In a scathing indictment of new home construction in New Jersey, the State Commission of Investigation yesterday proposed sweeping reforms designed to attack an "astonishing statewide panorama of waste, fraud and abuse."

Sparing no facet of the industry, commissioners said their lengthy investigation had documented shoddy workmanship in expensive houses, a breakdown in the state inspection system and a nightmarish maze of trouble for homeowners trying to get problems corrected.

The recommendations include everything from a lemon law that would require builders to buy back new houses with major deficiencies, to the licensing of unregulated construction trades like carpentry and masonry.

"This is a system mired in the past, a system utterly incompatible with 21st-century standards and expectations, a system that, in many respects, is as fractured and as imperiled by structural flaws as the problem-plagued homes it has produced," the SCI wrote in its report, which was replete with tales of broken trusses, leaking windows and crumbling foundations.

The hearings showed that in some booming towns, inspectors failed to climb ladders or even get out of their cars before approving work. It also documented cozy relationships between some inspectors and the builders they were supposed to regulate.

So far, four inspectors, two in Middlesex County and two in Monmouth, have been indicted for failure to do their job as a result of the investigation. The SCI said criminal penalties should be strengthened, and that more indictments are possible.

SCI Chairman W. Cary Edwards praised the state Department of Community Affairs, which oversees all construction inspectors, for recognizing that it must be "part of the solution." DCA Commissioner Susan Bass Levin said reforms are already under way and that the department supports many of the SCI's recommended legislative solutions.

While some of those reforms -- which must be approved by the Legislature -- undoubtedly will be fought by the state's powerful building lobby, the New Jersey Builders Association sounded a conciliatory note yesterday.

"Builders strive to provide the highest quality housing possible; unfortunately, as documented by today's report ... problems sometimes occur," the association said in a prepared statement. It declared a willingness to work with legislators on solutions.

Sources close to the industry said it was unlikely that some key provisions could win support, including the lemon law, a bill of rights for homeowners and a requirement that builders put all deposits in escrow.

Marty Schwartz, president of the Essex County Building and Construction Trades Council, said unions probably would not be averse to licensing carpenters and masons, because they already stress education.

"People who don't go through an apprenticeship program like our members do basically learn from the person who is working next to them," Schwartz said. "If the person next to them doesn't have the skills, that gets passed on."

He conceded, however, that the higher cost of union work generally has meant residential builders do not belong to unions. Charlotte Gaal, the SCI's deputy director, said the investigation found subcontractors for some of the state's biggest builders hiring day laborers or other unskilled craftsmen.

At five public hearings that began in 2003, owners complained of shoddy construction that caused mold, shaky walls, erosion and a host of other problems. One family's garage was too small for their car.

Patricia McAloon, whose $280,000 house in Gloucester County had buckled hardwood floors, leaking windows and missing extras she had paid for, said she welcomed the recommendations.

"That would be nice," she said when told of some consumer protection reforms. "Customer service is not one of this industry's strong suits."

Other recommendations would bring new houses under the protection of the Consumer Fraud Act -- meaning builders could get hit with triple damages -- and extend protections under the New Home Warranty Program. One would stop the warranty clock from ticking as soon as homeowners contacted their builder with a complaint, ending a practice called "lulling" -- stringing owners along until their warranty expires.

The SCI had difficulty characterizing precisely what had gone wrong in a state where builders complain they are already heavily regulated. But its members indicated that many complaints stemmed from assembly-line developments of hundreds of houses.

Gall said rapid construction designed to cut costs appeared to be a factor.

Instituting more stringent licensing of builders -- including on-site construction managers and supervisory carpenters and masons -- would bring New Jersey more into line with places like Florida, which cracked down on builders in the early 1990s after new construction proved flimsy during Hurricane Andrew.

Bass Levin said her department has stepped up the training of inspectors after the SCI investigation, including a focus on structural issues and framing -- two key problem areas.

She also said the DCA supports the notion of broadening licensing requirements and warranty protections. She said the DCA already has begun background checks on all registered builders.

Top builders had argued during public hearings last year that horror stories amounted to a handful of cases among the hundreds of thousands of new houses built in recent years.

But the SCI -- while agreeing that not all builders or inspectors are to blame -- stressed that the focus must be on protecting homeowners against whatever smaller percentage of ruthless contractors and inspectors that are out there. They said their investigation turned up roughly 2,000 victims.

"When it happens to you, it doesn't really matter how many good houses are out there," Gaal said.

Steve Chambers covers land-use issues. He may be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or (973) 392-1674.