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Construction Defects, The Flood to Come, Part II   (June 3, 2006)

Look closely at this photo of a famous Frank Lloyd Wright-designed home in Pasadena, Calif., which I referenced in a recent entry (The American House and Frank Lloyd Wright) Do you see the blue tarp?

Yes, it's the dreaded sign of leaks--a blue tarp can be seen draping the upper left wall. Even a building designed by a famous architect and built by experienced craftspeople can leak (or in the case of new, radical designs, will probably leak.) What's my point? Just that it is unfortunately very easy to get construction defects, as either a by-product of poor design, product failures, inadvertent onsite errors or slapdash, hurried construction.

A knowledgeable correspondent had this to say about my recent post on the possibility that the current building boom might well engender a flood of construction defects: (my emphasis added)
I enjoyed your article however you are *dramatically* understating the scope of the problem. I was directly involved as an expert architectural investigator for construction defect litigation in southern California for 12 years. In virtually every project (and nearly every unit) built in SoCal I could find issues that qualified as construction defects. In SoCal the industry is dominated by very large builders and the projects are large - ranging into the hundreds of units. The defects were particularly egregious in multi-family construction, mostly due to the complexity of the building type. The issues typically were not only related to water intrusion but also to structural (particularly seismic compliance) issues, soils (cut/fill and compaction), stucco application, firewall construction, building separation and site grading (particularly regarding water ponding and drainage directed to foundations).

At one point my office had nearly a BILLION dollars in litigation under investigation for mediation and trial - one architectural office in one city. The principal in the firm was pulling down more than a million a year. This was in the late '80s early 90s applying to construction that was built in the late 70's through the 80's. My guess is that this was chicken feed compared to what will surface in the next 10 years as the current crop of mass builder crap starts to leak and creak and settle.

SoCal is particularly prone to this problem because of the size of the builders and the projects, forgiving desert weather that allows construction quality much looser than what I see in New England, very complex soil geology, rigorous seismic codes and a legal system that structurally encourages this type of litigation. So perhaps other areas will not match the degree of litigation. But I have no doubt that the boom conditions attracted many many unqualified builders, scheduling pressure forced shortcuts and overworked inspection resources reduced the checks against blatant construction errors.
The correspondent went on to say:
I might also add that at about the time I burned out on the business the law firms (and their coterie of experts) were rapidly expanding operations in Las Vegas and Phoenix. In fact a close friend bought a pretty fancy twin engine plane to do the 'commute' since he was back and forth so much. The point is that these were for projects built in the 1975-1985 building cycle which was tiny for LV and Phoenix compared to the current mega cycle.

As bad as the builders were then, I'm sure the current hiring pressure and development cycles have resulted in more shortcuts, incompetent "tradesmen", less inspection and less inclination to correct mistakes. So, between just Southern California, Las Vegas and Phoenix, I'm willing to bet that the next wave of litigation will be a tsunami. If you're holding insurance company stocks you might want to check the exposure!

Since my perspective is geographically pretty limited (and 10-12 years out of the business) I would love to hear from your readers about litigation trends in other areas.
I would certainly second that request.

The points made by this astute reader are disturbing,
for they confirm the view that the problem isn't just hurried construction built by inexperienced workers, but a legal apparatus which encourages expensive (and not always useful) construction litigation (sometimes the building doesn't even get repaired, despite all the money thrown around in court), and an overworked inspection system. Inspectors, often seen as obstructors by builders and lenders alike, are faced with increasingly complex systems within buildings as well as larger absolute numbers of buildings to inspect.

The problem is also one of scale and materials; a modern three-bath house has a greater probability for plumbing errors than a one-bath house from the 50s simply as a result of the increase in joints and fixtures. Materials aren't the same, either; particle board will swell up and crumble when wet in a way which old solid-wood subflooring did not. Bathroom fixtures were once made to last (you can still buy a decent Chicago Brand faucet, but it may cost $100 rather than $20) whereas modern cheap faucets fail after an alarmingly brief lifespan. Modern waterproofing like Tyvek seals the exterior walls so securely that any leakage inside walls tends to accumulate rather than evaporate.

There are dozens of such changes in practises and materials which provide more chances for errors to creep into the construction process; and as the easy flat land gets built out, new housing in many parts of the country is built on less stable soil.

For another informed view, let's turn to another knowledgeable reader's comments: (my emphasis added)
Thanks for writing this (entry on construction defects). It’s interesting to read it coming from someone who has been a builder and has admitted to making construction mistakes as well. I agree that construction defects could be a near future crisis in housing. In January 2004, Consumer Reports stated 15% of newly built homes had at least two serious defects.

