Intro
Every year, the Consumer Federation of America publishes a nationwide survey of industries that receive the most consumer complaints. Every year, the home improvement contracting industry ranks among the three most problematic for consumers across the US.
Despite the overall national outlook, many states have taken major strides to regulate their contracting industries and maintain high levels of consumer satisfaction. To identify the states with the most effective approaches, we carefully investigated each state, comparing the regulatory approach they are taking with their consumer satisfaction rates.
Measuring licensing standards
Each state was evaluated against a set of common licensing requirements, which explored several key questions:
- How does the state measure professional competency? (e.g. board exam, work experience requirements)
- Does the state perform a criminal background check?
- Do they measure financial solvency?
- How do they minimize consumer liability?
- Do they have a system that provides homeowners with financial recourse if things go bad? (e.g. surety bond, recovery fund).
Here is how the matrix looked for 10 states with some of the most comprehensive standards. You can also view the complete list here.
Their regulatory approach only tells half the story. To better identify the truly great state license boards, we next evaluated consumer satisfaction in each state.
Measuring consumer satisfaction
To better understand consumer sentiment in each state, we analyzed over 60,000 contractor reviews, gathered via BuildZoom over the past two years.
On average, 29% of the reviews posted in a state were negative. This figure allowed us to benchmark consumer satisfaction within each state. The map below is coded according to how each state’s percentage of negative reviews compared to the national average.
Here are 10 states that outperformed the national average and 10 states that under-performed versus the national average. You can also click to see the full list.
Note on the reviews data: Each month, we receive approximately 800k unique visitors and 6,500 reviews. Each review is verified through e-mail/sms verification; a bayesian spam filter; and an IP scan to reduce review fraud. The BuildZoom research team then manually verifies each review against our editorial guidelines before it is published.
The Top 5
Having evaluated the licensing standards and consumer satisfaction in each state, we compiled the following list of state license boards with high marks in both categories.
Note that we focused on state agencies that licensed general contractors. State boards that only handle specialty licensing (e.g. The Ohio Construction Industry Licensing Board) and city boards (e.g. NYC Department of Consumer Affairs) were not eligible for consideration.
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#1 – California Contractors State License Board (CSLB)
The CSLB is the top ranked license board in the US. They have the most comprehensive licensing requirements and received 5.2% fewer complaints than the national average – a truly impressive feat given their large and diverse population.
License applicants are required to have four years of professional experience to qualify for the board exam and are required to submit fingerprints, which are checked against the California Department of Justice (DOJ) and Federal Bureau of Investigation (FBI) records. Once licensed, contractors are require to maintain a $12,500 surety bond and workers compensation insurance. General liability insurance is not a CSLB requirement although contractors are legally required to tell consumers whether or not they carry it.
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[/fourcol_one][fourcol_three_last]#2 – Hawaii Department of Commerce and Consumer Affairs (DCCA)
Hawaii received the highest marks for consumer satisfaction. 86% of consumer reviews in Hawaii were positive.
Like the CSLB, the DCCA maintains comprehensive licensing requirements. They include a financial background check, proof of previous work experience and a board exam. Once licensed, Hawaii contractors are required to maintain worker’s compensation and general liability insurance. The board also maintains a recovery fund, available to homeowners who have hired a licensed contractor and suffered as a result of negligence or incompetence. Currently, Hawaii does not require licensed contractors to submit fingerprints to the state for the purposes of a criminal background check. [/fourcol_three_last]
[fourcol_one][/fourcol_one][fourcol_three_last]#3 – Nevada State Contractors Board
Only 20% of reviews received for Nevada contractors were negative, which was the fourth best score in the country. The Board requires applicants to have four years of relevant experience, provide a current financial statement and pass a criminal background check to be eligible for the Board exam. Once licensed, contractors are required to maintain a surety bond in addition to workers compensation insurance. Additionally, Nevada maintains a recovery fund for homeowners of single-family residences who have suffered damages (and exhausted all other means of recovery) as the result of hiring a licensed contractor. Nevada does not require contractors to maintain general liability insurance. [/fourcol_three_last] [fourcol_one]
[/fourcol_one][fourcol_three_last]#4 – Maryland Home Improvement Commission
77% of reviews for Maryland contractors were positive, which was 6.1% higher than the national average. The Commission requires two years of relevant work experience to be eligible for the board exam. Once licensed, contractors are required to maintain general liability insurance. The Commission maintains a recovery fund established by assessments to contractors, which compensates homeowners for monetary losses due to poor workmanship or failure to perform a home improvement contract. They do not have a strict surety bond requirement and do not perform a criminal background check during the licensing process. [/fourcol_three_last]
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#5 – Oregon Construction Contractors Board
Oregon came in at #6 in our consumer satisfaction list, outperforming the national average by 7.9%.
License applicants must pass a Board exam, carry a surety bond, liability insurance and workers compensation. There is not a required criminal background check nor is there a strict requirement for previous work experience although applicants are required to participate in at least 16 hours of training on law and business practices.
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[/fourcol_one][fourcol_three_last]Honorable mention – Florida Construction Industry Licensing Board (CILB)
Florida did not perform as highly as some of the other states on this list in our analysis of consumer satisfaction but deserve honorable mention due to the size of their population and diverse challenges they face.
The CILB requires license candidates to show four years of professional or relevant academic experience to qualify for the board exam and like the CSLB, are required to submit fingerprints to the board for a criminal background check with the FBI and Florida Department of Law Enforcement. They are also required to carry workers compensation insurance. The CILB requires applicants to attest they have obtained public liability and property damage insurance in an amount determined by the board.
Unlike the CSLB, the Florida CILB does not require a bond although they do require applicants to prove they are financially responsible and stable prior to license issuance through a credit check, licensing bond or letter of credit. Florida also maintains the a recovery fund, available to individuals who have suffered monetary damages due to the financial mismanagement or misconduct of a contractor (after exhausting all other resources of payment.) [/fourcol_three_last]
Conclusion
Generally speaking, states with high licensing standards, had higher rates of consumer satisfaction; states with little or no licensing requirements, saw lower rates of consumer satisfaction.
There were some outliers as the scatterplot below shows.
Additional files
(1.) Spreadsheet (xls) with data used in this article
Jiyan Wei
I’m one of the BuildZoom founders. On the blog, I’m primarily interested in writing about emerging trends and technologies in the construction industry; and online marketplaces. I did my studies at Georgetown University and the London School of Economics. If you’d like to connect, my Twitter handle is @jiyannwei or you can e-mail me at [email protected].
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