Nation's Building News Online: February 9, 2004Print All Articles Text Version |
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NAHB President Rayburn Tells Canadian Officials to Stay the Course in Lumber DisputeWith Canada mulling over possibly resuming lumber trade talks with the U.S., NAHB President Bobby Rayburn traveled to Ottawa on Feb. 5 to inform top government officials in that country that any proposed settlement involving quotas would harm American home builders and buyers, and would be detrimental to the interests of Canadian provinces and lumber firms. In talks with Canadian Trade Minister Jim Peterson and members of Parliament, Rayburn urged the Canadian government to reject any proposed quota settlement to resolve the cross-border trade dispute over lumber and to vigorously pursue its legal challenges now pending before the World Trade Organization (WTO) and North American Free Trade Agreement (NAFTA) panels. “Given Canada’s recent victories before the WTO and NAFTA panels, the best way to overturn the current 27% lumber duties, achieve free and unfettered access to U.S. markets and receive a complete refund of the billions of dollars that Canadian firms have paid to date is for Ottawa to see its legal cases through to their conclusion,” said Rayburn. The Canadian government rejected a proposed deal last month that would have capped Canada’s duty-free share of the U.S. market at 31.5% and imposed a punitive $200 per 1,000 board feet tariff on shipments above that level. Canada’s share of the U.S. market topped 34% last year. “We are strongly opposed to the idea of a negotiated settlement for the sake of expediency that institutes quotas, tariffs or other restrictive border measures because they would restrict lumber supply and harm consumers by causing artificial price increases and volatile swings in the lumber market,” said Rayburn. He also noted that such an arrangement would pit province against province and producer against producer in a desperate battle for market share and also give the U.S. lumber industry unprecedented say in the management of Canadian forestry practices. Rather than caving in to political pressure to negotiate a bad deal, Rayburn told Canadian officials that their best recourse is to pursue the government’s legal cases before the WTO and NAFTA panels, which are scheduled to issue definitive rulings later this year. “All of the duties are likely to be eliminated because the NAFTA panel has already found that the ‘threat of injury’ ruling was faulty,” he said, noting that most independent analysts agree that the panel will once again rule that Canadian lumber does not pose an injury threat to U.S. producers. Under the U.S. legal system, a decree by a NAFTA appeals panel has similar force to a U.S. court ruling. In the lumber case, three separate NAFTA panels have considered different aspects of the U.S. action and found that the duties were not properly imposed. When the legal challenges run their course, the U.S. government will have no alternative than to roll back the tariffs and refund all duties paid out by Canadian firms. Officials from Home Depot and the National Lumber and Building Material Dealers Association accompanied Rayburn on his Ottawa trip, which also included a visit with Paul Cellucci, U.S. ambassador to Canada. The U.S. delegation called on Ambassador Cellucci to urge the U.S. government to oppose any type of settlement agreement that includes quotas or tariffs and to seek policies that reflect the interests of consumers, builders and other U.S. businesses that depend on lumber imports. Rayburn delivered the same message in a recent letter to U.S. Under Secretary for International Trade Grant Aldonas. Canadian federal officials were also told that they have several allies south of the border. Congressional resolutions supported by scores of lawmakers in the Senate and House are calling for “free trade regarding softwood lumber between the U.S. and Canada” and a “fair and expeditious review” by the WTO and NAFTA panels. On Dec. 10, Rep. Jim Kolbe (R-AZ), the chief sponsor of the House resolution, denounced the proposed quota settlement. “This latest announcement represents an attempt to subvert NAFTA’s rules-based system and trump the WTO’s process by luring Canadian producers into a managed trade framework,” Kolbe charged. “Rather than instituting protectionist measures, the best way to achieve free lumber trade between the U.S. and Canada is to include all stakeholders in trade discussions, and to allow for the cases that would invalidate the current tariffs — which are now before the WTO and NAFTA panels — to move forward without delay.” NAHB, along with other U.S. industries that use softwood lumber, will continue to urge the Bush Administration to abide by the WTO and NAFTA rulings, and to allow the cases to proceed expeditiously. “We stand steadfast in support of Canada’s legal campaign and resolutely oppose any settlement agreement that would restrict lumber shipments into the U.S. market,” said Rayburn. Building News Coast To CoastBuilding Materials Makers Miss Out on Housing BoomDespite record levels of residential construction, manufacturers of wallboard, carpeting, roofing, insulation and other basic materials have not enjoyed a significant windfall. Added manufacturing capacity during the housing boom of the late 1990s, recent home builder consolidations and builder access to alternative, less-expensive products can be blamed for their inability to hike materials