New Legislation May Ease Housing Crisis

For the first time in recent memory, state and national housing industry leaders are optimistic that they can begin to solve the affordable-housing crisis.

At the state level, California’s builders are pinning their hopes on legislation that would insulate them from lawsuits over construction defects until they have time to investigate complaints and make the necessary repairs.

The measure is far from a done deal, but if it passes, Michael Pattinson, president of the California Building Industry Assn., said builders will once again enter the affordable townhouse and condominium market and begin shoring up what has become a “chronic housing deficit.”

At the national level, builders say there has been “more of a focus” on housing problems in the last month than they’ve seen in years.

“I’m encouraged,” said Gary Garczynski, president of the 210,000-member National Assn. of Home Builders.

Speaking to reporters at the Pacific Coast Builders Conference here, Garczynski said the deepening chasm between America’s haves and have-nots “still has to be addressed.”

In a single week last month, the Bush administration released a report outlining the barriers that prevent minorities from becoming owners and then announced an unprecedented public-private commitment to knock down those barriers.

The president then visited the Department of Housing and Urban Development and said, “I believe owning a home is an essential part of economic security.”

The president’s June housing blitz was timed to coincide with National Homeownership Month.

According to the California Building Industry Assn., the housing shortfall in California will reach about 100,000 units this year, meaning that builders will produce about 100,000 fewer units than they could sell based on current demand.

For the most part, the deficiency is in the affordable price ranges, which builders have all but abandoned because of lawsuits, Pattinson said.

Since the mid-1980s, the San Diego builder charged, practically every builder of every condo project built in the Golden State since the mid-1980s has been sued over “real or alleged construction defects.” And as a result, the insurance industry has “basically walked away from this part of our industry.”

But with legislation that would establish a builder’s right to repair problems, Pattinson, who heads Barratt American in Carlsbad, said he’s “more optimistic” than he’s been in the last 10 years that “at least a partial solution to the condo crisis is at hand.”

In an attempt to define the difference between acceptable construction tolerances and defects, the bill would prescribe a set of “functionality standards” and guarantee that the home will meet those requirements. It would also detail what’s expected of buyers in terms of maintenance.

If something should go wrong, owners would be required to notify their builders of the problems within a certain time frame. And builders would then have so many days in which to investigate the defect and make any repairs deemed necessary.

If the two sides cannot agree on the problem and how to correct it, they would submit their dispute to a third-party arbitrator.

If litigation were to be curtailed in this manner, the builders’ association maintains, insurance would once again become available and housing production would increase sharply.

“This is what the consumer wants,” Pattinson said. “If he has a problem, he wants it fixed. He doesn’t want to be dragged into litigation.”

The bill is similar to measures passed or under consideration in Washington, Arizona, Virginia and a number of other states, according to the National Assn. of Home Builders.

California builders are on track to build nearly 150,000 new units this year. That’s about the same as the last two years, according to the California Industry Research Board, but it’s 100,000 short of production levels in the mid-1980s.

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Lew Sichelman writes a weekly housing column that appears in newspapers nationwide.