**Exhibit3.42(b)**

**FIRSTAMENDMENTTOOPERATING AGREEMENT OFKIMBALL HILL FAR EAST DETROIT, LLC**

This FirstAmendment to Operating Agreement of Kimball Hill Far East Detroit, LLC (“FirstAmendment”) is made as of July 1, 2006, by Kimball Hill Urban Centers, L.L.C. (“KHUC”),which is the sole member of Kimball Hill Far East Detroit, LLC (the “Company”).

KHUC executed theOperating Agreement of Kimball Hill Far East Detroit, LLC (the “Agreement”) asof April 20, 2004.  KHUC wishes to amendthe Agreement in order to set out the management structure of the Company.

KHUC hereby amendsSection V of the Agreement by deleting Section V in its entirety and replacingit with the following Section V:

**Section VManagement: Rights, Powers, and Duties**

5.1.                              *Manager*.

5.1.1.       *Manager*.  The Company has one Member, which is KHUC,and shall be managed by the Member as Manager of the Company.  The Member shall generally manage all theoperations of the Company through a Management Committee, to be appointed asprovided for in Section 5.2 below.  TheManagement Committee shall appoint officers to carry out the duties andresponsibilities as provided in Section 5.3 below.  All persons acting at any time as ManagementCommittee Members and/or as officers of the Company are acting for the Companyand not individually as members of the Company.

5.1.2.       *GeneralPowers*.  The Member shall havefull, exclusive, and complete discretion, power, and authority, subject in allcases to the other provisions of the Agreement and the requirements of applicablelaw, to manage, control, administer, and operate the business and affairs ofthe Company for the purposes herein stated, and to make all decisions affectingsuch business and affairs, and the power to delegate any and all suchfunctions, including without limitation, for Company purposes, the power to:

5.1.2.1.            acquire by purchase,lease, or otherwise, any real or personal property, tangible or intangible;

5.1.2.2.            construct, operate,maintain, finance, and improve, and to own, sell, convey, assign, mortgage, orlease any real estate and any personal property;

----

5.1.2.3.           sell,dispose, trade, or exchange Company assets in the ordinary course of theCompany’s business;

5.1.2.4.            enter into agreementsand contracts and to give receipts, releases and discharges;

5.1.2.5.            purchase liability andother insurance to protect the Company’s properties and business;

5.1.2.6.            borrow money for andon behalf of the Company, and, in connection therewith, execute and deliverinstruments authorizing the confession of judgment against the Company;

5.1.2.7.            execute or modifyleases with respect to any part or all of the assets of the Company;

5.1.2.8.            prepay, in whole or inpart, refinance, amend, modify, or extend any mortgages, trust deeds orsecurity agreements which may affect any asset of the Company and in connectiontherewith to execute for and on behalf of the Company any extensions, renewals,or modifications of such mortgages, trust deeds or security agreements;

5.1.2.9.            execute any and allother instruments and documents which may be necessary or in the opinion of theMember desirable to carry out the intent and purpose of the Agreement,including, but not limited to, documents whose operation and effect extendbeyond the term of the Company;

5.1.2.10.          make any and allexpenditures which the Member, in its sole discretion, or in the discretion ofthe parties to whom the Member has delegated the authority to act for theCompany as provided for above, deems necessary or appropriate in connectionwith the management of the affairs of the Company and the carrying out of itsobligations and responsibilities under this Agreement, including, withoutlimitation, all legal, accounting and other related expenses incurred inconnection with the organization and financing and operation of the Company;

5.1.2.11.          enter into any kind ofactivity necessary to, in connection with, or incidental to, the accomplishmentof the purposes of the Company;

5.1.2.12.          invest and reinvestCompany reserves in short-term instruments or money market funds; and

5.1.2.13.          delegate any or all ofits authority and powers as manager of the Company to the Management Committee.

2

----

5.2.          *ManagementCommittee*.

5.2.1.       *Powers ofManagement Committee*.  TheMember hereby establishes a management committee (the “Management Committee”)and delegates to the Management Committee the Member’s full power and authorityas manager of the Company to represent the Company, to act in the name of theCompany and to manage the business of the Company, including without limitationthe powers and authorities set forth in Section 5.1.2 of the Agreement.  Further, the Member hereby authorizes theManagement Committee to delegate its powers and authorities to the officers andother managers of the Company.  Theofficers of the Company described in Section 5.3 shall have the powers andauthorities set forth therein.  Theofficers of the Company shall conduct the business operations and activities ofthe Company in a manner consistent with the policies adopted from time to timeby the Management Committee.

