He said they were left with few options. "We had an engineers' report done and the only way forward is to demolish the houses and start again."
This was reinforced in a recent determination report by Department of Building and Housing's John Gardiner, which states: "Remediation to bring the building work into compliance with the Building Code is not practicable."
Mr Collins said he tried to sort things out amicably with the council but felt the group were being ignored in the hope they would go away.
"[To get compensation] we are going to have to sue and that could cost up to $150,000."
Rotorua District Council building services manager Darrell Holder said the council could not comment until the implications of the determination had been assessed and legal and insurance advice received.
The council did not accept the first two drafts of the determination report, which concluded the authority was incorrect to issue code compliance certificates for the properties and building consents were incorrectly issued.
Under the 2004 Housing Act, council has until February 1 to appeal or oppose the final determination.
Movement in some soil layers, caused by the weight of the buildings, has been blamed for the damage - an issue not identified until a geotechnical report on another section in 2007.
Later reports showed specific foundation designs would be required for future stages of the development, but this was too late for the homes already built.
Mr Gardiner said subsidence issues on other sections should have been taken into account in the certification process and considering the ground conditions, the lack of special foundation requirements in the consent process meant the buildings did not comply with the Building Code.
Mr Kenny, a former Rotorua District councillor, said he hoped the determination would help home owners get some sort of resolution and compensation.
"Their problem is very real - their houses are sinking. They deserve all the help they can get and they deserve some compensation."
However Mr Kenny said he did not hold the council responsible.
"The council could possibly have done things better but ultimately, they are not to blame."
He said he did not want to apportion blame and was limited in what he could say due to his own legal cases involving the development.
Mr Kenny, now living in Wellington, said he was not running away from the problems.
"I'm out of pocket by millions of dollars and need to get my situation sorted, then I can help these people."
He said he was not aware of the full extent of the subsidence problem until April 2008, when 10-12 houses had already been built. "It has been a huge disappointment."
Once aware of the subsidence problem, Mr Kenny said he found a solution and was able to continue the development with specially engineered building foundations.
"As far as I know, others in the estate are fine."
