Texas Homebuilding and the Global Financial Collapse

LOBBY INFLUENCE: Big builders control the Texas Legislature,
Texas Supreme Court and Governor’s Office, but few people
know how Texas contributed to the Global Financial Collapse.
• Legislature got $2.8M in last 3 years
• Governor got $649K, Lt. Governor got $537K
• Supreme Court got $260K

DEREGULATION: The U.S. Congress slowly deregulated the
financial services industry and eroded consumer protections
that were previously established during the Great Depression
in the 1930s, with disastrous results – a global economic
collapse. Banks, mortgage companies, brokerage houses, and
insurance companies were allowed to form interlocking
relationships without accountability or checks & balances, and
many of these institutions behaved irresponsibly (and
criminally), leading to losses in the trillions of dollars.

LARGEST MARKET: The Texas legislature removed
accountability from its $35B Texas homebuilding industry by
shielding builders from lawsuits for construction defects, and
so this large housing market (118,000 = 15% of 2007 singlefamily
housing starts, per U.S. Census) has become a magnet
for unscrupulous homebuilders with similar behavior.

EASY ENTRY: Texas Homebuilders don’t need a State license
and can build defective homes on cheap land (arsenic
contaminated or expansive soils) with impunity. The problems
are widespread and range from volume-produced starter
homes to multi-million dollar custom homes.

LOW RISK: Builders can also offload their warranty
responsibility with illusory home warranties and reduce their
financial risk with ties to (and often ownership of) mortgage
companies, title companies, home inspectors, subcontractors,
material suppliers, and realtors, among others.

EXAMPLE: The lives of Frank and Sandee Bradshaw were ruined
when their new home in Legends of Hutto began to fall apart.
Built on expansive clay soil common to Texas farming
communities, their home suffered cracks in the walls and
ceilings, sticking doors, a falling down fence, a wavy roof and
separating roof shingles, an electrical fire in the A/C unit,
plumbing leaks, and serious mold that destroyed Frank’s health
and that of his 13-year old granddaughter. After 18 hospital
visits and a stay in the ICU, Frank’s doctor said he’d die if they
didn’t get out immediately. “Your health is more important
than any financial loss,” he said.

EFFECT: But with such serious defects, the Bradshaws can’t sell
or rent their house at any price, and by walking away from the
mortgage, their credit will be ruined too. They may never be
able to buy another home.

NEIGHBORHOODS: Homes up and down their street have
similar problems and are for sale or rent or just abandoned.
The relatively new neighborhood is in serious decline, and
everyone’s property values are affected. The downward spiral
of Texas subdivisions affects the tax base that funds education
and public safety.

RUIN: Without condemning all homebuilders, many of the
same companies that built substandard homes also originated
subprime loans, which helped feed “the financial beast” and
left lives in ruin and subdivisions decimated.