The Federal Trade Commission is pushing ahead with its investigation of shoddy home construction practices, although a still-confidential FTC survey of new homeowners reportedly indicates most are "satisfied" with their properties. The agency's report is to be completed in July.
It's the "significant" minority of homes with major defects that still concerns the FTC, said Thomas Stanton, deputy director of the agency's office of policy planning.
"A large majority of homes are well built, but a significant number have problems," he said. "If you're stuck with one of the lemons, you're apt to be in real trouble." Most homeowners squeeze their available capital to the limit to buy a new home, leaving little available for major repairs, he noted. "We have thousands of letters with complaints at this point, from all over the country," Stanton said. "They indicate a serious problem."
But the dimensions of the problem are not obvious, in a country where a million new houses or more are built each year.
To shed light on this question, the FTC commissioned a telephone survey of 1,812 new-home buyers who were asked to report any construction defects they had discovered, and their success in getting builders to repair the problems.
"We're trying to get an idea of the extent of the problems," said Stanton, as a guide to the FTC commissioners in future discussions with the National Association of Home Builders, and other industry groups.
Although the telephone survey results are in, they have not been fully evaluated, Stanton added. In addition, the FTC had hired Mathematica Policy Inc., a Princeton, N.J. consulting organization, to conduct face-to-face interviews with 300 of the owners in their homes to assess the accuracy of the telephone survey.
Not until that follow-up work is done, will the FTC release the survey, Stanton said.
A preliminary report on the telephone interviews is circulating in the industry, however, which reportedly shows that four out of five respondents were satisfied with their new homes. On the other end of the spectrum, 15 percent were either "very dissatisfied" or "somewhat dissatisfied," according to the preliminary analysis.
The 300 on-site interviews are meant to doublecheck the accuracy of this breakdown, as well as the estimates by homeowners of the cost of repairing construction defects.
The entire survey will give the FTC a better profile of the problem builders, identifying the kinds of builders who tend to build defective houses and the kinds who are more or less likely to make good on repairs, Stanton said.
The survey isn't likely to pinpoint many specific "bad apples" in the building industry, however, Stanton said. That part of the investigation is in the hands of regional FTC offices, the offices of state attorneys general and consumer agencies, he said.
Stanton said he still believes the problem of shoddy home construction is best handled with case-by-case investigations of individual problem builders, coupled with an overall review of the indsutry's performance.
The survey is essential to the second of these actions, he said. He anticipates that once the survey is completed and published, the FTC commissioners will want to meet with the homebuilders' association to discuss improvements in voluntary industry actions to deal with poor construction.
Although the National Association of Home Builders has established a voluntary Home Owners Warranty (HOW) program, it is still not widely used. FTC staffers believe that the problem builders, in particular, are among the last to promote voluntary warranties.
As she retired from the FTC a year ago, former commissioner Elizabeth Hanford Dole warned the home builders that they would have to "make self-regulation work . . . or brace yourself for full-scale, hard-hitting regulation from the government."
Since then, however, the FTC has narrowly survived an attack by Congressional critics on many of its important investigative initiatives, an attack which threatened, briefly, to cut off the agency's funding. From now on, the FTC is certain to move more carefully, seeking strong evidence before taking on broad, industry-side enforcement actions, several FTC commissioners have said.