Re: Feb. 1 guest commentary.
Despite the allegations of builders, developers and high-end realtors, construction defect laws are not the reason for the limited condominium construction activity in the Denver metro area. Instead, market forces are at play.
Relaxing construction defect laws will not eliminate construction defects; it will simply shift the costs of any defects to the new homeowner. Yet homeowners must trust the construction met reasonable standards for foundation, roof and plumbing, as they have no other way to assess the product. All industries are responsible for the products they produce; the construction industry should be no exception.
I recently led a team of economists in rigorous research into the Denver metro area housing market and this data-intensive — not anecdotal — study showed that classic economic expectations explain the current condo construction situation.
There are still buyers for condos; however, the demand for apartments has been greater due to stringent lending requirements, higher down payments, higher purchase fees, lower real income and higher unemployment rates that make buying more difficult than renting as compared to pre-recession levels.
Also, among one of the largest groups of condo buyers — first-time millennial homeowners — the data shows later marriage, delayed childbearing and higher college debt explain slow condo development, not construction defect laws. Our research also found the construction defect laws in Colorado are similar or more favorable to builders/developers than the construction defect laws in other states.
Condos take a few years to plan and develop, and developers require more than one, two or even three dozen potential buyers in order to make a commitment to build. As a result, there is, and always has been, a housing cycle with a lag between the demand and supply in multifamily projects. To wit, there have been announcements of at least a half-dozen condominium projects in Denver’s urban centers that will offer several hundred condominium units within the upcoming year.
Thankfully, there are clear signs the economy has turned the corner.
Markets work; leave this one alone.
Patricia L. Pacey is president of Pacey Economics, Inc.
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