Why California Is Trying to Make Condos and Starter Homes Easier to Build

California has spent years trying to increase housing supply, but one important type of housing has become increasingly difficult to build: condominiums.

Condos and townhomes have traditionally offered a more attainable path to ownership than detached single-family homes. They can also serve the needs of downsizers, professionals, first-time buyers and homeowners looking for a lower-maintenance lifestyle.

Yet in many parts of California, developers have shifted away from building ownership communities and toward rental apartments.

Lawmakers are now examining whether construction-defect litigation, insurance costs and financing barriers are contributing to the shortage.

One proposal receiving attention is AB 1903, a construction-defect reform bill intended to make it easier for builders to address legitimate problems before disputes escalate into expensive litigation.

Why Aren’t More Condos Being Built in California?

The shortage of new condominiums is not caused by one issue.

Developers must consider:

• Land prices

• Construction costs

• Financing

• Insurance

• Local fees

• Approval delays

• Market demand

• HOA formation

• Construction-defect liability

Condominiums can be particularly complicated because individual owners share responsibility for roofs, exterior walls, foundations, common areas, plumbing systems and other community components.

When a construction problem arises, it may affect multiple units or the entire homeowners association.

That creates the possibility of large claims and costly litigation.

Developers and insurers argue that the risk of future construction-defect lawsuits can make condominium projects more expensive and less attractive to build.

In some cases, a developer may choose to build rental apartments instead because the ownership and liability structure is simpler.

What Is AB 1903?

AB 1903 is a proposed California bill that would revise parts of the state’s construction-defect and right-to-repair process.

Its general purpose is to give builders a clearer opportunity to inspect and repair certain alleged defects before a dispute becomes a full lawsuit.

The proposal addresses issues such as:

• Notice to builders

• Inspection procedures

• Repair opportunities

• Investigative costs

• Court discretion

• Compliance with pre-litigation procedures

• Standards used in construction-defect claims

The bill is not designed to eliminate valid claims or remove all builder responsibility.

Instead, supporters argue that it could make the dispute-resolution process more predictable and reduce legal costs when a builder is willing and able to correct a problem.

Why Does Construction-Defect Reform Matter?

Construction-defect disputes can be expensive for everyone involved.

For homeowners and HOAs, a serious defect may lead to:

• Water intrusion

• Structural damage

• Mold

• Roof failures

• Balcony problems

• Plumbing leaks

• Electrical issues

• Expensive special assessments

Owners need a meaningful way to hold builders responsible when a home or community was not constructed properly.

At the same time, lengthy legal disputes may delay repairs, increase legal expenses and create uncertainty for residents.

For builders, insurers and lenders, the possibility of large claims can increase the cost of developing and financing ownership housing.

The policy challenge is finding a balance between protecting homeowners and making new condominium construction financially realistic.

Would AB 1903 Reduce Homeowner Protections?

That is the central concern for many consumer advocates.

Supporters say the bill would preserve the right to pursue legitimate claims while encouraging repairs to happen earlier.

They argue that builders should be given a fair opportunity to:

• Inspect the alleged defect

• Determine what caused it

• Propose a repair

• Complete the repair when appropriate

• Resolve the dispute without unnecessary litigation

Critics worry that additional procedural requirements could delay claims or make it more difficult for homeowners associations to recover damages.

They may also question whether a builder’s proposed repair is sufficient or whether the process gives owners enough independent oversight.

Any final version of the bill will need to balance these competing interests.

How Could Condo Reform Increase Housing Supply?

If AB 1903 reduces legal uncertainty and insurance expenses, some ownership projects may become easier to finance.

That could encourage developers to build more:

• Condominiums

• Townhomes

• Small-lot communities

• Attached ownership housing

• Starter homes

• Mixed-use ownership projects

These housing types can be built at greater density than detached homes, which allows developers to spread land costs across more units.

That does not automatically make them inexpensive, especially in high-cost areas, but it can create ownership opportunities at price points below nearby single-family homes.

Would More Condos Help First-Time Buyers?

Potentially.

In many Orange County communities, a condominium is the most attainable entry point into ownership.

A buyer may be able to purchase a condo with:

• A smaller down payment

• A lower purchase price

• Less exterior maintenance

• Access to shared amenities

• A more central location

Condo ownership can allow buyers to begin building equity while remaining close to employment centers, schools, shopping and coastal communities.

However, buyers must evaluate more than the list price.

The true monthly cost also includes:

• HOA dues

• Property taxes

• Insurance

• Special assessments

• Maintenance responsibilities

• Financing requirements

A lower purchase price does not always mean a lower total ownership cost.

