US home building quality under scrutiny in FTC study

The credibility and quality consciousness of US home builders is on the line. A recent study, contracted by the Federal Trade Commission (FTC), reveals some consumer-shaking facts about defects in the construction of today's new homes. Another independent study points out reasons why the home-building industry is not more progressive in the use of better technology and materials.

The FTC report is based on a $200,000 research study project. Among other revealing facts, it states that a buyer of a new home can expect a variety of construction defects that will cost nearly $1,000 to repair.

The study includes interviews with 1,812 owners of homes built in 1977-78. Two-thirds of those homeowners had at least one construction problem that had not been repaired by the builder.

For those homes with problems, the average repair cost was $1,411 per home.

The report may spark a rough time ahead for home builders. "There are some housing industry members who continue to do unsatisfactory work," says Jeffrey Harris, assistant director of the FTC's Bureau of Consumer Protection.

"As a result, our staff will recommend that the commission pursue its law-enforcement mandate against those problem builders on a case-by-case basis."

The FTC report also discloses that:

* One out of 5 of the interviewed homeowners reported a serious disagreement with a builder. One out of 15 consulted a lawyer; and 1 out of 25 hired one.

* Homeowners reporting serious disagreements each took an average of 74 hours , spent $175 beyond the actual repair cost, and lost one day of work trying to settle the disputes.

* The rate of new-home defects did not vary greatly by geographical region or house-hold income. However, houses priced in the low- and high-price range had more construction problems than those priced in the middle range.

* Problems related to walls, ceilings, and floors led the list of trouble areas. Next came yard drainage, driveways, and exterior concrete. Plumbing and roof problems also were common.

The new FTC report did not send tingles of excitement and joy through the National Association of Home Builders (NAHB). A responding statement to the report said:

"The FTC's survey on new housing exaggerates the extent of construction defects in new homes as well as the cost of fixing those alleged problems.

"The vast majority of new homes built in this nation are well built. Moreover, NAHB builder members stand behind the homes they build and about 90 percent of customers report they are satisfied with the quality of homes they buy."

In the wake of the report, many consumers are asking why so many defects are emerging in the construction of new homes when new and better building materials and technology are being developed every year.

Perhaps a clue to the reasons for this apparent lack of built-in quality in today's houses is shown in another report -- this one by the prestigious research and consulting firm of Arthur D. Little Inc. of Cambridge, Mass.

"Lack of innovation in housing construction and new technology utilization" is a key reason for the slow progress in upgrading the quality of new homes, the report indicates.

Many barriers hinder innovation in housing construction, the report goes on. They include:

* A major characteristic of the large and fragmented building industry is that any new product or technology moves at a slow pace into the marketplace.

* Because of fragmentation of the industry, individual builders usually cannot afford detailed investigations of new materials and techniques.

* Because many builders operate on a small scale and with small margins, they are reluctant to take risks. They must build houses that will sell now. They tend to be followers, not leaders.

* Past failures have retarded the acceptance of new materials.

* The great number of different local building codes inhibits new technology. While this situation is gradually changing as more communities adopt uniform building codes, it remains difficult to mass-produce building products that will meet the requirements of many and varied codes.

The report points out that the energy issue has changed the situation somewhat. Builders are forced to make changes in insulation and in the use of solar heating and cooling.

"These changes could be significant," the report emphasizes.

The report is the result of an independent study by the Arthur D. Little firm , commissioned by the National Association of Realtors.

If a lesson is to be learned by the consumer from the findings of these reports, it is that today's new home buyer should be more sensitive to, and concerned about, the track record and reputation of the home builder before a final decision is made to buy or not to buy a particular new house.

In other words, look for indications that the builder is progressive in his efforts to build a consistently higher level of quality into his homes through the use of better materials and technology.

When defects do surface, a builder should have the reputation for making repairs promptly.

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