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COMMENTARY: Democrats seek to undo construction defect legislation

Since 2018, Nevada has enjoyed an economic boom that has catapulted our state into the lead in employment, income and population growth. Whereas the average employment growth in the United States was 1.9 percent, Nevada led the nation with 3.9 percent gains. Average incomes grew 4 percent for most Americans, but Nevadans enjoyed 6.2 percent increases. And while the United States saw population growth of 0.6 percent, Nevada’s population grew by 2.1 percent.

In the not-so-distant-past, however, that was not the case. Nevada was hit hard during the Great Recession as we saw an exodus of people and jobs leaving the state. Our economy, overly reliant on construction and tourism, struggled behind the country to recover. As wages and labor pools started to dry up, our housing market collapsed.

Nevada’s economy has since recovered. We have diversified and implemented common-sense policies that are bringing new and exciting jobs back to the state and creating an improving housing market.

Assembly Bill 125, from the 2015 legislative session, was one of those reforms that led to our improving market by encouraging timely identification and repair of housing defects and discouraged unnecessary and expensive litigation. Before AB125, claims against homebuilders skyrocketed, resulting in a decrease in new home sales by 86 percent from 2000 to 2012, while construction defect claims increased by 355 percent. Construction defect cases were so great in Clark County that three District Court judges had to be assigned to a panel to handle the increase in frivolous cases.

The explosion in home-defect litigation had consequences: It left folks with fewer affordable new housing options — especially when it came to multifamily housing developments such as condominiums and town houses.

Frivolous construction defect suits were out of control and led to high insurance rates, costly lawyer fees and less affordable multifamily housing for homebuyers. In fact, before AB125, Nevada’s construction defect caseload was 38 times higher than the national average. A 2015 survey found that 52 percent of homeowners involved in construction defect litigation were unaware of their options to make claims under their warranty coverage rather than sue, while 67 percent became aware of their involvement in such litigation after the fact.

Since the passage of AB125, the annual number of homes in litigation for construction defects has fallen by nearly 90 percent from its peak in 2014, according to a new report by the Nevada Home Builders Association. The total cost to settle construction defect cases dropped from $32 million to $4 million after AB125.

Construction defect reform resulted in more predictability and a less risky environment for homebuilders and homebuyers. As a result, we are building more family homes, creating thousands of high-paying jobs and injecting billions of dollars into the economy. But of greater importance, consumers continue to be protected from defects without being dragged into costly and frivolous lawsuits.

But legislative Democrats are now considering a rollback of the reforms implemented four years ago. If they follow through on such a proposal, we will very likely see a major increase in the cost of building single family and multifamily housing. These costs will be passed down to the homeowner or renter, and the result is less affordable housing.

If these policies move forward and become law, Nevadans who need affordable housing will suffer.

Jill Tolles and Tom Roberts are Republican members of the Nevada Assembly, representing Reno and Las Vegas, respectively.

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