A major drive against shoddy construction in the homebuilding industry is under way at the Federal Trade Commission.
Although no formal announcement has been made, staff experts confirmed this week that the FTC's long-awaited foray into the complaint-ridden housing field has begun. Within the next six months, one source said, the agency plans to launch a series of legal actions "against the worst offenders in the building industry."
FTC investigations in some regional offices have singled out the initial targets of the enforcement campaign against deception and unfair building practices. The agency plans to "hit the bad actors hard" with civil suits and other remedies, a staff member said, to let those builders serve as examples to others whose unwarrantied houses are often the subject of consumer complaints.
The vast majority of houses built now in the United States carry no written warranty; only 11 percent of the new units built during a recent 12-month period were covered by the voluntary Home Owners Warranty (HOW) program of the National Association of Home Builders.
Retiring FTC Commissioner Elizabeth Hanford Dole warned members of the National Association of Home Builders two months ago that they would have to "make self-regulation work... or brace yourselves for full-scale, hard-hitting regulation from the government." She pointed out then that the FTC supported the HOW concept as a good example of industry self-policing. But members of the commission are concerned that too few of the "problem" builders have joined.
HOW offers buyers protection against defective materials and faulty workmanship by the builder during the first year and guarantees key components such as heating, cooling and electrical systems for up to 10 years. The program is available, for a modest cost that is added to the price of the house, from 218 builders in the Washington area.
"The trouble with HOW," an FTC official said, "is that it's not being pushed aggressively enough in most states. It has signed up 10,000 builders, but that's drop in the bucket in an industry where 1.5 million new homes are sold in a year."
Consumer complaints about construction quality received by the FTC, the National Council of Better Business Bureaus and other organizations "have risen so dramatically that we really are left with little choice but to go after the rip-off artists out there," the official added. Better Business Bureau data, for example, indicates an increase in complaints of more than 50 percent over the past two years. FTC regional offices are piling up thousands.
Scattered state and local agencies are handling some of these complaints, and the courts are getting a heavy load of them, but federal agencies have pretty much stayed out of it until now," said a staff member.
The Department of Housing and Urban Development could be playing an agressive role in protecting buyers, but "HUD is an inevitable prisoner of its own constituency (the builders) and hasn't found a way to get moveing on this issue," he said.
HUD is, however, splitting the costs with the FTC of a nationwide survey of housing construction defeats during the coming seven months -- the first comprehensive statistical effort ever conducted on the problem. That survey, a commission source said, will be "fed into our legal strategy. It should help identify some of the patterns of abuse that escaped the notice of our field offices."
Concurrent with its legal strategy, the FTC plans to pursue a policy of negotiations with the building industry aimed at encouraging greater use of wearranties. The commission has no immediate interest in an industry-wide trade regulation that would prescribe mandatory standards for all builders in the U.S.
"More regualation is not what the typical, good builder needs to put a quality product at a decent price on the market," said an FTC official. Builders need encouragement in cleaning out ther own (industry's) house, and they need wider use of HOW and other (private) warranty approaches that are certain to come on the market."
Meanwhile, he added, the FTC's Bureau of Consumer Protection (Washington, 20580) wants to hear from buyers across the country who have experienced significant construction quality problems.