prices. According to builders, stable materials costs have kept home prices down even as land costs and permit fees have risen. However, prices of lumber and engineered-wood products surged last year — but only in response to wildfires and ramped-up demand following Hurricane Isabel. Green Houses in St. Augustine Will Save on Energy CostsIn St. Augustine, FL, the St. Johns Housing Partnership will team up with World Island Builders to erect 32 single-family homes priced between $103,000 and $117,000 near the downtown area. Low-income buyers will benefit from $20,000-$25,000 in downpayment assistance from the housing partnership as well as green building techniques designed to make occupants healthier and minimize the effects of development on the environment. According to St. John Housing Partnership Executive Director Bill Lazar, the homes at Hancock Place will be energy-efficient and use landscaping to reduce water consumption. Green building aims to preserve the health of residents with materials that produce fewer chemicals, ventilation systems to provide fresh air and designs that take advantage of natural light. The U.S. Green Building Council has established a new chapter in North Florida so area builders can learn more about the strategy, which Jacksonville-based engineer Mark Gelfo says slashes long-term operational and maintenance costs. Stetson University's Eugene M. & Christine Lynn Business Center is the only structure in Florida to be certified by the council's Leadership in Energy and Environmental Design (LEED) program, but two others in Alachua County are currently being considered for certification. Risk Doesn't Deter Growth in Fire-Prone AreasDespite the recent wildfires in California that killed 25 people and destroyed more than 3,600 homes, experts anticipate even more growth in fire-prone areas in the future. Scores of residents are fleeing to the wilderness to escape crowded cities, purchase vacation retreats or find low-cost housing. The forest lifestyle is popular in other states as well, but it is more dangerous in California and the Rocky Mountain states — Idaho, Montana, Wyoming, Utah, Colorado, Nevada, New Mexico and Arizona — due to dryer climates and lax enforcement of restrictions intended to minimize fire risks. California residents living within the "wildland-urban interface" must clear the brush surrounding their dwellings and use certain roofing materials, among other rules; but officials in the Rocky Mountain states have not imposed any such mandates. According to California's forestry department, 7.2 million homes are located in high-risk areas. Insurers in California avoid home owners who refuse to comply with fire standards, and rapid growth has prompted those in the Rocky Mountain states to follow suit. Homes: Ownership Reached Record Levels in '03A Census Bureau report documents a new peak in U.S. homeownership levels. Propelled largely by historically low mortgage rates, the number of Americans who owned their homes bumped up from 68.3% in the fourth quarter of 2002 to 68.6% at the end of last year. The minority homeownership rate, meanwhile, climbed to unprecedented levels for both the fourth quarter and for 2003 as a whole, the Census Bureau added. Builders Advance Plan to Create Affordable HousingThe Long Island Builders Institute wants New York lawmakers to pass a bill that would boost densities for residential projects of five or more units for developers that set aside 10% of the units for lower-income residents. The group has released a report entitled "Homebuilders' Blueprint for Producing More Reasonably Priced Homes," which calls for higher densities in return for affordable housing; encourages the development of special districts with housing for seniors, entry-level workers and first-time home buyers; and supports tax abatements for first-time buyers as well as multi-level strip shopping centers with housing components. According to Long Island Builders Institute Executive Vice President Robert Weiboldt, "Affordable housing can be done attractively, clustered on smaller parcels of land that use fewer roads and provide more open space." However, without higher densities, he insists that builders will be forced to cater to upscale home buyers. Low-cost housing is a major issue on Long Island, considering that home prices have surged 81% since 1999 and continue to outpace income gains, which have drifted up just 14% in comparison. Builders expect school districts and incorporated villages with minimum lot sizes of one or more acres to reject their proposals. In related news, U.S. Rep. Steve Israel (D-Huntington) soon will introduce legislation that would offer financial assistance to home buyers in communities home to firms with $5 million-plus contracts from the Department of Defense or the Department of Homeland Security. Concrete Now a Lofty, Funky Design ConceptThe 2004 New American Home, unveiled at the recent International Builders' Show in Las Vegas, attempts to bring the loft into the suburbs. According to architect W.A. "Lex" van Straten, the loft could pave the way for high-density, single-family, suburban development. The $1.8 million model home covers 5,180 square feet and incorporates an insulated concrete form (ICF) foundation, copper roof shingles and a steel-frame roof with structural insulated panels to guarantee better energy efficiency than traditional wood-frame dwellings. In fact, heating, cooling, hot water and lighting will cost 46% less in the New American