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You are here: Home / Boulder Real Estate Blog / Colorado construction defect law and the build-to-rent trend

Colorado construction defect law and the build-to-rent trend

August 1, 2022 by The Boulder Property Network

 

Colorado’s first construction defect law dates back to 2001 when the first version of the Construction Defect Action Reform Act (CDARA) was introduced. Since that time, CDARA has created the framework for how construction defect litigation and arbitration are conducted in the state of Colorado. The state legislature has made several amendments to CDARA since its inception, causing the statute to evolve to its current form. The bottom line is that the statute has softened from the builder point of view, but still is causing builders to think twice before starting construction on a multi-family, condo-for-sale project.

As a result, most of the new construction has been “for-rent” housing rather than “for-sale” housing. Due to a variety of issues, such as land costs and construction defect laws, almost every metro market is seeing more new multi-family for-rent homes. In our area, when you drive down Highway 36 and Interstate 25, you see a variety of new construction projects that look like condos. However, most of them are for-rent apartments. As a result, there has been a shortage of attached homes for sale, making it very difficult for first-time home buyers to get a start in this market.

The trend of “build-to-rent” apartments instead of condos has now moved to the single-family home market. In addition to construction defect laws, there are other reasons the build-to-rent trend is happening in the single-family home market. First, market demand from consumers for a place to live. The for-sale market is so competitive it is hard to find a place to buy. Providing a rental neighborhood of small single-family homes with yards fills this need. Second, with inflation and supply chain issues, municipal fees, and more, builders are having difficulty delivering contracted homes at a profit. By building for the purpose of renting, the builder can sell the home later, at a profit, once the market catches up with what the actual costs turned out to be.

The build-to-rent concept in single-family homes has evolved to encompass entire neighborhoods that are being zoned for permanent rentals. This concept can be attractive for someone who wants to rent but does not want to live in an apartment, yet would like the benefits of apartment living, such as a maintenance-free lifestyle.

The build-to-rent concept in both multi-family and single-family homes can fulfill a consumer need for having a place to live. However, it draws away builder resources from providing homes to buy, putting further pressure on the current inventory shortage. It also prevents the consumer from building wealth through the ownership of real estate.

Nevertheless, it is possible that many of these units could be converted to condos at a future date, increasing the number of condos available for purchase.

By Duane Duggan. Duane has been a Realtor for RE/MAX of Boulder since 1982. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail DuaneDuggan@boulderco.com, call 303.441.5611 or visit BoulderPropertyNetwork.com.

Filed Under: Boulder Real Estate Blog, Duane's Timely Topics Tagged With: #bouldercountyhousingmarket, #bouldercountyrealestate, #buildtorent, #coloradorealestate, #constructiondefectlaw, #firsttimehomebuyer, #homebuyer, #housingmarket, #housingshortage, #RealEstate

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