Deficient building practices cited in high home insurance rates
Dawn and Scott Richardson received an unwanted glimpse into the homebuilding and insurance industries after being forced out of their $300,000 Austin-area home last year. Just five weeks after construction in 2001, Richardson said the home had become so contaminated with toxic mold and chemicals that she and her baby daughter began suffering health problems that included nausea, neurological problems, and allergic reactions... And as a pitched political battle continues over how to remedy soaring statewide home owner's insurance rates, some building officials and consumer activists have begun to echo Richardson's sentiment, pointing to deficient construction practices as a significant factor in insurance rates that have doubled and in some cases tripled in the past year.
Deficient building practices cited in high home insurance rates
The Plano Star Courier
By PAUL MEYER , Staff writer 08/11/2002
Dawn and Scott Richardson received an unwanted glimpse into the homebuilding and insurance industries after being forced out of their $300,000 Austin-area home last year.
Just five weeks after construction in 2001, Richardson said the home had become so contaminated with toxic mold and chemicals that she and her baby daughter began suffering health problems that included nausea, neurological problems, and allergic reactions.
"I know a percentage of the problem now is the insurance companies being too slow and not doing their job, but builders are building houses that won't last their mortgage time," Richardson said in a telephone interview.
And as a pitched political battle continues over how to remedy soaring statewide home owner's insurance rates, some building officials and consumer activists have begun to echo Richardson's sentiment, pointing to deficient construction practices as a significant factor in insurance rates that have doubled and in some cases tripled in the past year.
In May, Richardson, who has filed a lawsuit against the builder, testified in front of the Texas House of Representatives Committee on Business and Industry and has also testified for the Civil Services Committee.
"I've talked to so many home owners and it's simply a really pervasive problem," she said. "We had pieces of wood in the homes that were put in moldy during the construction process."
An uneducated work force, a premium placed on affordability, and a lack of statewide regulation are some of the factors officials cite in home problems that lead to increased insurance claims.
"We need to build affordable housing, but the ramifications of affordability are costing us tons of money as a society in terms of insurance premiums, maintenance costs, water penetration costs, and lawsuits," said the national program manager of a Collin County building supplies company who spoke under the condition of anonymity. "Water penetration is caused by a dysfunctional process that uses poor quality materials and often has design flaws."
Losses from water and mold damage last year in Texas totaled nearly $1.2 billion, more than double the $512 million in similar losses in 2000, according to information provided by The Insurance Council of Texas. Meanwhile, total insured losses in Texas jumped from $2.3 billion in 2000 to $2.9 billion last year.
On Monday, the state led by Attorney General John Cornyn filed a lawsuit against Farmers Insurance, the largest home owners' insurance provider in the state, alleging deceptive and discriminatory practices that led to this years spike in insurance premiums.
But the insurance industry is only half the problem according to Janet Ahmad, president of Home Owners for Better Building, a San Antonio-based consumer group.
"It's a combination of unskilled labor, the poor building practices that result, and the idea that the builders aren't liable for defects," Ahmad said on Friday. "We went to one house being built in the area and it was amazing to see how much mold was on the two by fours. The mold was non-toxic, but it's only found on decaying lumber so in the best case scenario we have lumber that's decaying being put in new homes."
Chuck Vance, program manager with the insurance industry funded Institute for Business and Home Safety in Florida, said blame for the insurance crisis can't be laid squarely on the shoulders of the insurance industry alone.
"We certainly need to send a message that it's not all just black and white with the insurance industry bearing all the blame," said Vance. "You have a governor and a gubernatorial candidate who are saying they will take care of the insurance issue by making the companies do things their way. If that happens, more companies will simply walk away from the market and you'll have more of a problem."
The use of green wood, poorly wrapped homes, starch-based wood, and punctures are just some of the material problems officials cite as having the potential to cause the kind of mold and water penetration claims that have beset the insurance industry.
"When you have new kinds of wood being used that are starch-based and you have an area without a whole lot of air circulation, then you have the perfect breeding ground for mold," said Doug Johnson, a spokesperson for the Insurance Council of Texas.
