Friday, February 4, 2005

The homebuilding industry’s political power stems partially from its lavish donations to Republican campaigns over the past four years. Since 2001, the industry has donated more than $8.9 million to candidates, parties, and political action committees, according to an analysis by the campaign watchdog group Campaigns for People. That includes $744,562 to Gov. Rick Perry, $294,100 to Lt. Gov. David Dewhurst, and $60,500 to House Speaker Tom Craddick (R-Midland). Bob Perry, head of the aforementioned Perry Homes, has been the largest single political donor in the state the past four years. Read the article at the Texas Observer.

The Agency that Bob Perry Built

By Dave Mann and Lauren Reinlie| February 04, 2005| Texas Observer

It seemed a boon to homebuyers when the Legislature created a new state agency in 2003 to regulate the home construction industry. For nearly a decade, homebuilders had steadily eroded consumer rights in Texas: Buyers who moved into brand-new houses and found cracked foundations and leaky roofs had little recourse. Some couldn’t file a lawsuit even if they wanted. They had signed housing contracts that forced them to resolve complaints through binding arbitration hearings notorious for favoring builders.

The Texas Residential Construction Commission was supposed to help change all that. Legislators talked up the new agency as a forum to resolve impasses between homeowners and homebuilders—a kind of marriage counselor for the housing sector. The agency was supposed to act as a mediator that, when necessary, would require homebuilders to make needed repairs. The commission would keep homeowners out of court and arbitration and save both sides a lot of legal fees. That was the pitch.

In practice, however, the Residential Construction Commission has become another Texas state agency captive to the very industry it’s supposed to regulate. Homebuilders are some of the state’s heftiest contributors to political campaigns. Their interests so dominate the TRCC that the new agency is little more than a tool to help the industry win disputes against consumers. The main problem with the TRCC is an almost total lack of power to enforce its own rulings. When the commission does rule in favor of consumers, it can’t force homebuilders to fix the faulty houses. The result is that homeowners complete the lengthy complaint process and end up right back where they started—facing a court battle or arbitration. Rather than help homeowners, the TRCC makes matters worse.

“It places another hurdle that costs the consumer time and money before they go to court,” says Reggie James of Consumers Union. James and other consumer advocates who follow housing issues contend that they had almost no say in the drafting of last session’s little-noticed House Bill 730 that created the TRCC. The final legislation—passed with significant input from the governor’s office—was riddled with industry giveaways that slanted the commission in the homebuilders’ favor. In fact, much of the bill’s language came from John Krugh, general counsel for Houston-based Perry Homes, one of the state’s largest residential construction outfits. (Krugh didn’t return three messages left at his Houston office seeking comment.) “There was a different spirit down [at the Lege] this time," says Mark McQuality, a Dallas attorney who specializes in representing consumers in housing disputes. McQuality says he was always included in negotiations on housing bills in sessions past, but not in 2003. “They knew they had this one in the bag.”

The homebuilding industry’s political power stems partially from its lavish donations to Republican campaigns over the past four years. Since 2001, the industry has donated more than $8.9 million to candidates, parties, and political action committees, according to an analysis by the campaign watchdog group Campaigns for People. That includes $744,562 to Gov. Rick Perry, $294,100 to Lt. Gov. David Dewhurst, and $60,500 to House Speaker Tom Craddick (R-Midland). Bob Perry, head of the aforementioned Perry Homes, has been the largest single political donor in the state the past four years. He has given more than $6.9 million in that period, nearly all of it to Republican candidates. Though Perry is the most prolific check-writer, other construction magnates have been generous political contributors as well, including Woody Hunt of Hunt Construction ($308,000 from 2001 to 2004), David Weekley of Houston-based Weekley Homes ($189,500), and Frank McGuyer ($175,000).

So, not surprisingly, when Gov. Perry made appointments to the Residential Construction Commission in September 2003, the homebuilding industry found itself generously represented. HB 730 mandates that the building industry hold four permanent seats on the nine-member commission [“Consumers Get Housed,” TO, September 26, 2003]. Gov. Perry appointed Krugh of Perry Homes to fill one of those four spots. Of the other five so-called neutral appointees to the commission, at least four have direct ties to the homebuilding industry. Commissioner Mickey Redwine, for example, is president of a telecommunications cable company. But he also has managed numerous commercial construction projects in Texas and nationally, according to the TRCC Web site. By contrast, not a single consumer advocate sits on the commission. (The TRCC has one lone consumer voice: Ware Wendell, policy director for the consumer advocacy group Texas Watch, serves on the agency’s task force on arbitration.)

Even if they want to, homeowners can’t sidestep the commission. HB 730 amends state law to require aggrieved homeowners to file a complaint with the TRCC and complete the agency’s “dispute resolution process” before they can file a lawsuit or go to arbitration. That forces homeowners into months of waiting for a resolution that never comes.

