LUCERO INSIGHTS | HOUSING
When a Condo Becomes Unfinanceable
Colorado’s next attainable-homeownership problem is already hiding in plain sight
John R. Lucero | October 2026
For decades, condominiums and townhomes have provided one of the most practical entry points into homeownership. They generally cost less than detached homes, require less land and allow more households to build equity in neighborhoods where detached housing may be beyond their reach.
That role is becoming increasingly fragile as Colorado condominium financing faces pressures that extend well beyond the purchase price.
Colorado has spent considerable time debating how construction-defect liability affects the production of new condominiums. That debate matters. But even if recent reforms encourage developers, insurers and lenders to support more attached ownership housing, Colorado faces another problem: portions of its existing condominium inventory are becoming increasingly expensive to own, difficult to finance and, in some cases, difficult to sell.
A condominium can have an attainable purchase price and still be unaffordable – or effectively unfinanceable – once association dues, insurance costs, reserve deficiencies and special assessments enter the calculation.
The attached market is sending a warning
The divide between detached and attached housing is becoming harder to dismiss.
In the seven-county Denver metro area, August sales of single-family homes declined 13.3 percent from the previous year, while townhouse and condominium sales fell 18 percent. The median attached-home price declined 3.8 percent to $375,000, while the median single-family price remained essentially flat at $622,500.
Statewide, condominium and townhome sales declined 16.1 percent, and average market time increased to 80 days.
The lower price of an attached home should make it attractive when mortgage rates and detached-home prices remain elevated. Instead, buyers are often looking beyond the listing price and finding a more complicated ownership equation.
The monthly obligation may include a mortgage payment, property taxes, individual insurance, association dues and a share of the building’s long-term capital needs. If the association is underfunded or the master insurance policy becomes more expensive, owners can face higher dues or significant special assessments.
At that point, the condominium may no longer function as attainable housing – even if its sale price suggests otherwise.
Financing depends on the entire community
A detached home is generally evaluated as an individual property. A condominium buyer is purchasing an individual unit, but the lender must also evaluate the financial and physical condition of the larger project.
That distinction is critical.
A buyer may have strong credit, sufficient income and an adequate down payment, yet still struggle to obtain conventional financing because of problems involving the association’s insurance, reserves, deferred maintenance or building condition.
Recent national coverage placed a Golden, Colorado, condominium owner at the center of this problem. The owner initially encountered difficulty obtaining financing because the association’s master insurance policy did not satisfy applicable lending requirements. He eventually purchased the unit with a different lender and a larger down payment, but now faces the possibility that a future buyer could confront the same financing obstacle.
That is not simply an inconvenience for one buyer or seller. When fewer purchasers can obtain conventional financing, the eligible buyer pool contracts. Units take longer to sell. Sellers reduce prices. Existing owners lose mobility and potentially lose equity.
The financial condition of the association becomes part of the market value of every home in the community.
Federal standards recognize the risk
Fannie Mae updated its condominium project and property-insurance standards in March 2026. The changes provide some flexibility, including expanded project-review waivers for certain smaller communities and greater flexibility in the treatment of roof coverage.
At the same time, the standards place greater emphasis on reserve adequacy and the long-term financial health of condominium projects. Fannie Mae specifically identified a relationship between underfunded reserves, critical repairs, unexpected special assessments and financial hardship for unit owners.
The standards also limit the allowable per-unit deductible under a master property policy to $50,000. When a master policy includes a per-unit deductible, the borrower must carry individual coverage sufficient to address that exposure. Those provisions became mandatory for affected loan applications beginning July 1, 2026.
These requirements are not arbitrary obstacles created to make condominium lending more difficult. They reflect legitimate risk. A lender purchasing or guaranteeing a 30-year mortgage needs reasonable assurance that the building will remain insured, maintained and financially sustainable.
But the result is unavoidable: an association’s failure to maintain adequate insurance or reserves can now have a direct effect on whether an otherwise qualified household can purchase a unit.
Colorado has taken an important first step
Colorado’s HB26-1099 begins addressing the financial condition of common-interest communities. The law requires the developer of a new planned community or condominium to obtain an independent reserve study before selling the first unit. The study must estimate the costs of maintaining, repairing and replacing common elements over a 30-year period and must be disclosed to prospective buyers.
The law also establishes requirements related to reserve contributions and updated studies as control of the association transitions from the developer to the owners.
This is a reasonable consumer-protection measure. Buyers should understand the long-term obligations they are assuming, and associations should not begin their operating lives without a realistic picture of future capital needs.
But the law primarily improves the financial foundation of newly created communities. It does not recapitalize existing associations that have postponed reserve contributions, accumulated deferred maintenance or experienced sharp insurance increases.
That is where much of the immediate risk lies.
Affordability cannot depend on deferred obligations
Keeping association dues artificially low may feel like an affordability strategy, but it often transfers costs to the future.
A roof, elevator, facade, plumbing system or parking structure does not become less expensive because the association delayed saving for it. When reserves are insufficient, the eventual cost arrives through a special assessment, additional borrowing or another substantial increase in monthly dues.
The same is true of insurance. Colorado associations are absorbing higher premiums and, in some cases, higher deductibles. Those costs ultimately fall on the owners, whether through regular dues, individual insurance requirements or greater exposure following a loss.
This creates a difficult policy balance. Requiring stronger reserves and adequate insurance increases current ownership costs. Failing to require them can expose owners to larger financial shocks and undermine the future financeability of the entire community.
The answer cannot be to ignore either side of the equation.
The next phase of Colorado ownership policy
Construction-defect reform remains part of the effort to restore condominium production. But producing new units and protecting the viability of existing units are different policy challenges.
Colorado’s next attainable-homeownership discussion should examine several questions:
- How can existing associations obtain reliable reserve studies and implement realistic funding plans without immediately pricing vulnerable owners out of their homes?
- Can insurance reforms, risk mitigation or broader purchasing arrangements help associations control master-policy costs?
- Should buyers receive clearer, standardized information about reserves, insurance, deductibles, deferred maintenance and pending assessments before purchasing?
- How can lenders, insurers, associations and policymakers identify problems early – before an entire community becomes difficult to finance?
- What forms of temporary assistance might help income-qualified owners absorb necessary assessments without converting deferred maintenance into displacement?
These questions require collaboration rather than a single legislative answer.
The real measure of attainable ownership
A condominium’s affordability cannot be measured solely by its purchase price.
Attainable homeownership also depends on whether the buyer can finance the unit, whether the association can insure and maintain the property, and whether the community is preparing honestly for its long-term obligations.
Colorado needs more attached ownership housing. It also needs to protect the attached ownership housing it already has.
If a unit is priced within reach but cannot qualify for conventional financing – or carries association obligations the household cannot reasonably absorb – it is not functioning as attainable housing. It is simply a lower-priced property with risks waiting beneath the surface.
The next phase of Colorado’s housing work must connect production, insurance, reserves, lending and consumer protection. Otherwise, the state may succeed in creating new pathways to condominium ownership while existing pathways quietly close behind us.