Home. Other features include numerous types of concrete flooring, mosaic tile, a media room, a wine cellar, a galley kitchen, an outdoor kitchen and fireplace and a reflecting pool. Despite the upscale finishings, the residence still has an industrial feel complete with the exposed ductwork seen in lofts in Chicago, Philadelphia and other cities. More Buyer Input by DesignA growing number of builders are letting home buyers participate in the design process, according to NAHB research executive Gopal Ahluwalia. Today's buyers know more about design trends than those in the past because of the Internet, television and print publications; and many want the chance to personalize their dwellings. Buyers will actually seek out builders that offer flexible designs, which have been made easier with technology. San Francisco-based architect Richard Hunt already communicates with clients via fax, e-mail and Web cameras; and he believes that online sketches are on the horizon. Buyers want more involvement when it comes to interior design, mainly because community associations impose rules regarding exterior paint colors and architectural styles. New Jersey architect Peter Pivko speculates that buyers also leave the exterior to the builder in order to maintain the home's curb appeal and preserve its resale value. Companies Join With Congressional Leaders to Launch Internet Access CampaignOne Economy's "Bring IT Home" campaign aims to provide high-speed Internet access, online portals and other technology tools to the 12 million people currently living in government-subsidized housing. The program works with developers to include technology in affordable housing designs and calls for state governments to include the costs of Internet access in household operating budgets, much in the way that utilities are. "Our goal is to maximize the efficiencies of the Internet and create a means to get low-income families online rather than standing in line," remarks One Economy CEO Rey Ramsey. The non-profit organization is partnering with Cisco Systems, eBay, the Fannie Mae Foundation, Freddie Mac, Microsoft, Verizon, Yahoo! and others to accomplish its goals. So far, officials in Alabama, California, Iowa, Kentucky, Missouri, Nebraska, New Mexico, Ohio, Oregon, Pennsylvania, South Dakota and Wisconsin have changed their housing policies as a result of the campaign. Nevada Test House Cuts Energy Usage by 42 PercentArchitect Sarah Susanka designed a demonstration home in Nevada that incorporates numerous energy-efficient features, such as a photovoltaic solar-panel system, air conditioning and heating ducts under the floor, placement of installation for the most energy savings and a steel-coated roof with reflective material. The Home by Design offers energy savings of 42% compared to a regular home. The building of homes in the area based on the design could reportedly allow Nevada Power to abandon a plan to launch a 150-Mw power plant in the region. Printers: Small Office, Shoestring BudgetFor small business owners dealing with tight budgets and increased demand, PC Magazine tested 17 affordable laser printers and compared them in terms of cost, quality and efficiency. Color laser printers have become popular among small businesses, especially as they decline in price. The low-cost models tested by PC Magazine include monochrome, color and multifunction lasers ranging from under $300 to $750. While the cheaper models lacked stacking, sorting and double-sided printing functions, they all boasted high-quality images and top speeds. E-mails That SellE-mail advertising and promotion can be a tricky technique for many sales representatives, but following specific guidelines can make e-mail advertising more successful in garnering new clients and selling other services to existing clients. For instance, experts suggest remaining professional in e-mail, addressing the client as Mr. or Mrs., unless otherwise informed, and sales reps should always check spelling and grammar before sending an electronic communication. Short promotions can be concise, offer a coupon or trial period for specific services or just inform potential and current clients of the latest products, but those messages should be tailored to the needs of the client. ValPak's Judith Deal cautions reps never to give out too much information in e-mails, saying they should only provide customers with the information they need or request. Moreover, reps should be cautious about the language they choose when sending out promotional materials via e-mail; managers should ensure they are not giving out pricing information or using overly aggressive language that could scare off potential clients. Finally, sales representatives should be intent on building a rapport with customers, complete with a feedback loop and phone and face-to-face meetings. Condominiums the Brightest Spot on the Horizon for Multifamily Housing Industry This YearMultifamily builders looking for good economic news will have to build condominiums, or be patient for a bit longer, according to NAHB Chief Economist David Seiders and Ron Witten, president of Witten Advisors, Dallas, speaking to an overflow crowd of builders and developers at last month’s International Builders’ Show in Las Vegas. The brightest spot on the multifamily horizon at this moment is the condominium market. According to Seiders, condos now represent 25% of all multifamily units being produced. “We expect that 25% to increase to 30% in 2004,” he said, adding that many