Homeowners of Texas (HOT) thanks you for your continued interest and support. We’re working to make sure new and remodeled homes are properly engineered and built by licensed general contractors, with appropriate regulatory oversight. We want builders held accountable to homeowners, who should have fair access to legal remedies if construction defects or disputes occur.

The 2009 legislative session has us extremely busy but, with so much going on, we felt you’d like an update. Here’s a summary of legislative issues important to you and other homeowners.

Avoiding Six More Years of Homeowner Abuse

February started with Groundhog Day and an opportunity to poke fun at Texas and its builder-friendly laws. Our Media Alert questioned whether legislators would wake up to the light of constituents, or hide behind the shadow of big builders. We introduced a "spoof bill” in case they refuse to regulate the homebuilding industry. It extends the same courtesy to ALL Texas professions, including doctors, nurses and lawyers.

Our spoof bill takes Governor Rick Perry’s small-government, low-tax, limited lawsuits and “light touch” regulatory policies to new heights. It (1) rescinds licensing and removes barriers for entering once-restricted professions, (2) eliminates business risks by preventing lawsuits, and (3) returns Texas to the “Wild West Land of the Free and Home of the Brave.” The bill would lower the unemployment rate by making it easier for unemployed workers to start new careers without investing the time and money once required for prerequisite education. It would also lower the cost of critical services like medical and dental care and legal representation.

The Media Alert pointed to eight light-hearted posters that promote the Texas Business Relief and Economic Development Act of 2009.
 

Groundhogs Don't Build in Expansive Soil

Soil Issues for Residential Construction in Texas is a new white paper that alerts builders, homeowners and policy makers to two concerns about building homes on reclaimed farm and ranchland. The first relates to expansive soils that are unsuitable for building and that cause foundation problems and threaten the structural integrity of homes. The second is residual contamination from industrial waste or toxic pesticides that can cause serious health problems. Read this if you live in the Blacklands Prairie region where cotton farms were urbanized into neighborhoods.

Intense Interest in Regulating Homebuilding

The time is right to reform the homebuilding industry to tighten regulatory oversight and improve construction quality. 

Texas has had far fewer mortgage problems but plenty of construction problems because our business climate prevents lawsuits and lets bad builders run wild. Even though Texas fares better than most states, the homebuilding industry is widely viewed as the spark that led to the global economic crisis. (HOT white paper coming soon)

The TRCC, which has been ineffective at protecting the public and instead protects builders, faces a mandatory sunset review. The agency will shut down automatically unless legislators approve funding and vote for an extension. Hopefully, that won’t happen without major reforms.

Recent elections left the Texas Legislature more balanced between Democrats and Republicans, and there's a new Speaker of the House. Tom Craddick once ruled the roost with a heavy-handed style, partisan control and his homebuilder allies. His power came from assigning committee members, appointing chairs, setting priorities, and determining which bills had a chance to pass or die.  Members complained that they were pressured into voting against the interests of their districts. Joe Straus promises to be a much more moderate speaker, with a bottom-up, member-controlled agenda, as opposed to a top-down approach under Tom Craddick. 

HOT Legislative Agenda

Our Texas agenda is to enact the same types of consumer protections for new home buyers as for existing home buyers including:

License all Texas homebuilders and remodelers; 

Establish a statewide contract for all homebuilders and new home purchasers; 

Require full disclosure and repair of all construction defects by homebuilders; 

Provide new home purchasers with flexible legal remedies if construction defects are not repaired; and 

Enable new home purchasers to buy home warranty insurance regulated by the Texas Department of Insurance. 

Proposed Legislation

Our licensing bill restores the right to voluntary dispute resolution by abolishing the TRCC. It replaces TRCC “registration” with licensing, administered by the TDLR (Texas Department of Licensing and Regulation). General Residential Contractors will be required to pass a test to prove competency, carry general liability insurance, and provide a surety bond for each home. The bill is getting strong support among both Democrats and Republicans, all of whom like our messaging and legislative flyer, Homebuilder Licensing: Existing Homes vs. New Homes.

All bills relating to TRCC and many homebuilding issues will be heard by the House Business and Industries committee. That’s good news from what we’ve seen so far. In its initial meeting last Monday, February 23, the Committee expressed a great deal of skepticism of TRCC and questioned its performance. Most Committee members have received little or no financial support from builders and seemed earnest in their support of homeowner issues.

