In California’s pricey real estate market, condos are a more affordable option for first-time buyers compared to single-family homes. However, a new report from the Terner Center for Housing Innovation reveals that the shortage of new condos is partly due to a 2002 state law allowing up to 10 years for condo owners to sue developers over construction defects.
This law, intended to fill gaps in consumer protection, has increased insurance costs for developers, deterring new projects. Since condo construction peaked in 2006, there has been a sharp decline, with new starts dropping from over 30,000 in 2006 to under 5,000 in 2022 in Los Angeles and Orange counties.
The report suggests California should revise this liability law to balance consumer protection with development incentives, recommending shorter claim periods and mandatory mediation. It also proposes a warranty program like New Jersey’s to address defects without litigation.
While the Right to Repair Act allows defect repairs without lawsuits, legal advice often leads condo associations to sue, raising insurance costs and discouraging affordable development. Senate Bill 1470, which would have required a chance for repairs before suing, did not pass due to opposition from consumer advocates.
The report also notes that the 10-year limit covers both major and minor defects, pushing developers toward luxury projects and keeping condo prices high. For more insights, check out the full Terner Center report.
SOURCE: CoStar News