5.2.2.       *Compositionof Management Committee*. Effective as of the date of this First Amendment, the ManagementCommittee shall consist of three persons (“Management Committee Members”), whoshall be appointed from time to time by the Member.  The Member hereby appoints David K. Hill,Eugene K. Rowehl and Hal H. Barber as the Management Committee Members,effective as of the date of this First Amendment.  Each Management Committee Member shall holdoffice until his successor shall have been appointed by the Member. ManagementCommittee Members need not be residents of the state in which the Company isorganized.  Any vacancy occurring in theManagement Committee shall be filled by the Member.  The Management Committee from time to timeshall appoint officers of the Company to act for and on behalf of the Company.

5.2.3.       *Meetings ofthe Management Committee*.  TheManagement Committee shall meet at such times and places as a majority of theManagement Committee Members may designate from time to time.  Notice of any meeting shall be given at leastfive days previous thereto by written notice mailed or telefaxed to eachManagement Member at his business address, unless the giving of such notice iswaived by such Management Committee Member. The attendance of a Management Committee Member at any meeting shallconstitute a waiver of notice of such meeting. Neither the business to be transacted at, nor the purpose of, anymeeting of the Management Committee need be specified in the notice or waiverof notice of such meeting.

A majority of theManagement Committee shall constitute a quorum for transaction of business atany meeting of the Management Committee. The act of the majority of the Management Committee Members present at ameeting at which a quorum is present shall be the act of the ManagementCommittee.  Any action which may be takenat a meeting of the Management Committee may be taken without a meeting if awritten consent, setting forth the action so taken, shall be signed by all theManagement Committee Members.  Anywritten consent signed by all the Management Committee Members shall have thesame effect as a unanimous vote, and may be stated as such in any documentreflecting action taken by the Management Committee.

3

----

5.3.          *Officers ofthe Company*.  The officers ofthe Company shall be a chairman and chief executive officer, one or morevice-chairmen, a president, one or more vice-presidents, a treasurer, asecretary, and such other officers as may be elected or appointed from time to timeby the Management Committee.  Any two ormore offices may be held by the same person. Each officer shall hold office until his successor shall have been dulyelected or until his death or until he shall resign or shall have been removedby the Management Committee.  Election ofan officer shall not of itself create contract rights.

5.3.1.       *Chairmanand Chief Executive Officer*.  Subject to the direction and control of theManagement Committee, the chairman shall be the chief executive officer andshall have the following general duties and responsibilities:  be in charge of the business of the Company;see that the resolutions and directions of the Management Committee are carriedinto effect except in those instances in which that responsibility is specificallyassigned to some other person by the Management Committee; and, in general,discharge all duties incident to the office of chairman and such other dutiesas may be prescribed by the Management Committee from time to time.  The chairman shall preside at all meetings ofthe Management Committee.  Except inthose instances in which the authority to execute is expressly delegated toanother officer or agent of the Company or a different mode of execution isexpressly prescribed by the Management Committee, the chairman may execute forthe Company any contracts, deeds, mortgages, bonds, or other instruments whichthe Management Committee has authorized to be executed.

5.3.2.       *ViceChairman*.  The ViceChairman (or Chairmen) shall assist the chairman and chief executive officer inthe discharge of his duties as the chairman may direct and shall perform suchother duties as from time to time may be assigned to him by the chairman or bythe Management Committee.  Except inthose instances in which the authority to execute is expressly delegated toanother officer or agent of the Company or a different mode of execution isexpressly prescribed by the Management Committee, each Vice Chairman mayexecute for the Company any contracts, deeds, mortgages, bonds or otherinstruments which the Management Committee has authorized to be executed.

5.3.3.       *President*.  The president shall assist the chairman andchief executive officer in the discharge of the chairman’s duties as thechairman may direct and shall perform such other duties as from time to timemay be assigned to him by the chairman or by the Management Committee.  In the absence of the chairman or in theevent of his inability or refusal to act, the president shall perform theduties of the chairman, and when so acting, shall have all the powers of thechairman.  Except in those instances inwhich the authority to execute is expressly delegated to another officer oragent of the Company or a different mode of execution is expressly prescribedby the Management Committee, the president may execute for the Company anycontracts, deeds, mortgages, bonds or other instruments which the ManagementCommittee has authorized to be executed.