In this document (PDF) from Partnership for Advancing Housing Technology (PATH), there is a chart on page 3 indicating a MUCH higher percentage. Given the number of houses we see going up with no window flashing, (just ONE example of a construction shortcut being routinely and deliberately made now), I think the percentage of seriously faulty new homes has to be very, very high.

You are right that there is about “zero” recourse for the homeowner in many of these cases.
The shoddy new homes being built these days are tomorrow’s slums and tear-downs. The amount of material in these disposable homes is an obscene waste; a home should last for AT LEAST the life of the loan that was taken out to finance it, if not for generations.

When I was growing up my dad worked for a home builder. He made a decent wage and we owned decent houses on his salary. It was a respected profession. Homes then were more affordable than today’s homes where in some areas you can’t even get a fixer-upper for less than a quarter million. I do not have all the inflation-adjusted figures but I don’t think that’s needed to be able to compare. It’s easy to see that when builders make 30% or more profit, and can afford to slash prices as much as $100,000 when the market cools, that the price of new homes today is artificially inflated. Why? Because builders can get away with it. In fact, I’ve read numerous news articles where appraisers were quoted saying they are pressured to inflate the value of homes or not get any work. Today’s prices seem to have little to do with anything but greed.

Builders lobby to erode consumer protection laws, create builder protection laws, and do away with regulation that once protected the environment, cities’ right to plan and control growth, etc.

Suing builders who build shoddy homes and breach the warranty was certainly never easy, what with the cost of hiring a lawyer. Now, arbitration clauses prevent customers from suing anyway.

I could go on and on about this topic and I realize my letter has probably already gotten longer than your article. I just wanted to say thanks and provide you with some links that did have statistics about how many new homes have serious problems. It is way too many.

Cindy Schnackel,
National Secretary,
Homeowners Against Deficient Dwellings
Here is an excerpt from the Consumer Reports article cited above:
Why the problems? Many experts point to the country’s 10-year housing and real-estate boom. The top 100 U.S. home builders together sold an estimated 1,000 new homes a day in 2002, or one-third of all new-home sales.

That pace strained production. While home builders nurture the image of painstaking traditional craftsmanship, most new homes today are produced as if on an assembly line. Building affordable homes means being acutely aware of time and costs. Those builders that are public companies have the added pressure of shareholders to satisfy, industry executives and former employees say. Builders are completing homes in 90 to 120 days. A decade ago, the range was 120 to 200 days, according to one industry study.

“We were shooting for 60 days,” says Jim Banks, a former supervisor for an Ohio-area builder and a contributor to “HomeBuilding Pitfalls,” a book on how to avoid buying a defective tract home. “The quicker you do it, though, the more mistakes get made. Production supervisors aren’t working on just one home. They have 8 or 12 going at a time.”

Shortages of skilled tradespeople sometimes contribute to the problem of shoddy construction. In fast-growing areas, including parts of California, Florida, Nevada, and Texas, a lack of framers, plumbers, roofers, and electricians means that less-skilled or unskilled laborers may be performing this work, industry observers say. Lack of training and language barriers between construction supervisors and workers can also contribute to poor workmanship.

To lower housing costs, builders now often substitute new, less-expensive materials for those they used in the past, industry experts say. For example, oriented strand board, a pressed-wood product made from small strands of wood, has replaced plywood as sheathing.

Also, homes are more complicated to build today because of regulations that, among other things, require homes to conserve energy.
This reader's commentary is equally disturbing, for it suggests that at least some significant percentage of builders has addressed the problem not by tightening their standards and improving their defect rate but by invoking legal limitations on the homeowner's recourse should defects not get repaired. Furthermore, it points out the the high cost of building with shoddy materials; all the raw materials, oil and labor that went into producing the throwaway product is wasted once it fails and is tossed into the landfill.

From my point of view, this is yet more evidence of the Wal-Martization of American values: "lowest prices--always." The fact that low-priced junk fails quickly and must be replaced with high-cost American labor is ignored in this "cost-saving calculus," along with the horrendous environmental costs of such waste.

What can we conclude? That it is partly a matter of perspective; if you are the developer or builder, defects are your nightmare; as the homeowner or homeowner's advocate, they are the source of outrage and frustration; as an attorney, they might be your bread-and-butter, and as a city official, they are one of your ever-present concerns.

The upshot? Just this, perhaps: know what you're buying (or having built) well.

For more on this subject and a wide array of other topics, please visit my weblog.


copyright © 2006 Charles Hugh Smith. All rights reserved in all media.

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