developments originally planned as luxury rentals are being turned into condominiums before they are completed. This increased popularity of condominiums is expected to continue in the coming year, said Seiders, driving construction starts of for-sale multifamily units to highs not seen for more than 10 years. Multifamily rentals are having a rougher time now, but both speakers said that there is good news coming. “Our forecast for economic growth in ’04 is good,” said Seiders, citing “a healthy economic expansion that will generate real job growth.” And, he added, “This is important for producers of rental housing, since negative job growth [jobs being cut or going offshore] and high vacancy rates are strongly related.” The forecasts from Seiders and Witten both point to continued growth in jobs being created through 2004, which will help push the unemployment rate down. Source: Witten Advisors, Historical data from U.S. Bureau of Labor Statistics; forecast from Economy.com and National Association for Business EconomicsPresenting some cause for concern, multifamily starts for buildings with five or more units have continued steadily at about 300,000 units annually, even in the face of near-record vacancy rates. And, as renters who’d rather be owners left their rental units and bought homes at record-low mortgage rates last year, the market has not been absorbing all the vacant units — both newly-vacant apartments and the new rental units being built. That situation, says Witten, has been improving, but the supply of apartments continues to outpace demand, as investors continue to fund new multifamily development. Witten sees a return to balance between supply and demand by the end of this year. He identified Houston, Atlanta, Dallas, Los Angeles and Washington, D.C. as the cities he expects to have the largest number of rental apartments started in the coming year. But he sees Jacksonville, FL, Los Angeles and Miami as the most favorable cities for rental development. Housing SnapshotMortgage rates increased only a tad last week, less than expected following hints by the Federal Reserve that today's low interest rates won't last forever. Looking ahead, job creation remains the focal point for the economy. While the Labor Department reported last week that 112,000 jobs were created in January, that was well below the pace predicted by the White House's Council of Economic Advisers, which expects 2.6 million new jobs this year. It could be wrong: last year the Administration anticipated 1.7 million new jobs, when there was actually a loss of 53,000. Productivity gains of 4.9% in 2002 and 4.2% last year have been an impediment to a major turnaround in unemployment woes, so it was a good sign that productivity declined to an annual pace of 2.7% in the final quarter of 2003, down sharply from 9.5% in the prior three months. Lumber prices last week continued to climb, although at less than a torrid pace. Random Lengths reported that the price of framing lumber was up $4 to $356 per 1,000 board feet. The mill price for 15/32-inch 3-ply CDX Southern Westside plywood was up $5 to $435 per 1,000 square feet, up from $248 a year earlier; and oriented strand board jumped $25 to $440 compared to $188 a year earlier. Mortgage Interest Rates30 Year Fixed Rate: 5.72\% Housing Starts: Dec. 2003Total: 2.088 million\% New Home Sales: Dec. 2003 *1.060 million Existing Home Sales: Dec. 2003 *6.47 million * Seasonally Adjusted Annual Rate Housing America’s Working FamiliesGetting a good education, landing a job in your chosen profession, working hard and buying a home — for generations that’s been the way to get ahead in America. Nowhere has this idea of progress been so clearly demonstrated as in the quality and quantity of U.S. housing built during the past 50 years. Despite intermittent setbacks, the homeownership rate has risen steadily and now stands at a record 68%. At the same time, the percentage of Americans living in overcrowded or substandard housing has dropped significantly. By any standard, the United States has become the best-housed nation on earth. These remarkable achievements that helped define a half-century of American progress, however, do not necessarily guarantee the same measure of success in the future. Dangerous undercurrents are churning in today’s housing market. Despite very affordable mortgage interest rates, millions of working families are finding it increasingly difficult to purchase or rent a decent home in or close to the communities where they work. Many teachers, police officers, firefighters and other moderate-income workers — representing the heartbeat of any community — are working two or three jobs to meet their monthly housing expenses or are looking for housing 50 miles or more from their jobs. In many markets, the gap between those who can afford a home and those who can’t is widening at an alarming rate, and affordable rental housing is in short supply. But the nation’s housing industry has been tested before. Time and again, home builders have demonstrated that with the proper tools and policy they can overcome major obstacles and meet the housing needs of the American people. In 2004, the 215,000 members of the National Association of Home Builders will rededicate themselves to this effort and set forth an agenda to draw attention to — and to begin to reverse — today’s growing affordability gap and to open new opportunities for millions of working American families who are unable to purchase or rent a decent home.
