Home Builders were told today to provide their own warranties for new dwellings or face government regulation as the result of mounting complaints about defects in new houses.
Elizabeth Hanford Dole, a member of the Federal Trade Commission, told convening builders: "Either you can each independently decide to make self-regulation work, or you can brace yourselves for full-scale, hardhitting regulation from the government."
Dole, who said later that the FTC already is preparing recommendations on how to respond to home-buyer complaints, endorsed the HOW (home-owners' warranty) insurance program that is administered by an arm of the National Association of Home Builders.
"As home builders, you already have in your hands the instrument that you need. The HOW program, while imperfect, offers an excellent opportunity for home abuilders to be responsive to consumer concerns -- and ultimately to bring great benefit to the builders themselves," Dole said.
Dole, an attorney whose husband is a Republican senator from Kansas, chided the builders that only 22 percent of them recognize that warranties are important to customers, whereas a study showed that 79 percent of purchasers considered a new home warranty "very important" in their decision to buy a new home.
A spokesperson for the HOW program, which provides basic protection on structure and finishing touches of houses on the basis of insurance fees paid by participating builders, said: "We couldn't be more pleased by Mrs. Dole's tough stance. We will accept any builder for HOW protection, if the builder meets our performance standards.
"And the protection for an average $58,000 U.S. house costs but $116. The program is working, and it also provides for resolution of complaints between builder and buyer if they fail to agree between themselves on proper action to satisfy the complaint," the spokesperson said.
Dole also acknowledged that many builders face problems because of the "negligence of subcontractors." But she added that many builders "cope with this adverse environment, providing quality homes and turning a good profit." Also, she said private warranty programs can be efficient in reducing housing costs by precluding expensive remedial work.