” of $175,000-$255,000. The threat of litigation drives these important attainable housing units out of the market.

If you let the facts speak for themselves, there is clearly a problem in need of remedy. As a result of these findings, Senate Bill 220 was introduced by Senator Jesse Ulibarri of Commerce City. The bill was a modest one. It required HOA boards to fully inform their property owners of the upside and downside of litigation. It required a vote, not of the HOA board, but a majority of property owners to go forward with litigation. And, it required greater use of arbitration which gets faster repairs of defects and reduce costs, including builder liability insurance.

Although we realized this bill would face almost certain demise through a series of procedural moves, we won’t go down quietly. Because those without a voice, who don’t even know why they can’t buy condos, are being heard, finally. The Metro Mayors have become that voice – the voice for smart development and community building. Let’s hope we will hear that voice again next session. 


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About Phil Kalin

Phil Kalin joined Pinnacol Assurance as CEO in 2013. He has served as the chief executive of both public and privately-backed companies, including large hospital systems, as well as organizations focused on health care data, technology and education. He has been active nationally on health care topics related to insurance, data analytics, technology innovation, cost improvement and risk mitigation. Phil is providing an informed opinion on what we see in the Monthly Economic Indicators.

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About Pinnacol

Pinnacol Assurance is the Metro Denver EDC's Research Sponsor. Pinnacol is Colorado’s leading provider of workers’ compensation insurance. Pinnacol provides comprehensive, competitively priced coverage; immediate attention to claims; a highly qualified network of medical providers; and proactive safety programs to more than 55,000 Colorado businesses. Annually, Pinnacol supports nearly $500 million of Colorado’s economic activity, spends over 35,000 hours keeping Colorado worksites safe and provides compassionate care to over 40,000 Coloradans injured on the job.

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