Bill would push up the price of all housing

Paul Guppy | • Published March 30, 2009

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Lawmakers in Olympia are debating a bill that would hurt the recovery of the housing market, and would hit small homebuilders particularly hard.

The proposal would create a new way to sue homebuilders and small contractors by mandating, as a matter of law, that all new homes carry a state-imposed warranty that creates liability for builders for up to six years. Under the bill, substantial remodels of existing homes would be included in the definition of new homes. The price of new and remodeled homes affects the whole real estate market, so a mandated warranty would artificially push up the price of all housing in Washington.

The proposal comes at a time when the housing market is in serious trouble. Statewide, building permits are down 42 percent compared with a year ago, and home values have declined by more than 10 percent, even as property taxes continue to rise.

The proposed warranty would be imposed on every homeowner contract, even if it works against the wishes of the homebuyer.

Under the proposal, homebuyers would be barred from choosing a different warranty or voluntarily establishing their own guarantee terms with the builder. The mandated warranty still would apply when the home is sold, even if the new owner doesn't want it.

The bill has the strong backing of the state's powerful trial lawyers association, but the threat of more litigation means higher liability insurance premiums for architects, engineers, builders, general contractors and subcontractors. Higher premiums in turn drive up costs for these professionals and make it harder to operate a successful practice in our state.

By making it harder for people to buy a home, the bill also would slow down the recovery of Washington's housing market, resulting in less work for construction workers, mortgage company employees and real estate agents.

In practice, the bill would do little to help homebuyers. The law already provides strong protections for consumers in contract disputes. The Better Business Bureau, the Attorney General's Office and the Department of Labor and Industries all have programs to promote good contractors and weed out bad ones. In addition, builders are required by law to have insurance that pays customers if the company fails to fulfill the terms of its agreements.

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