Colorado’s Declining Condo Construction Contributing to Housing Shortage
(The Center Square) – Condominium construction in Colorado plummeted after the 2008 financial crisis, contributing to the current shortage of affordable housing, according to a new study.
“The disappearance of condominiums in Colorado embodies the state’s housing affordability challenges,” Peter LiFari, author of “The Decline of Condominium Construction,” published by the Common Sense Institute, said in a statement announcing the report. “We simply can’t seem to figure out how to deliver the types of housing Coloradans desire at the price points they can afford.”
LiFari is a fellow at the public policy group and the chief executive officer of Maiker Housing Partners, a socially conscious public housing authority and owner, operator, and developer of multifamily affordable housing.
The report stated condominiums are the most affordable owner-occupied housing.
CSI noted several factors contributing to the trend:
Across the 11 front-range counties where 80% of Colorado’s population lives, the development of condominiums between 2018 and 2022 dropped 76% compared to 2002 to 2008. Demand for condominiums is strong despite the downturn in construction. Insurance rates for condominium developers increased due to the high frequency and cost of construction litigation. The rate is 233% higher than multifamily rental home projects. The number of condominium developers dropped 84% during the 15-year span from 2007 to 2022.
The report highlighted the organization's Homebuyer Misery Index, which showed the state's housing affordability dropped at the second-fastest rate in the nation.
In order to meet the demand for affordable condominiums, CSI urged Colorado to reform its policies to balance risks for both developers and homeowners.
“Adequate reform does not require the repeal of existing law but can instead involve a strategic series of incremental reforms,” the report stated.
From 2003 to 2009, there was one new condominium constructed for every 1.25 apartments. Since 2018, 14 new apartments were constructed for every new condominium, the report said.
“Amid a thriving economy and an influx of young professionals, condos are considered attractive choices for many buyers due to their low-maintenance lifestyle and often more affordable price tags compared to single-family homes,” LiFari said. “In essence, condos are the ideal starter homes and the ideal options for over housed seniors at affordable prices. The question is: Where have all the condos gone?”
Restrictive zoning regulations and an anti-growth sentiment also hindered the ability of developers to construct denser housing in many areas. The report said the median sales price of a single-family home was $625,000 in the Denver area and a townhouse/condominium was $425,000, a 32% difference.
“While diversifying housing production is essential, it’s critical to note that homeowners’ net worth averages more than 40 times that of renters,” the report stated. “This stark disparity illuminates the urgency for Colorado leaders to strongly reconsider allowing the primary affordable homeownership segment to continue its stagnation.”