DENVER – Negotiations on construction defects reform collapsed Thursday in the Legislature, just as state lawmakers began debating affordable housing bills.
The demise of any defects reform this year is likely to embolden the Durango City Council to enact its own ordinance, as several other local governments have done.
Talks became so complicated that legislation was never even introduced.
“They failed us,” said Councilor Sweetie Marbury. “They couldn’t reach any kind of decent conclusion to help the need for housing, so Durango will have some recommendations.”
At the start of the legislative session, lawmakers from both parties said they expected a package of bills to encompass defects reform and affordable housing. The idea is that the fear of defects lawsuits is keeping builders from constructing affordable condominiums and townhouses.
As a hearing on three affordable housing bills started Thursday – with less than a week left in the legislative session – defects stakeholders said they had come to an impasse.
“We were willing to agree to new rules on disclosures and homeowner voting to proceed with a construction defect action, but our bottom line was defending families’ legal rights to protect their homes,” said Molly Foley-Healy, an attorney representing the Community Associations Institute.
Homeowners were adamant that any effort to curb defects lawsuits should preserve a jury trial, while some on the other side attempted to negotiate to allow for a specialty court or administrative process.
“While we are disappointed that we could not convince the other side to increase transparency and give homeowners a voice in whether their most precious asset – their home – is tied up in long and costly litigation, we are not without hope,” said Lakewood Mayor Adam Paul, a stakeholder with the Homeownership Opportunity Alliance, a group of business leaders, builders and elected officials that pushed for defects reform.
The group hopes to come back next year with a new push in the Legislature.
The thrust of the effort was to require a majority of all homeowners in a development to agree to a lawsuit, rather than just a vote by the association board.
Durango officials have given initial support to a similar proposal that would require a majority vote. Homeowners associations also would have to enter into mediation or arbitration before heading to court, another idea floated in the Legislature.
The Durango City Council may revise the proposal before a final vote is taken to add additional protections for homeowners.
City planners are likely to make final recommendations in the coming weeks before the council votes, something that could be expedited now that the Legislature failed.
The supply of condominiums has shrunk drastically in Durango. Experts estimate 560 housing units are needed annually to meet demand. Meanwhile, rental rates are going up as vacancy goes down.
The three affordable housing bills heard Thursday would expand housing loans for buyers, allow prospective buyers to use tax-free savings accounts and extend tax credits to affordable housing builders.
But only one of the bills passed the committee with bipartisan support on Thursday, leaving observers fearful that even the affordable housing package is doomed in the split Legislature. The bills could receive a second hearing as early as Thursday evening.
“This will have a meaningful impact; it can help people go from poverty to a different place economically,” House Majority Leader Crisanta Duran, D-Denver, said of the affordable housing effort. “It would also help a lot of middle class families, a lot of families across the board.”