President Carter's special assistant for consumer affairs, Esther Peterson, recently urged the nation's organized homebuilders to double the number of new-home warranties issued in the next year, a goal the National Association of Home Builders says is compatible with its own.
The editor of Professional Builder magazine, David E. Link, also recently challenged NAHB to increase its efforts by making all its members join the program. Only a third of Nahb's 46,000 members belong to the warranty plan, Link pointed out. Less than a third of the nation's 127,000 building firms belong to NAHB, although the organization's members construct two-thirds of the country's houses.
Builders in general are "not listening to a vociferous minority of home buyers who are complaining -- many of them legitimately -- about broker promises and shoddy and inferior work from builders," Link wrote.
But Robert J. Reid, president of NAHB's Home Owners Warranty Corp., says the program should continue to be voluntary rather than mandatory. He recognizes that the freewheeling homebuilding industry does not want government telling it to adopt a specific insurance program.
"We can only hope that builders get the message and act voluntarily," Reid said.
Created five years ago, the HOW program makes insurance against major structural defect available to homebuilders and their customers. About 15 percent of the houses sold in the past five years have been covered by the warranties.
Reid acknowledged that thousands of new-home buyers are complaining about defects and shortcomings in their houses. He also is aware that few houses -- most of which consist of about 150,000 parts and pieces -- are created nearly perfect.
As the result of the growing number of complaints, the Federal Trade Commission has launched a major investigation of building defects.
While Reid is skeptical of an FTC assertion that 10 percent of new houses have substantial deficiences, he said his organization can't prove or disprove it.
HOW is attempting to enroll more builders in its insurance program, which Reid describes as "more similiar to a major medical policy than to an overall health insurance policy."
Reid, a former insurance executive in St. Louis, said the HOW program is "a tool that will enable homebuilders to sell to a public that wants to be assured of . . . the basic soundness of the house being offered."
To date, more than 540,000 new houses have been sold under the Home Owners Warranty program. More than 13,500 builders are partipating. HOW coverage is available in 45 states and more than 4,000 builder-buyer disputes have been handled outside the courts through HOW conciliation and arbitration.
Reid and the HOW staff point to those statistics as progress in providing voluntary assurance for new home buyers. The FTC, while approving of the HOW program, maintains that not enough homes are being protected by it.
The HOW program has also been losing money because more than 5,000 claims totalling $4 million have been paid during the past two years.
"Most of what was for repair work on claims that involved builder insolvency," Reid said.
In the Washington area, the How programs set up by area chapters of NAHB in recent years have covered more than half of the houses constructed. Most major builders here have enrolled in the program, which costs the builder -- and hence, the buyer -- $2 per for every $1,00 of the house price for a warranty in the first year against defects in workmanship and materials and long-range insurance against major structural defects.
Some local builders, including several who specialize in luxury houses are not part of the HOW program. They maintain that they take care of customer complaints and don't need such insurance.
But other builders with equally good reputations for product and service have adopted the HOW program.
Builders with bad rreputations tend not to join the program in the first place, because HOW screens out those whose financial stability and/or customer service performances are found to be deficient.
"Frankly, we cannot afford to enroll builders who do not generally try hard to solve their own problems with customers and who do not have sufficient capitalization to survive some problems," Reid said.
"Additionally, we will terminate builders from the HOW program if they create too many problems and demonstrate a lcak of financial clout to handle them. Frankly, our biggest problems are builder who go broke and those who build on lots that have unusual soil problems," he said.
Reid added that soil problems sometimes result from variations in the ground conditions within a small area. "Soil expansion is uneven and excessive rains and freezing can cause major problems with foundations And, for instance, driveways are not covered by minimum residential construction standards. But a driveway problem can be serious."
What about wet basements, one of the bugaboos of housing?
"They usually show up the first year and a builder can take care of them," Reid said. "But later, wet basement problems often result from plantings placed too close to a house and splash blocks that do not carry drain water far enough from the house." He said that every house should be periodically reinspected to avoid drainage problems.
The HOW staff is working on a booklet that would tell home buyers in simple terms how best to take care of their houses. But houses vary so much in style and construction that Reid said his staff is finding it difficult to produce general information that is both worthwhile and pervasive.
HOW is also painting a pilot program to cover rehabilitated houses, an increasing part of the housing market in cities. CAPTION: Picture, HOW's Robert Reid hopes builders will get the message about home warrenties. By Linda Wheeler -The Washington Post