For the first time in history, Colorado contractors pulled permits for more multi-family homes than single-family homes in 2022. Historically, multi-family has represented 30% of all housing construction and since 2012 it has run closer to 40%. Last year, it represented over 50% of all permits pulled.

It obviously costs more per unit to build a single-family home than a condominium and with Denver’s population growing as its economy expands, it makes sense that we’d see more condo projects to meet demand from price-conscious buyers. Indeed, the median price for a single-family home in Denver is over $600,000 and for condos it was just above $400,000, so we can expect to see more families start their road to homeownership in condos instead of detached single-family homes in the future.

But there’s a troubling wrinkle in Denver’s multi-family construction industry. While it would seem the cost to build condos is almost identical to building apartments, concerns about construction defects litigation, higher taxes when selling condos vs. apartments and additional costs for common walls between units & homeowners association documentation leads many builders to opt for apartments instead of condos.

Despite legislation to limit builder liability in 2017, contractors and their insurers still fear construction defect litigation, making apartment buildings more appealing projects than condos. After all, if construction defects arise, the developer can simply fix it because they own the apartment building; if that happens in a condo complex, the HOA sues and litigation costs add up. Also, selling condos triggers higher taxes on builders than building an apartment complex–holding it for more than a year and paying long-term capital gains on the sale is significantly less.

So, until and unless things change, we can probably expect to see fewer affordable single-family homes or condos available for people to start (or end) their homeownership journey.