Editor’s note: This commentary is by Jeff Dardozzi, who is an architectural designer, builder and craft-worker based in Brandon.
[R]ecently VTDigger posted an article about renewed efforts to bring contractor licensing requirements to Vermont under the guise of “protecting” consumers. The term “registration” was substituted for “licensing” in an attempt to play down the meaning of the regulations as well as obscure its purpose. This is, essentially, a licensing scheme since contractors will be required to seek permission from the state and meet requirements in order to ply their trades and it will require a bureaucracy to manage and police them.
Unfortunately, the article failed to point out that research has shown that licensing leads to fewer jobs and fewer service providers, which in turn increases cost of service to consumers. Evidence for public benefits appears non-existent and rarely do advocates for licensing occupations offer anything beyond anecdote. For those who wish to study some of the research, Harvard Business Review published a recent article replete with sources.
The first question to ask is, what is the scale of this problem in Vermont? Looking at the attorney general’s own numbers: There were 600 complaints over six years with total losses of $3.1 million. That is approximately 100 complaints a year and $500,000 in alleged losses. This may sound like a lot but how many thousands of jobs are completed every year across the state by “unlicensed” contractors with no problem? I have to assume the AG deliberately left out those numbers since they would clarify the depth of the problem and probably reveal the fact the the scale is not that insignificant. The public needs to know the total number of jobs completed during that time, the total expenditures for residential remodeling and construction, the average alleged lost as well as the nature of each dispute to determine the extent of the problem. I suspect that the number of complaints and monetary losses are very small in relation to the whole.
The second question to ask is does contractor licensing protect the public? If someone is unethical or does poor work, they will simply find ways around the contractor regulations as exhibited in this example.
Oregon has very onerous and expensive licensing requirements for contractors. The board that oversees licensing routinely fails to discipline contractors. Recent changes require complainants to pay high fees to file a complaint, and as a result, the number of complaints has dropped precipitously in recent years. Not surprising. It’s not in the state’s interest to interfere with commerce by protecting consumers – it’s in the state’s interest to secure revenue for its operations by taxing business activity.
Most state requirements for contractor licensing do not test competency — that would be difficult and expensive. Usually testing, if there is any, is for knowledge about taxation, insurance, contracts and workers’ comp. So, to a very large extent, it is a scheme to capture revenue for the state by forcing everyone engaged in contracting to become known to the state so fees can be levied and income taxed. Fair enough, but to suggest that the prime objective is to protect consumers is pretense.
This initiative is driven largely by contacting and professionals associations in collusion with the state in order to achieve exclusive control of the built environment, not so much to protect the public but to drive up the value of building services, real estate and tax revenues respectively. They do this not by driving out incompetent contractors, but those who compete directly for work and are able to offer more affordable services at no lesser quality by operating in less formal and more competitive ways.
Many trade workers ply their trade competently and ethically on the side and often run small shops but do not wish or are unable to run a full-fledged contracting business because of the capital requirements, overhead, hassles and mind-numbing bookkeeping and paperwork that often takes the joy out of practicing craft. Often, side work is the way to to supplement income as well as build skills, experience and reputation as a pathway to going out on one’s own. According to the article, the Vermont Associated General Contractors does not want to see their own ranks affected but they are happy with small shops and solo acts being forced into the scheme. This obviously benefits VAGC members by driving out small operators, increasing the pool of labor that drives down wages and raises the value of construction contracts.
Professional and trade associations dislike competitive environments and routinely conspire to erect steep barriers to entry as a way of driving out competition on behalf of their members. This was the case when professional engineers engaged in cartel-like antitrust activities through the National Society of Professional Engineers. They used the NSPE to punish members for working for too cheap, discussing prices with potential customers, etc. They were successful until the U.S. Supreme Court declared the scheme price-fixing in violation of the Sherman Act in NSPE v. US. While licensing certain disciplines is valid, associations like these must kept in check from abusing their power the license grants them.
The idea that professional associations of this nature protect the public from incompetence is highly questionable as the Harvard Business Review documents and as evidenced in this example. Pennsylvania is now at the center of a building disaster affecting thousands of new homes that were designed and engineered by “licensed professionals,” built by “licensed contractors,” all with the latest in building “science” and certified for occupancy by building officials.
Has the state revoked anyone’s licenses over this? Not that I am aware. Architecture licensing has been in effect for decades and Pennsylvania mandated contractor registration almost a decade ago. Licensed professionals oversaw and/or performed the design, construction, inspections, occupancy certifications and such and yet there is now a magnitude of disaster that can only be attributed to greed and sheer incompetence.
The same story has played out across the country in many states. In Mount Pleasant, South Carolina, one-third of a high-end community of 1,000 custom homes has to be gutted, skinned and rebuilt within a few years of occupancy due to a similar problem. These were $500,000 and above homes designed by licensed architects, built by licensed contractors and inspected and certified by licensed professionals. To the best of my knowledge, not one contractor or architect lost their license but many homeowners suffered damage to finances and health. Does anyone remember the Exterior Insulation and Finishing System (EIFS) fiasco that is still going on? Tens of thousands of homes damaged or destroyed. Does Glenfeld Tower Fire ring any bells? In this case 72 dead. Yet no one lost a license.
Other instances of professional incompetence and/or neglect where consumers fail to be protected by state licensing regulations regarding buildings are widespread. I could post example after example from around the country. It’s not rocket science to understand why these laws fail to protect consumers: professional classes and licensed contractors produce revenues for the state via fees and taxes by virtue of their business activity. Homeowners do not and states are loath to interfere with commerce since the structure of state power is contingent on it.
In addition, this state also prefers a noncompetitive business environment. Vermont consistently ranks in the bottom third, according to CNBC studies for business competitiveness, and US News has us at the very bottom in entrepreneurship and tax burden. Considering Vermont’s future GDP and population growth prospects are dismal, the state and industry have no choice but to focus on generating more revenue from a small, captive and aging population. This is part and parcel of the general strategy to drive out competition for the benefit of larger enterprises which are easier to monitor and tax and whose control over the economy allow it to reap greater profits at the expense of everyone but the few.
New regulations will only provide marginal protection for consumers while increasing the state and professional bureaucracy’s control over the built environment. This will only increase the cost of housing – not its quality. It will make Vermont more expensive for all but the select few. As a result, more of our beautiful old housing stock and rich architectural heritage will continue to rot into the ground because the cost of repair and maintenance is too high for average Vermonters to afford.
Rural communities should be especially aware of this threat since this will have negative impact on our quality of life. It’s no secret that rural Vermont is also poor Vermont. All direct and indirect costs associated with these licensing schemes are borne by the homeowner, renter and taxpayer. Increased costs of services will lead to an erosion in the value of one’s home due to the inability of average Vermonters to afford maintenance and improvements. Think of our aging population living on fixed incomes. It will also remove from the marketplace many competent, capable and trustworthy crafts-workers and small contractors whose survival depends on being to able earn an honest living without permission by the state. These schemes are certainly not in keeping with the spirit of rural life in Vermont.
I suspect the good news is that Vermont’s non-licensed contractors are ethical and do good work. Why punish them and the public with more regulation that will benefit the few at the expense of many? Before Vermont embraces this legislation, let’s see some real data that quantifies the scale of the problem against the cost of erecting this new bureaucracy, as well as quantifying the increased cost to the public against evidence of real risk.
VTDigger needs to do a better job of challenging narratives that are for the most part industry and state propaganda, otherwise it’s just another mouthpiece for power operating under the pretense of journalism.
