The most likely culprit for your issue is moisture being trapped behind siding. Address that before doing anything else.
I’ve been painting cedar siding for decades and seen cedar last a hundred years as long as it can breath, doesn’t fully dry out unprotected, or rot. Best way to get such a long life is to use of a penetrating treatment that doesn’t form a film like paint. But since you’re stuck with paint…your issues can be one or a combo of the following: Surface impurities, moisture,
or issues with application and materials.
1: Surface Impurities
What specifically, in detail was done to prep before priming and painting? How was it washed and more importantly, did they leave any dust on siding after scraping/sanding? I use an air compressor to blow off any left over dust as it can cause paint failure.
Get yourself a wood moisture reader and test the moisture content in various spots. Anything above 10-15% means you have a moisture issue. Next is to figure out why. It could be one of two things:
A. If you had peeling and cracked paint and the siding had a high moisture content to begin with and never got a change to dry out fully before they primed and painted over that, it will fail. If they power washed it and painted the next day, it will fail.
B. The siding isn’t breathing and trapped moisture is coming through the back of the boards to the front, lifting up paint. This happens when moisture gets trapped between the house sheathing and siding. This happens a lot when so many layers of paint have been applied over the years that all of the successive rows of the bottoms of the shakes (or beveled boards) are painted “shut” between each row. Worse, sometimes people will caulk all along the bottom of every single row of siding. This traps moisture and it has no where to go but through the back of siding and out the front, lifting up paint.
There are two things to do in this case: 1) make sure there is an opening between each successive row of siding - it should not be painted or caulked shut. They sell special wedges that you can put in between each row to keep that space open. And 2) you may want to investigate if you have water coming in somewhere from a leak at your eaves or anywhere else and making its way down behind the siding and address that.
But even without any water leaks, there will be moisture from normal course of house life and seasons, etc, and it absolutely needs a way out. These days, it’s common to install a “rain screen” under the siding boards. These are typically furring strips over which the siding is nailed, thus leaving an air space between the sheathing/house wrap and the back of the siding.
3: Application methods/materials/etc
Besides moisture, another common problem that can cause bubbling is premature application of successive coats without adequate time for last coat to fully cure. What primer are they using and what is the recommended “cure,” not “dry,” time written on the side of the can? Sometimes when primer hasn’t fully cured and a coat of paint is applied too soon, paint failure can result. Sometimes primer types and paint types aren’t always compatible. I highly, very highly, recommend the use of “Mad Dog Dura Prime” - it is the absolute very best primer you can get for a long lasting job.
Are they spraying? If so, are they back-brushing and back-rolling everything? If you just spray, it will fail.
What products are used? If they buy their paint in a big box store, find another contractor.
I would not recommend getting rid of the siding just yet. Old siding like that can be from old growth cedar which you will not find any more - it is the gold of wood siding. If remedied, it will last forever.
Depending on how much you love the look of the wood and if you want to keep said siding for a few more decades and how much money you’re willing to spend, you can do a few things, from most extreme, to least:
1- Carefully take off the siding on the worst wall, trying to preserve as much of it as possible. Examine the underneath. The house wrap is probably non existent or ruined at this point and will need to be reapplied. Replace any sheathing if necessary. Do not use OSB.
Consult with someone if they can help install a rain screen. It’s a bit complicated to do this on just one wall at a time and get your corners to match with the wall you’re not touching, but doable. All of the trim work will also need to be redone since the rain screen will bump out the siding by a bit. This is also a good time to replace any windows if need be and if not, to at least make sure existing windows/doors are properly flashed and all have proper drip caps.
Take the siding you removed and see how much you can reuse - a lot of it can be saved by flipping it inside out. Prep and prime it on BOTH sides, tops, bottoms, AND butt ends. Let it fully cure. Do the same with new pieces you purchase to replace whatever broke in the process of removal. You can even put the first coat of paint on. Nail on the siding. Any pieces you needed to cut in the process should have the freshly cut ends primed before going on wall.
Observe that one wall over next few years. See how it fairs. My prediction is that you will like it. Do the same with the rest of the house.
2- Using a “paint shaver” system or chemical means, fully strip all the old coatings. (Side note: If you do it yourself, you don’t have to worry about “lead laws” but a contractor will have to take certain precautions, depending on how strictly you want to follow regulations that were created by people that never worked with their hands and are almost impossible to follow fully and get anything done.)
Replace any damaged siding. Make sure there’s open spacing between each row - use wedges made for this purpose. Fully prime with Mad Dog Dura Prime - two coats. Top with Benjamin Moore Regal or Aura.
Of course, always be checking moisture content before doing anything else.
3 - Make sure moisture content is below 10%. Make sure the above bullet points 1-3 are addressed fully. Remove as much paint as possible in failing spots. Spot prime with Mad Dog and then fully prime everything with a full coat of Mad Dog. Paint. Do not use any product that comes from a big box store.