Upset residents told the Otago Daily Times the mistake occurred when plumbers working on a new family home being built in the Orchard Grove subdivision, East Taieri, mistakenly connected sewage pipes to a stormwater drain.
The error meant sewage was discharged from the house into a nearby creek, which runs through the 22-section subdivision where children from the neighbourhood played.
The mistake went undetected and a second home built next door - initially as a show-home - was connected in the same way six months ago, after plumbers copied the configuration of pipes from the first problem home, residents said.
This home has been unoccupied.
The work was approved as compliant by Dunedin City Council building inspectors, and the problem was only discovered two weeks ago when workers refurbishing the second house for a new owner lifted a stormwater cover and found sewage inside.
Council development services manager Kevin Thompson confirmed plumbing at both houses had been wrongly installed, with stormwater pipes being connected to wastewater pipes, and had been ruled compliant by council staff.
However, he defended the inspections regime yesterday, saying while staff were required to examine the pipes it was "not unreasonable" for connection errors to be overlooked.
"They do look, but depending on what sort of connection it is you can't actually always see it's been done right. We have to rely on the drain-layer.
"It's not unreasonable not to notice it," he said.
Staff had acted as soon as the "very unusual" problem was reported last Thursday, with plumbers called to rectify the faults at their own expense, he said.
Correct connections were made at the first house the same day, while those at the second were installed yesterday.
The owner of the first home, who asked not to be identified, said he was unaware waste was going into the nearby creek until the fault was discovered two weeks ago.
"We're pretty upset. There were kids playing in this creek over an 18-month period. It was pretty bad," he said.
"There was a lot of toilet paper in the creek during the week."
The Orchard Grove residential subdivision, on the site of the former Miller's Orchard, has 22 sections between 2000sq m and 2500sq m in size.
The development, granted resource consent in 2004, was marketed by developer and Orchard Grove Ltd director Pat Cummings.
Mr Cummings said last night his involvement ceased when his company was wound up in 2005.
The ODT was unable to contact the principal plumber involved in the first installation last night.
