Critics: Texas Agency Favors Builders Over Buyers

The second of a two-part series.

Read The Reviews

"Current regulation of the residential construction industry is fundamentally flawed and does more harm than good."

Sunset Advisory Commission's hearing material on the Texas Residential Construction Commission (PDF)

"If it were up to me personally, I would blast this TRCC builder-protection agency off the bureaucratic books."

Carole Keeton Strayhorn, Texas comptroller of public accounts, in a report on the Texas Residential Construction Commission (PDF)

Part I Of This Series

Bob and Jane Cull's house in Texas was built by one of the most powerful and politically connected homebuilders in the country — and it was defective.

Imagine hundreds of executives from BP, Shell and Exxon Mobil rallying on the steps of the Capitol in Washington to save the Environmental Protection Agency.

That may be hard to picture, but recently in Texas, 1,000 homebuilders rallied at the state Capitol in an effort to save the agency that theoretically regulates them. Texas homebuilders are big fans of the job the Texas Residential Construction Commission has done since its inception five years ago. But after a backlash from homebuyers, who say the process is stacked in the builders' favor, state lawmakers are now considering whether to abolish it.

Out of 181 legislators, there are only six who don't take money from the Texas Association of Builders. So when the homebuilders come to Austin to lobby, the most powerful politicians in the state pay their respects.

After a welcome message from the governor, the rallying homebuilders fanned out to the offices of every legislator, bearing small gifts and a message: Save the Texas Residential Construction Commission.

"We're happy, you bet," says Ron Connally, a homebuilder and developer out of Amarillo who is also president of the Texas Association of Builders. "Court actions are way, way down because TRCC has taken care of a lot of those problems."

Process Can Be Costly And Prolonged

The TRCC was written into existence by a lawyer for Houston homebuilder Bob Perry, the most powerful and politically connected homebuilder in Texas. Perry's lawyer was then named the new housing agency's first commissioner by the Texas governor, who has taken hundreds of thousands of dollars in campaign contributions from the homebuilder.

Connally says when the GOP gained control of both houses of the Texas Legislature at the beginning of the decade, the homebuilders moved quickly.

"We were proactive," he says. "We didn't wait for the Legislature to bring some bill that would try to control or regulate the builders — we worked hand in hand with them."

The TRCC was designed to protect new homebuilders from frivolous lawsuits. Its mission is to provide an alternative state administrative process that resolves new homebuyer complaints before they go to arbitration. But two independent state reviews of the TRCC reported the commission routinely fails: For example, only 12 percent of homebuyer complaints were resolved. And half of the time, homebuyers' grievances were rejected outright by the TRCC's inspectors. The process takes up to 20 months and can cost the homebuyer thousands of dollars.

"Two state reports on TRCC have concluded that it is beholden to the building industry," says Tom Archer, the president of Homeowners of Texas, a nonprofit dedicated to residential construction reform.

Archer says that of the nine TRCC commissioners who review homeowner complaints, the homebuilders regularly get seven votes.

"In actuality, I think the number most would say would be eight out of nine," he says.

Staying Out Of Court

Archer says an even bigger problem with the TRCC is that the agency has no ability to discipline bad or even criminal builders. In Texas, there is no state licensing of builders, and builders of new homes are not required by law to disclose known defects, unlike sellers of existing homes.

Even if a builder is repeatedly negligent and deceptive, there's little the state can do about it. In five years of existence, the Texas Residential Construction Commission has revoked just one builder's registration. Archer says when it comes to protecting buyers of new homes, the Lone Star State is not exactly leading the pack.

"I would say we're dead last," he says. "I don't believe there's any state in the country where the homeowner is up against more obstacles and more impossible tasks in terms of getting relief than they face here in Texas."

The TRCC process is designed to keep new homebuyers out of court, where a state judge would hear the facts and rule. That's the way it used to be in Texas. But the executive director of the TRCC, Duane Waddill, believes his agency has been a big improvement over unreliable state judges.

"It ultimately came down to a judge hearing dueling experts and that judge had to make the decision, so it was very arbitrary and was left in the hands of that adjudicator," Waddill says. "What we provide through our inspection process is a neutral professional."

Waddill agrees that the TRCC needs to tweak how it handles homebuyer complaints. But he says the agency does a good job of serving the interests of both builders and new homebuyers.

"We want to do everything we can to make sure that people want to use our process," he says. "What we've seen in every review of ours has been that the agency is run well."

Complaints From Homebuyers

When the TRCC was first proposed in 2003, most Republicans in the Legislature supported it in the name of tort reform. But a steady stream of complaints has come out of the growing suburbs of Houston, San Antonio, Austin and Dallas. GOP legislators have been getting an earful from young, conservative, first-time homebuyers.

"I have a builder in my community that currently has 37 felony indictments against him — you know, over basic TRCC-type of issues," says state Rep. Dan Gattis, who represents the fastest-growing county in the state, just north of Austin.

Gattis says buyers of new homes in Texas, who are often first-time buyers, have to be better protected.

"When you're talking about the No. 1 investment asset vehicle that anybody owns, there ought to be some protections there to make sure that people are not being taken advantage of," Gattis says.

Gattis is sponsoring a bill that would abolish the TRCC. But the Texas Association of Builders intends to do everything it can to kill that bill and save its regulatory agency.

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