Michael Hamman sat for the California licensing exam more than a quarter of a century ago, but the memory still makes him laugh — and cringe.

“I was so naïve,” chuckles the San Francisco contractor. “I stayed up and studied for days.” He assumed it would be a grueling, day-long test of his construction knowledge. He drove to Sacramento the night before to cram, then the next morning “went in and was shocked at the absurdity of the questions.”

Hamman was applying for a Class B license. As defined by the California Contractors State License Board (CSLB), Class B licensees are general building contractors whose “principal business is in connection with any structure built, being built, or to be built.” That meant that Hamman, who at the time was doing small residential remodeling jobs, “was taking the same test that contractors who build high-rises take. Yet there was only one question on concrete,” and it went something like this:

Good concrete should:
a. Stick to the shovel
b. Run off the shovel
c. Slide off the shovel

Faced with questions like that, Hamman “was out in an hour.” The licensing test was a joke, he says, with more questions about color mixing and matching than on construction methods or structural issues. “Obviously they had hired a consultant who knew nothing about construction but said, ‘Where are the complaints?'” Well, Hamman notes, “most complaints are about finish stuff.”

“This was scary,” Hamman says. The licensing exam “certainly didn't test one's ability to be a contractor.”

The real test came later, and it turned out to be one of faith rather than knowledge or ability. Because for Hamman and thousands of other licensed remodelers, it's not so much acquiring a contractor's license that's hard, although the process can take months in California. The bigger challenge for remodelers is balancing their inherent belief in an ideal based on protecting consumers and raising the professional bar with their frustration at a reality that can be administratively burdensome, prohibitively expensive, and dubiously effective.

With this dilemma in mind, REMODELING set out to explore the current state of licensing: its relevance and flaws, and a few strategies that can make it work.

Legitimizing the Industry Licensing is a local issue that has taken on national importance as the industry's steady march toward professional legitimacy is beset by incidents that the media love to sensationalize — “Is a rogue contractor eyeing your house? Story at 11!” — and law-abiding remodelers recognize as a growing problem. Eighty percent of respondents in the REMODELING Reader Panel survey say licensing should be mandatory for remodelers.

Vince Butler, a Virginia remodeler and vice chairman of the National Association of Home Builder's Remodelors Council, considers licensing “sort of the baseline. You're either above it or below it.” And for those who fall below, “there's going to be a whole slew of other things” beyond legal requirements that fall by the wayside, such as following code, treating employees fairly, and being accountable for problems.

A major factor behind recent licensing activity is fraud in the aftermath of big storms. Several states and jurisdictions have created or toughened legislation partly in response to hurricanes, tornadoes, and other storms that have torn off roofs, flooded basements, and otherwise made homeowners vulnerable to unaccountable operators.

Another impetus is transient contractors vying to cash in on the building boom. Idaho passed the Contractor Registration Act in March at the behest of established remodelers like Bill Keilty of Boise. “Most of us are tired of putting time and effort into bidding on a project, only to have some guy come in and undercut you so severely that there's no way you can compete on cost,” Keilty explains. Without some form of regulation, there's absolutely nothing to stop any “truck-and-dog contractor” — a characterization cited by several people we spoke to — from calling himself a remodeler.

Keilty welcomes the new law as a great first step toward undoing Idaho's reputation as a safe haven for contractors who are banned from doing business in other states. Yet he and others acknowledge there's no panacea for a problem that is as entrenched as the underground economy itself. “Everybody agrees that one cannot legislate against those who are full-bent to do havoc,” says Kendall Buck, executive director of New Hampshire's Home Builders & Remodelers Association (HBRA).

An Unfair Burden California may be an extreme example of licensing ambition overshooting its reach, but its struggles underscore some weaknesses that seem to pervade licensing programs everywhere. That is, unless licensing laws are thoughtfully crafted and rigorously enforced, they sometimes seem to have the inverse effect of actually pushing more people under the radar of legality.

For instance, one of Hamman's beefs with the state's licensing laws “is that they've simply devolved into a system of collecting money for the state,” he says. The problem isn't the $200 a year he pays to renew his license, but the overhead expenses that come with compliance, including liability insurance, payroll taxes, and workers' compensation insurance, which in California is among the highest in the country. Throw in record keeping and safety training, along with additional requirements at the local level, “and operating perfectly legally at least doubles our labor costs,” Hamman adds.

Other compliance requirements are just impractical. The California CSLB churns out “voluminous rules” that “specify things like the size of type on contracts,” Hamman says. Paul Berning, a construction lawyer with Thelen Reid & Priest, says such rules are so obtuse that when a client hired him to write a “user-friendly” contract, Berning needed 10 typewritten pages — single-spaced — to get through all the required disclosures. The client “took a look at the thing and said, ‘My God. I'll never get a customer to sign it.'”

Nor are licensing laws necessarily relevant to remodelers. The CSLB handles more than 20,000 construction-related complaints each year, says an agency spokesperson, and a good percentage of the complaints are related to residential remodeling. Yet the agency has no remodelers on its 15-member board, which consists mainly of political appointees. “All the contractor and business seats are taken by large union contractors who do large commercial projects,” says Hamman, who is working with California NARI chapters to create an additional seat for small remodeling contractors. What's more, California considers remodelers a subset of building contractors rather than a specific business class. (So does the Internal Revenue Service.) “Our interests and concerns are different,” he adds.

Finally, the cash-strapped state has weakened licensing enforcement. Data supplied by the CSLB show the agency has lost 20% of authorized staff positions since 2000, and has experienced a high vacancy rate thanks to a multibillion-dollar budget shortfall and hiring freeze. “If you don't enforce the laws, you're going to have a lot of people who ignore them,” says Hamman. “Then you create an unfair burden on the people who do play by the laws. [No wonder] the majority of the residential remodeling work done in the state is done by unlicensed contractors.”