We’ve found 18 other bills pertaining to homebuilding that have been filed or proposed so far, and we provide a summary at www.homeownersoftexas.org/HomebuildingBills.doc. They address issues such as:

Abolishing, amending or reforming the TRCC (Texas Residential Construction Commission); 

Replacing the TRCC with licensing and regulatory oversight that requires education and insurance; 

Stronger engineering requirements and building codes; 

Fire sprinkler systems, energy efficiency and air quality; 

Texas lien laws for contractors and subcontractors; 

Affordable housing and foreclosure sales; 

Construction trust funds; and 

Home warranties. 

TRCC Blasted in Business & Industry Committee Hearings

Monday, 2/23: The first public hearing of the newly formed Building & Industry committee couldn't have gone better for us or worse for the TRCC. The agency was asked to brief the committee on the its progress, along with other agencies up for sunset review. Duane Waddill, TRCC Executive Chairman, did the presentation and answered questions.

The TRCC was last on the agenda. The mood rapidly shifted and went downhill after Wadill started talking about his agency. He said State inspections confirmed as many as 800 defects in a single house, an astounding number.

Waddill made a strategic error by using a wobbling ceiling fan as an example of a defect that can cause homeowners to pay a $250 fee to request a TRCC inspection. “You can’t be serious!” said Representative Dan Gattis, who criticized him and his flippant example. As a trial lawyer by profession, Gattis knows how to cross examine and ask tough questions.

Waddill tried to climb out of the hole he dug by referring to a recent indictment of Williamson County homebuilder Peter Stucky on 37 charges. He said the TRCC slapped Stucky with a lifetime ban from working in the homebuilding industry, but that only made matters worse. Gattis attacked again, because his district includes Williamson County and he’s intimately familiar with the case and the Attorney General’s role. Gattis said the TRCC had nothing to do with the lifetime ban. Stucky’s attorneys offered it as a compromise so the guy wouldn’t have to testify in public, and the TRCC agreed.

Waddill admitted that his agency has no authority to compel builders to fix construction defects. He wants the legislature to give him more authority to issue cease & desist orders. Gattis, however, made it clear that the agency hasn’t used the authority it already has, even in the Stucky case. When pressed, Waddill said he wanted regulation like TDLR. (So why not just replace TRCC registration with TDLR licensing, as our bill does?)

In the three months after Hurricane Ike, some 250 builders or remodelers were found to be working without a license. (There he goes again, mixing the terms licensing & registering.) 25% of remodelers in the Rio Grande Valley were not registered with the TRCC. 50% of them in Dallas were not registered.

Other members of the Committee continued to ask tough questions and criticized the TRCC and its lack of authority, clearly preferring to license builders. They used many of the arguments that we’ve been promoting.

“When did you get your last haircut? How much did it cost? And if you didn’t like the cut, how long would it take to grow back out?”

Waddill said he pays about $10 and gets it cut once a month. That's a stark contrast to the impact of buying a defective home where a family’s life savings is at stake.

“Why aren’t there criminal penalties?” Gattis said it was in the TRCC bill last session, because he put it there. But it disappeared from the final version. Gattis was obviously angry that big builders had so much lobbying power and said, “All that’s needed to be a builder is a pickup truck, a magnetic sign, and paying your registration fee.” This reaction was typical of at least half of the committee.

The issue of insurance came up, because registration does not include bonding and insurance requirements. Licensing would.

Representative Rob Orr asked why the Staff Report recommended abolishing the TRCC. That led to a discussion of regulation (licensing vs. registration) and dispute resolution services (the inspection process) and the fact that TREC (Texas Real Estate Commission) licenses realtors, but TRCC only registers builders.

After the hearings, we introduced ourselves to Representatives Dan Gattis, Chente Quintanilla and Chairman Joe Deshotel. All were very interested in our work and our bill and asked for follow-up meetings.

TRCC Blasted in Senate Finance Committee Too

Are TRCC executives politically inept or just trying to sabotage their own agency? In hearings before the Senate Finance Committee, they proposed a 26% pay raise for their executive director, Duane Waddill. Don’t they realize their own agency and jobs are in jeopardy, that workers across Texas are losing their jobs, that the economy is in a dive, and that the governor wants state agencies to cut back?