Jeanne Carter moved into her new home in College Station last summer. When it rained, water poured through a hole in the ceiling onto her stove. Her homebuilder had also installed the wrong electrical breaker in the upstairs bedroom, creating a dangerous fire hazard. And if a fire did start, the bedroom lacked a smoke alarm. The area around the house wasn’t draining well due to a poorly graded yard. After getting the house inspected twice and pleading with the building company to make her home livable, she filed a complaint with the TRCC. She paid the $350 inspection fee the agency requires (it’s sometimes as high as $650, depending on the type of inspection). Before the commission considered her complaints, Carter had to provide written and visual proof of all the problems. Even if inspectors see additional defects, the TRCC will ignore any problems not included in the homeowners’ complaint.

The commission told Carter she had to wait for an inspection. Yet simply to be able to live in her home, Carter says she had to fix the dangerous electrical problem in the upstairs bedroom and the water pouring on her stovetop. She paid out of her own pocket to repair those problems in her months-old home.
According to commission rules, however, those repairs Carter made herself, before the TRCC inspector toured her home, were disregarded even though she had photos of the damage. The TRCC inspector must see the problems in person for the builder to be held liable. Despite those repairs, the TRCC inspector’s report found that Carter’s builder was responsible for the poor drainage around the house and for problems with the foundation.

The worst part of the process, Carter says, was that after she went through the whole ordeal, the commission didn’t have any authority to make sure the recommendations would be implemented. The building company has ignored the agency’s major findings, she says, and neither the drainage nor foundation has been fixed. (She notes that her builder did eventually install a smoke detector.) “If we want them to finish everything, we’ll have to sue them,” she says.

Carter’s experience is a common one. So far the commission has completed work on complaints against builders from 29 homeowners (out of the more than 80 valid cases filed since spring 2004), according to agency figures. Inspectors ruled in favor of consumers in 27 of those 29 instances, according to the agency. Yet few of those homes may have been fixed. The Observer independently contacted more than a dozen homeowners who had already gone through the agency’s dispute process. Only one homeowner reported that her builder had voluntarily complied with the agency’s findings and fixed the defective house. In all other cases, the builder disregarded the TRCC’s ruling.

Tempest Williams, a school teacher living in Bastrop, purchased a new home last year that, among other things, needs its foundation stabilized, an estimated $25,000 job, she says. The TRCC handled her complaint quickly and professionally, she says. When the inspector issued his report, he found the building company (which Williams didn’t want to name) was responsible for fixing 13 code violations. (Because the TRCC ruled in favor of Williams, she got her $450 inspection fee back, for which the builder must reimburse the agency.) But the commission couldn’t force the builder to do any of the needed repairs. Williams also says that a copy of every document she filed with the agency was given to her builder. The homebuilder, however, was not required to provide any documentation to Williams. “I asked [the agency] if it worked both ways, and I didn’t get a response to that,” Williams says. Consumer advocates fret that homebuilders are using the TRCC as a tool to pursue free legal discovery on consumers before a lawsuit is filed.

Karen Lowery, a Houston marketing executive, argues that the TRCC is a good idea gone awry. She and her husband moved into their newly built $185,000 home in October 2003. She concedes that her problems aren’t life-threatening: water leaks where the chimney meets the roof, and several rooms receive no air conditioning or heat, among other more minor problems. “But it’s a new home, and I want it to be right,” she says. For more than a year, Lowery nagged her builder to fix the problems without success. Finally, last October, she filed a complaint with the TRCC. The agency ruled in her favor, yet the builder disregarded the agency’s recommendation.

Lowery, needless to say, isn’t impressed with the state’s newest bureaucracy. “[The process] takes too long and it gives most of the power to the homebuilder,” she says. “There’s no way to hold the builder accountable. It has put a bad taste in my mouth.” Lowery is a Republican voter, she explains, and likes the idea of unburdening the court system from lawsuits. “But it’s not working,” she says. “It just prolongs taking the builder to court. It’s three or four months to go through the process and now I’m back to square one: My next step is to go file a lawsuit.”

TRCC spokesman Patrick Fortner defends the agency’s complaint process, contending that it helps homeowners. “While it doesn’t compel the builders, it certainly aids the process if the builder chooses to let the homeowner go into the legal arena,” Fortner says. He argues that the “strong evidence” gathered during the dispute process and presented in the TRCC reports serve as an incentive for the builder to settle the claims outside of arbitration or the courts.

Consumer advocates counter that they haven’t seen much evidence of that yet. They hope legislators will revisit the issue this session and provide the TRCC with the legal teeth needed to enforce its rulings. Until then, however, the agency will remain a barrier to resolving homeowners’ grievances. “I call it the defense of economic and emotional attrition,” says McQuality, the Dallas attorney. He’s seen the homebuilding industry chip away at consumers’ rights for more than 10 years now. “But [The TRCC] is sort of the cherry on top for homebuilders.”