Paul Cauduro, director of government relations for the Dallas Association of Homebuilders, said that the state homebuilders association is drafting legislation to address greater oversight for the industry.
"There are practices not addressed in the International Building Code that may or may not be happening like water intrusion if a home isn't wrapped correctly," Cauduro said. "I think the industry does take some of these issues very seriously. But what we don't want to have happen is for builders to bear the brunt of counterproductive remedies. Overall, given the number of homes built in the state, the number of complaints is still low."
Still, Vance said, what the industry needs is a combination of better building practices, more stringent building codes, and greater home owner education.
"What the public needs to know is that building codes are the absolute minimum," he said. "One of the distortions is "it's built to code," but the codes are battled over by various constituents who don't want strong codes in place."
Frisco building codes
Almost a year ago, North Texas cities began adopting a new International Building Code intended to provide uniform building standards.
"The international code in a lot of areas is not as stringent as the old codes were," said Jim Cottone, plan reviewer for the city of Frisco.
Frisco is regarded by homebuilders and industry observers as having some of the most stringent code requirements in North Texas.
"Two-and-a-half years ago when we got into our growth spurt, we realized a lot deficiencies in the way homes are being built in North Central Texas, so we began a methodical study from the soil all the way to the exterior materials," Cottone said. "Although we knew we would be adding a little additional cost to homes in Frisco by having stricter codes, we also knew that eventually realtors and consumers would become aware of the fact that quality homes were being built here."
The result was a series of standards that went beyond the international building codes, but that have been met with fierce opposition from homebuilders.
"This has been met by unbelievable resistance from the builders in that the builders try to use generic plans that can use in all of the surrounding cities," said Cottone. "I think there are some homebuilders that have intentionally avoided Frisco and there are builders I'm aware of in surrounding cities that don't build in Frisco because their product can't meet our standards."
In addition to robust code requirements, Cottone said a house is inspected between 12 and 14 times during construction.
"If you look at a house in Frisco 10 years from now compared to a house in another community 10 years from now, you will be able to see the difference."
But even Frisco, Cottone said, has been beset by the same endemic labor problems facing other communities.
"Workmanship is the biggest problem we run into," he said. "It reveals itself in framing, in mechanical installation, and in the relatively low professional level of labor."
Brett McCullough, chief building official for the city of Allen, echoed Cottone's analysis.
"As the housing market gets busier and busier, the labor force had deteriorated somewhat," said McCullough. "In framing, there's really no qualification needed and those are the people that do the rough framing and work to make the house moisture resistant."
And in Plano where the housing boom has tapered off, Chief Building Official Russ Mower said the most common code violations include poorly sealed joints and holes punched into the exterior wrap, conditions that if unnoticed can contribute to moisture problems.
Complicating the picture, included in the international building codes were new energy efficiency regulations that Vance and others say may be partially responsible for new mold growth.
"We may have complicated the issue by having homes built to new standards like energy star that makes for a less breathable home," said Vance. "If you don't have whole house ventilation and circulation system, you have a perfect environment for mold to grow."
Educating the consumer
Apart from structural changes within the industry, officials say increased education of the home buyer and home owner can help avoid many of the problems that have arisen.
"When you buy a house it's literally the most baffling experience," said the Collin County building manager. "There's literally no information available and people don't understand the construction process or materials. All they are looking at is where it is, the size, and the aesthetic appeal. As an industry we don't provide good information."
Mower said prospective home buyers should follow a number of steps to ensure they're not buying a lemon.
"I would tell consumers to check with their local homebuilders association for the reputation of the builder, look at other homes the builder has built, and even knock on doors and ask tenants to see if they are happy with the home the builder built for them," said Mower. "I would also encourage people, before they ever close, to have their home inspected by an independent residential real estate inspector."
But Ahmad said that knowledge alone can't overcome the most extreme cases of deception or oversight on the part of homebuilders.
"I can't tell you how many knowledgeable people who have been taken advantage of," she said. "I cannot imagine educating people enough or having an inspector thorough enough to prevent abuse."
Contact staff writer Paul Meyer at 972-543-2229 or by e-mail at
?Plano Star Courier 2002