Source: Terner Center for Housing Innovation

Date Published: 9/15/2025

Link: The Financial Impacts of Construction Defect Liability on Housing Development in California

Knowing that the current housing construction in California is “stagnating” (around 100,000 new units yearly), well behind the State production goal of 2.5 million units between 2023 and 2031, the author examines a new report on California’s condominium market. In particular, the study outlines how developers “often pay three to four times as much for insurance for condominiums as they do for similar rental apartments,” a cost which disincentivizes many projects. The author examines how the length of legal standing, the definition of construction defect, and the ability of any HOA owner to sue collectively – drives litigation and, in turn, prompts developers to activate their insurance policy. In addition to the owner-friendly laws, insurance policies for developers have been increasingly requiring more expansive coverage to include contractors and subcontractors. Outlining potential solutions, the author explores shortening the length of repose, expanding developer protections, requiring a higher standard of building maintenance for owners, requiring more HOA owner approval before litigation, limiting attorney fees, and implementing a “warranty” system similar to those implemented in New Jersey and parts of Canada.