4

----

5.3.4.       *VicePresidents*.  Eachof the vice-presidents shall assist the president in the discharge of thepresident’s duties as the president may direct and shall perform such otherduties as from time to time may be assigned to him by the chairman and chiefexecutive officer, the president or the Management Committee.  In the absence of the president or in theevent of his inability or refusal to act, the vice-presidents in the order ofseniority of tenure as vice-president shall perform the duties of thepresident, and when so acting, shall have all the powers of the president.  Except in those instances in which theauthority to execute is expressly delegated to another officer or agent of theCompany or a different mode of execution is expressly prescribed by theManagement Committee, each of the vice-presidents may execute for the Companyany contracts, deeds, mortgages, bonds or other instruments which theManagement Committee has authorized to be executed.

5.3.5.       *Treasurer*.  The treasurer shall be the chief financialofficer and principal accounting officer of the Company.  He shall have charge of and be responsiblefor the maintenance of adequate books of account for the Company, have chargeand custody of all funds and securities of the Partnership and be responsiblefor the receipt and disbursement thereof, and perform all duties incident tothe office of treasurer and such other duties as from time to time may beassigned to him by the chairman and chief executive officer, the president orthe Management Committee.

5.3.6.       *Secretary*.  The secretary shall record the minutes ofManagement Committee meetings or actions taken by unanimous consent of theManagement Committee, be custodian of the Company’s records, sign with thechairman and chief executive officer or the president or a vice-president orany other officer authorized by the Management Committee any contracts, deeds,mortgages, bonds or other instruments which the Management Committee hasauthorized to be executed, except when a different mode of execution isexpressly prescribed by the Management Committee, and perform all dutiesincident to the office of secretary and such other duties as from time to timemay be assigned to him by the chairman, the president or the ManagementCommittee.

5.3.7.       *AssistantTreasurers and Assistant Secretaries*.  The assistant treasurers and assistantsecretaries shall perform such duties as shall be assigned to them by thetreasurer or the secretary, respectively, or by the chairman and chiefexecutive officer, the president or the Management Committee.

5.4.          *Authority ofOfficers and Managers*.  Inaddition to the powers and authorities granted to officers as provided inSection 5.3 above, the Member or the Management Committee from time to time maygrant additional powers and authorities to the officers and managers of theCompany.  The Management Committee mayauthorize any officer, manager or employee of the Company to enter into anycontract, including without limitation contracts to borrow money, and toexecute and deliver any instrument, including without limitation contracts toborrow money, and to execute and deliver any instrument, including withoutlimitation promissory notes and other evidences of indebtedness, in the name ofand on behalf of the Partnership, and such

5

----

authority may be generalor confined to specific instances.  Theofficers and managers of the Company shall have authority to delegate any orall of their respective powers and authorities to subordinate managers andemployees of the Company.

5.5.          *Action byMember*.  Since there is onlyone Member, any action of the Member can be taken unilaterally by writtenconsent or by any other means deemed appropriate by the Member.

5.6.          *PersonalServices*.

5.6.1.       The Member is not requiredto perform services for the Company solely by virtue of being a Member.

5.6.2.       Upon subordination of theamount and purpose thereof, the Member shall be entitled to compensation and toreimbursement for expenses reasonably incurred in connection with theactivities of the Company.

5.7.          *Duties ofMember*.

5.7.1.       The Member shall devotesuch time to the business and affairs of the Company as it deems necessary tocarry out the Member’s duties set forth in the Agreement.

5.7.2.       Nothing in the Agreementshall be deemed to restrict in any way the rights of the Member to conduct anyother business or activity whatsoever, and the Member shall not be accountableto the Company with respect to that business or activity even if the businessor activity competes with the Company’s business.  The organization of the Company shall bewithout prejudice to its rights to maintain, expand or diversify such otherinterests and activities and to receive and enjoy profits or compensationtherefrom.

5.8.          *Liabilityand Indemnification*.

5.8.1.       The Member, the ManagementCommittee Members and the officers appointed by the Management Committee shallnot be liable, responsible, or accountable, in damages or otherwise, to theCompany for any act performed by them within the scope of the authorityconferred on them by the Agreement or for any actions for which they may beindemnified as provided for below in this Section 5.8.

