How to fix a water damaged sub floor?
There is something else going on here... Sub-floors get wet all the time in construction. They should be glued down with construction adhesive, all of those I have used would have dried before any rain water could have worked through the sub floor to the floor joists, and work on wet lumber to boot! Even if the plywood de-laminated a little bit here and there that wouldn't account for squeaky floors or those feeling squishy. Squeaks come from one thing rubbing against another, usually a nail moving in a piece of lumber, but your sub floor may be rubbing against each other if the sheets were installed without proper spacing. More likely it's the nails. Nails this new shouldn't be squeaking yet either, they usually start squeaking after the lumber is really dried out and old. We, exaggeratedly, refer to it as petrified lumber. One year isn't enough time. So my guess is you have flex in your floor, causing those nails to squeak. The joists might be undersized, or they may not have sufficient blocking between them Either solid blocking or X-bracing will stabilize the flex in the framing. Blocking should be every 6-8' or so. If you need liquid leveler, on a framed sub-floor, you have a poorly built house. I've never seen it done on framing, for a hardwood floor. Hardwood should be installed over the sub-floor with 15# felt paper between the two, or on firring strips over felt over the sub-floor. Small variations won't affect the performance of hardwood. The most affordable way to fix this floor is to try anything besides tearing it up. I would test my theory by shoring the floor from below with a few posts or at least tight fitting 2x4's to see if taking a little bounce out of the floor will solve your problems. I wish I'd have built your house buddy. The floors wouldn't have squeaked. See what else shows up here other than tearing up a new floor. Most anything else will be worth a try. Good luck!
OMG, what a mess. Well, normally builders will waterproof the subfloor the instant after they lay it down. Your's didn't, but I'm not sure that's the problem. You have hardwood floors on top of subfloor on top of 16 center joists? Man, that shouldn't be spongy at all. Something is definitely wrong, but it could be the joisting, the rim joists, the mud sill, the main support beam, the subfloor, or the hardwood floor. Normally framing carpenters will glue and nail a subfloor as it's installed and then waterproof it (usually with that el-cheapo Thompson's stuff) as soon as it's all down. They will come back later, after the building is dried in (a roof has been framed, sheeted, and tar papered) and shoot screws through the subfloor into the joists. The glue hasn't quite set up in that time and it reacts well to the screws, no squeaks. I have no clue why your floor is spongy. I guess you could have had a complete delamination failure of your subfloor, but man, I've never heard of it. Did they try to use something not rated for subflooring? That's about all I can think of. Sorry for your bad luck, I sure hope it gets better. BTW, it ISN'T standard practice to sand a subfloor before installation of a finished floor. That isn't a normally necessary step and somebody screwed the pooch on that one. One or two delaminations occur on every job, but not enough to SAND the damn thing. Sue the hell out of your framing carpenter. That's what bonding and insurance are for.
The only way to fix a water damaged sub floor is to replace it. Sub floors act just like a sponge sucking up water. once that moisture is in there...it will never dry out.
Isn't there the equivalent of the uk's House Builders Registration Council in the states.. Here in a new build there must be a 10 year guarantee against faulty materials or workmanship. Your builder was clearly at fault and guessing what it is going to cost to rectify I would consult a lawyer for possible action against the builder. He is prbaby covered by insurance anyway.
I think the best way to fix water damage is to hire a professional company to do this. One good company that can repair water damage is Dryfast.