What Could Condo Reform Mean for Downsizers?

More condo and townhome construction could also benefit established homeowners.

Many longtime homeowners would consider downsizing but struggle to find a replacement property that offers:

• A desirable location

• Modern design

• Fewer maintenance responsibilities

• Single-level living

• Security

• Storage

• Outdoor space

• Reasonable HOA costs

When suitable options are limited, homeowners may remain in larger properties longer than they otherwise would.

Additional condo supply could create more choices for downsizers and help free up existing single-family homes for move-up buyers.

What Should Buyers Review Before Purchasing a Condo?

A condo purchase requires careful review of both the unit and the homeowners association.

Important questions include:

Is the HOA financially healthy?

Review:

• Reserve funding

• Annual budgets

• Delinquency rates

• Recent financial statements

• Planned capital projects

An underfunded association may eventually need to raise dues or impose a special assessment.

Are there pending lawsuits or defect claims?

Active litigation can affect:

• Financing eligibility

• Insurance

• Resale value

• HOA expenses

• Buyer confidence

Buyers should understand what the dispute involves and whether there is a realistic path toward resolution.

What does the master insurance policy cover?

California condo communities are also facing rising insurance costs.

Buyers should determine:

• What the HOA’s policy covers

• What the individual owner must insure

• Whether the association has adequate limits

• Whether premiums have recently increased

• Whether future increases are expected

Are special assessments planned?

Ask whether the HOA expects major expenses related to:

• Roof replacement

• Balconies

• Plumbing

• Elevators

• Paving

• Exterior painting

• Structural repairs

• Insurance deductibles

A low monthly HOA fee can be misleading if the association has not adequately saved for future repairs.

Is the project eligible for conventional financing?

Some projects may face financing restrictions because of:

• High investor ownership

• Active litigation

• Inadequate reserves

• Commercial space

• Insurance issues

• Deferred maintenance

Financing should be investigated early rather than after an offer is accepted.

Would AB 1903 Make Condos More Affordable?

Not by itself.

Even if the bill lowers litigation or insurance costs, condo prices will still depend on:

• Land

• Labor

• Materials

• Interest rates

• Development fees

• Parking requirements

• Local regulations

• Market demand

• HOA operating costs

The legislation could improve project feasibility, but that does not guarantee that new homes will be affordable to every household.

In coastal Orange County, new condos may still be expensive because of land values and demand.

However, they may still provide a more attainable option than a detached home in the same location.

Why This Matters for Orange County

Orange County has strong demand for several types of ownership housing:

• First-time buyer properties

• Low-maintenance homes

• Luxury condominiums

• Townhomes

• Downsizer-friendly communities

• Homes near employment centers

• Properties close to the coast

Yet building new ownership housing remains challenging.

If California can reduce some of the legal and financing barriers, developers may be more willing to create communities that serve buyers who do not need or cannot afford a detached home.

That could improve housing choice even if it does not immediately reduce prices.

The Bigger Housing Policy Shift

California’s housing debate is gradually moving beyond the question of where housing is allowed.

Lawmakers are increasingly looking at why approved homes are still not being built.

That means addressing:

• Construction costs

• Insurance

• Financing

• Infrastructure

• Development fees

• Litigation

• Permitting

• Consumer protections

AB 1903 is part of that larger conversation.

The state is trying to determine whether it can reduce unnecessary barriers without weakening the protections homeowners need when construction problems are real.

What Consumers Should Take Away

Condo construction reform may sound technical, but it has a direct connection to homeownership.

When fewer condos and townhomes are built, buyers have fewer options between renting and purchasing a detached home.

That can affect first-time buyers, downsizers, move-up households and anyone who wants to own in a desirable location without taking on the cost and maintenance of a larger property.

AB 1903 will not solve California’s housing shortage on its own.

It could, however, help address one reason developers have moved away from building ownership housing.

The success of any reform will depend on whether California can encourage more construction while preserving strong protections for homeowners and HOAs.

Frequently Asked Questions

What is AB 1903?
AB 1903 is a proposed California bill that would revise parts of the construction-defect and right-to-repair process.

Would the bill eliminate construction-defect lawsuits?
No. It would change procedures and give builders additional opportunities to inspect or repair certain alleged defects.

Why do construction-defect laws affect condo construction?
The cost and uncertainty of future claims can increase insurance and financing expenses for ownership projects.

Would the bill lower condo prices?
Not directly. It may reduce certain development risks, but pricing will still depend on land, labor, fees, interest rates and demand.

Who could benefit from more condo construction?
First-time buyers, downsizers, professionals, move-up households and buyers seeking lower-maintenance ownership options could all benefit from additional supply.