5.8.2.       The Company shall indemnifyany person who was or is a party or is threatened to be made a party to anythreatened, pending or completed action, suit or proceeding, whether civil,criminal, administrative or investigative (other than an action by or in theright of the Company) by reason of the fact that he is or was a Member,Management Committee Member, officer, employee or agent of the Company(collectively, an “Action”), against expenses (including attorneys’ fees),judgments, fines and amounts paid in settlement actually and reasonablyincurred by him in connection

6

----

with such Action if heacted in good faith and in a manner he reasonably believed to be in or notopposed to the best interests of the Company, and, with respect to any criminalaction or proceeding, had no reasonable cause to believe his conduct wasunlawful.  The termination of any Actionby judgment or settlement, conviction or upon a plea of *nolocontendere*or its equivalent shall not, of itself, create apresumption that the person did not act in good faith and in a manner which hereasonably believed to be in or not opposed to the best interests of theCompany, and with respect to any criminal action or proceeding, had reasonablecause to believe that his conduct was unlawful.

5.8.3.       Any indemnification underSection 5.8.2 shall be made by the Company only as authorized in the specificcase upon a determination that indemnification is proper in the circumstancesbecause the person requesting indemnification has met the applicable standardof conduct set forth therein.  Suchdetermination shall be made (a) by the Management Committee by a majority voteof a quorum consisting of Management Committee Members who are not parties tosuch Action, or (b) if directed by the Management Committee, by independentlegal counsel in a written opinion. Notwithstanding the foregoing, to the extent that a Member, ManagementCommittee Member, officer, employee or agent of the Company has been successfulon the merits or otherwise in defense of any Action, or in defense of anyclaim, issue or matter therein, he shall be indemnified against expenses(including attorneys’ fees) actually and reasonably incurred by him inconnection therewith.

5.8.4.       Expenses (includingattorneys’ fees) actually and reasonably incurred by a Member, ManagementCommittee Member, officer, employee or agent of the Company in connection withthe defense or disposition of any Action may be paid from time to time by theCompany in advance of the final disposition thereof upon receipt of (a) anaffidavit by such person of his good faith belief that he has met the standardof conduct necessary for indemnification under Section 5.8.2, and (b) anundertaking by such person to repay to the Company the amounts so paid if it isultimately determined that he is not entitled to indemnification as authorizedin Section 5.8.2, which undertaking may be accepted by the Company withoutreference to the financial ability of such person to make repayment.  Any payment of expenses under this Section5.8.4 shall be made in the sole discretion of the Company and on such terms andconditions as the Company, in its sole discretion, deems appropriate.

5.8.5.       If both the Company and anyperson to be indemnified are parties to an Action, legal counsel representingthe Company therein may, at the request of such person, also represent suchperson (unless such dual representation would involve such legal counsel in aconflict of interest in violation of applicable law or principles ofprofessional ethics), and the Company shall pay all fees and expenses of suchlegal counsel incurred during the period of dual representation other thanthose, if any, that would not have been incurred if legal counsel wererepresenting only the Company.  Anyallocation of fees and expenses between the Company and such person made bylegal counsel shall be final and binding upon the Company and such person.

7

----

5.8.6.       The indemnification andadvancement of expenses provided by this article shall not be deemed exclusiveof any rights to which a Member, Management Committee Member, officer, employeeor agent of the Company may be entitled under any contract, agreement orotherwise, both as to action in his official capacity and as to action in anothercapacity while holding such position or office, and shall continue as to aperson who has ceased to be a Member, Management Committee Member, officer,employee or agent and shall inure to the benefit of the heirs, executors andadministrators of such person.

5.8.7.       The Company shall havepower to purchase and maintain insurance on behalf of any person who is or wasa Member, Management Committee Member, officer, employee or agent of theCompany, or is or was serving at the request of the Partnership as a director,officer, employee or agent of another corporation, partnership, joint venture,trust or other enterprise against any liability asserted against him andincurred by him in any such capacity, or arising out of his status as such,whether or not the Company would have the power to indemnify him against suchliability under the provisions of this article.

As so amended, theAgreement shall continue in full force and effect in accordance with its terms.

 

IN WITNESSWHEREOF, KHUC has executed this First Amendment to Operating Agreement as ofthe date first written above.
|   | KIMBALL HILL URBAN CENTERS,  L.L.C.,        |
|--------|---------------------------------------------|
|   |  an Illinois limited liability company |
|   |                                        |
|   |                                        |
|   | By:                                         |  /s/    Hal H. Barber |   |
|   |                                        | Hal H. Barber |
|   |                                        | Vice President |

 

8

----