The Committee was not impressed. You can read the details in the Houston Chronicle article by Clay Robison. We added highlights and reader comments and include the text of a letter by Senator Glenn Hager (Sunset Advisory Commission's vice-chairman). Hager was especially critical of the TRCC, saying that the request for a raise was “wholly inappropriate ... at a time when the commission should instead be focused on regaining public and legislative confidence.”

Texas Builders Hold Rally Day at Capitol

The Texas Association of Builders (TAB) is dedicated to creating a business environment that favors the housing industry. We met with their executives earlier this month in their Austin HQ. It was like “walking into the lion’s den.”

We disagreed on most issues but did find mutual support of builder education programs to improve construction quality. Everyone agreed that a Texas Construction School could help train construction workers and help establish successful businesses. TAB, of course, opposes our positions on abolishing the TRCC and replacing it with licensing.

TAB had a rally day in Austin this week to promote their own legislative agenda and had hoped to have 1,500 builders representing all 33 local builders associations in Texas. But based on the pictures we took, we estimate the crowd was was less than 500.

We attended the Rally Day to hear TAB's messaging and to talk to builders directly. This confirmed our belief that TAB, as is so common to industry associations, represents the interests of the largest members who provide most of the funding, rather than the smaller builders like those we talked to.

TAB President Ron Connally kicked off the rally on the Capitol steps and described the size of the Texas homebuilding industry: more than $35 billion, representing over 500,000 jobs. Connally then introduced Executive Director Scott Norman, who introduced Governor Rick Perry. Norman described the Governor as “a longtime friend of homebuilding” and said, “You know what he’s done for lawsuit reform.”

Perry was the only public official to speak. He said Texas has the healthiest homebuilding market in the country and we need to keep building good, affordable, quality homes so people will move here. (Isn’t that backwards? Don’t people moving here create demand for homes?) 

Perry's overall message was, “Don’t let regulations choke business.” He credited a favorable business climate and legal system for Texas being less affected by the economic crisis that other states. He said that 30% of all people who moved to a new city last year moved to Texas, and 80% of new jobs are created in Texas.

Perry also discussed mortgage foreclosures in Nevada (1 out of every 76 homes) and California (1 out of 123?) and compared that to Texas (1 out of 967).

(Rather than credit Perry’s policy decisions, we think our good fortune came from the lessons our banks learned from the S&L crisis, booming defense and petroleum industries, and diversification among other industries. Inhibiting more rapid growth is our high property taxes.)

What the Builders Told Us

We hung around after the rally to chow down on free barbeque on the south lawn of the Capitol. We met with several builders, but rather than push our agenda on them, we wanted to understand their perspectives and agenda. We talked with small custom builders, remodelers and subcontractors, large volume builders, and representatives of homebuilder associations. They generally shared our concerns that bad builders hurt their industry and supported measures to require more professional education for builders. And they all, to our surprise, supported (or could tolerate) licensing. Although many of them first questioned licensing, they found no reason to not support it and ended up generally favoring it. We also got good support for licensing the construction trades, because it helps general contractors hire qualified workers and trust that disputes are easier to resolve if licensed.

A construction supervisor for KB Homes was surprisingly supportive of both education and licensing. He said he was hired to fix serious problems in neighborhoods managed by less qualified supervisors.

KB Homes has received a lot of bad press lately because of these bad neighborhoods, so it was interesting to hear that they acknowledge the problems and are taking steps to fix them. We would not have expected KB Homes or any large volume builder to support our initiatives, so this guy’s response to our interview gave us hope.

A North Padre Island custom builder told us about his experience and pride in the product he produces. Because of stories we so hear from homeowners, we too often view builders as crooks. It was refreshing to meet so many who at least seem to be honest and reputable. The lesson we learned is is that we can accomplish more by understanding all perspectives and crafting laws that protect homeowners while also addressing the needs of the homebuilding industry.

Our most challenging interview was with a group of officers of the Home Builders Association of Greater Dallas. They spoke the TAB party line and were well prepared to argue against consumer group challengers, but they weren’t prepared for us. That’s because we’ve learned to diffuse natural hostilities by listening and then asking probing questions to gain new insight and seek common ground. Even this group, which included builders and remodelers of all types, warmed to the idea of education and licensing of general contractors as a first step towards licensing all trades. For us, the interview was also a good chance to polish our messaging and objection handling.