Balancing Buyer Protections with Development Costs: A Look at Arizona’s Construction Defect Liability Law

Insights | November 2025

By Paul George-Blazevich
February 2026

Event Overview

The Arizona Research Center for Housing and Economic Solutions hosted a panel event on construction defect liability on the University of Arizona campus in Tucson on Wednesday, November 19, 2025. Assistant Professor of Real Estate Development and Planning Daniel Kuhlmann moderated a discussion that focused on how construction defect liability impacts homeowners and housing developers in Arizona. Representative Sarah Liguori of the 5th Legislative District in Arizona and Massimo “Max” Sommacampagna of Bolzano Construction were panelists at the event.

Arizona’s Housing Trends

Dr. Kuhlmann kicked off the discussion with an observation of recent trends in housing construction in Arizona. On the one hand, Arizona is building more multifamily housing than it has in the past. Dr. Kuhlmann observed, “From 2020 to 2024, Arizona issued about 100,000 permits for multifamily units. This comprises about 35% of all permitted units. This is almost double what we produced in the five years previous. If you look back to 2015–2019, we permitted about 50,000 multifamily units.” But while the state is building more multifamily housing, nearly all the housing units are rentals: “If you look at census estimates, housing units built 2020 or later in the state, only 1% of that is owner-occupied. Of that 100,000 units we’ve built since 2020, only about 1,000 of them are for sale.”

Impact of Defect Liability on Development Decisions

The panelists then explored how Arizona’s construction defect liability law may be impacting how developers decide what type of housing they build. One notable impact of Arizona’s existing law is that it forces builders of attached owner-occupied housing to purchase expensive wrap insurance policies, which can dramatically increase construction costs. As Mr. Sommacompagna explained, “A wrap insurance policy provides a ten year insurance against liability that protects the builder, the subcontractors, and all of the parties involved. So you can imagine that insurance product is quite expensive. We recently got a quote for this insurance product and it was about 3% of the total construction project…It is a very large line item when it comes to our expenses.”

Housing Choice and Affordability Consequences

By increasing construction costs, insurance coverage for defect liability disincentivizes developers from building for-sale attached products. In her research in other statues, Representative Liguori observed that, “A number that I’ve heard from multiple states is that the insurance for a ‘for sale’ product can be up to 233% higher than ‘for rent.’ So that makes you pause and realize that if the project doesn’t pencil on paper, it’s not moving forward.”

Representative Liguori highlighted how Arizona’s defect liability law limits people’s housing choices, particularly for a more affordable, for-sale housing type. People who have an annual income under a certain threshold cannot save up enough money to purchase a single-family home and so are forced to continue renting. Liguori observed, “Townhomes can be the first rung on the home ownership ladder. They’re 20% to 40% more affordable, or more, than single-family homes. They fit a wide range of demographics: seniors looking to downsize, new married couples without kids or one kid, single people, working families. What I’m hearing now is that townhomes are the number one sought-after housing product because of their affordability, because of their flexibility, because they fit the needs of a wide range of demographics of buyers.”

Policy Reform Opportunities

The panelists explored several possible reforms that would better align consumer protections and development costs. Max suggested, “Instead of having an 8-year or 10-year timeframe, bringing that down to 5 or 6 years [would help]. We could also have an opt-in process for a qualified third-party company to also inspect. Because you went above and beyond what we expect, you’ll have a 5- or 6-year liability period instead of an 8-year liability.” And Representative Liguori has been researching reforms in other states recently. “We look at states like Texas, Colorado, Washington, Utah, and California. It seems to be a huge problem in southwestern, sunbelt states. It’s not just an Arizona issue. This is a multi-state issue when it comes to housing affordability. We can make sure that money from a lawsuit or insurance settlement goes directly to that defect instead of the HOA holding that money in reserve. The best way to protect the homeowner is to make sure that defect is repaired.”

Looking Ahead

The panel concluded on an optimistic note. When asked how he’d respond to future defect liability reforms, Mr. Sommacompagna responded, “I’d build the same product I’m building now, but sold individually; we know we can build this product, we know there’s economic demand for it. The demand is there and we’d love to build it. We know how to build it, we know where to build it, we just need to mitigate the liability and the numbers will work.” And when asked what motivated her interest on this issue, Representative Liguori responded, “What about those that want to get their foot in the door with home ownership? What about people that want to build generational wealth or accumulate wealth? A lot of people in our community, the teachers, the firefighters, have no option for homeownership now. I could still buy a home after graduating for $300,000 in central Phoenix and that home is now $750,000. I would never be able to afford that. We’re trying to unlock home ownership for different generations. So that’s why working on this excites me.”

Learn More

The full panel discussion is available to view online. Sign up for email updates from ARCHES to stay in the loop on future events hosted by the center.