Housing’s Vital Role in the Economic Recovery When it comes to the health of the housing market, everything begins with sound economic fundamentals. In recent years, the U.S. economy’s performance has been inconsistent and lackluster. The one exception has been the housing market, which has been performing remarkably well. Housing has accounted for a disproportionate share of growth in the nation’s Gross Domestic Product during the past two years, and housing production and home sales have helped prevent the economy from slipping back into recession. However, housing cannot do it alone indefinitely, and other sectors of the economy will have to rebound in order to sustain a more robust and long-term economic recovery. The NAHB-supported tax cut and economic stimulus bill adopted by Congress last year provides numerous tax incentives for small businesses and should help trigger a more broad-based economic recovery in 2004. In addition, NAHB will continue to encourage the Federal Reserve Board to pursue the right mix of monetary policies to keep interest rates low and promote long-term economic growth.
Housing and the National Election Critical to housing’s long-term future will be the national elections in 2004 when the American people will go to the polls to elect the President of the United States, 435 House members and 33 U.S. Senators — in addition to thousands of public officials for local and state positions. NAHB will leave no stone unturned in its efforts to elevate housing as a top national priority and to drive home the importance of providing affordable housing for working Americans. Among other things, NAHB will:
Maintaining a Healthy Secondary Mortgage Market Much of the credit for the nation’s remarkable Increase in homeownership and steadily rising housing standards during the past 50 years must go to the development of its world-class and highly efficient housing finance system. Central to today’s highly effective secondary mortgage market has been the development of programs by Fannie Mae and Freddie Mac to lower the cost of home mortgage credit, finance affordable rental housing and assure an ample supply of mortgage credit through a broad range of mortgage instruments tailored to the diverse needs of American households. Today, about two of every three mortgages flow through these two Government Sponsored Enterprises (GSEs). Unfortunately, accounting and management issues at Freddie Mac have triggered an opportunistic onslaught that could reverse decades of progress. The Administration proposed moving almost all of the key regulatory oversight responsibilities for the housing GSEs from the Department of Housing and Urban Development (HUD) to the Treasury Department, which historically has displayed an anti-housing bias. Administration officials have also welcomed discussions on diminishing or eliminating Fannie Mae and Freddie Mac’s government-sponsored status. The issue is now before Congress, and the stakes involved in how this issue is ultimately resolved are huge. Cutting GSE lines of credit to the Treasury — as one top Treasury official has suggested — would raise the cost of home mortgage credit, reverse upward trends in homeownership and undermine housing’s support to the economy and the job market. Even the Administration’s official proposal to move program and mission authority from HUD to the Treasury Department would be extremely damaging to the nation’s efforts to fulfill the goal of providing “a decent home in a suitable living environment for every American family,” which was adopted by Congress and signed by President Truman in 1949. Ironically, it also would impede efforts to achieve President Bush’s goal of increasing minority homeownership by 5.5 million. In light of these developments, NAHB supports the following proposals for regulating the housing GSEs:
A Strong National Policy Agenda for Housing At the federal level, NAHB will pursue an aggressive legislative, regulatory and legal agenda that will, among other things, improve the functioning of the nation’s market delivery system, enhance the housing finance system and lend a helping hand to working Americans living at the edge of affordability in urban and rural America. Specifically, NAHB will:
Promoting Smart Growth and Removing Regulatory Barriers To increase housing opportunities for working Americans over the long term, three things must happen. The overall economy needs to grow at an adequate pace while maintaining low interest rates. This will raise real incomes, create new jobs and increase the purchasing power of working Americans so they can afford to rent and buy decent shelter. Second, the federal government needs to lend a helping hand to assist those Americans living at the edge of affordability. Third, local and state governments need to reform and streamline the zoning and regulatory process to meet a community’s housing needs and to allow for construction of a mix of different types of housing in various price ranges. Cumbersome regulations, excessive fees and exactions, unrelenting public sentiment against higher-density zoning and growth, and resistance to smart growth planning and zoning policies have all contributed significantly to the nationwide shortage of affordable housing. In some areas, regulatory delays and excesses have added as much as 20% to the cost of building housing. To support regulatory reform at the local and state levels, NAHB will:
Tapping the Political Clout of Grassroots Members To implement this highly ambitious agenda for 2004, NAHB will work in partnership with the leadership of its 800 local and state associations to utilize and take full advantage of the energy, resources and political clout of its 215,000 grassroots members. Among other things, NAHB will provide regular updates and status reports on progress being made on its “Housing America’s Working Families” agenda for 2004. NAHB will also make information on the many NAHB products, services and tools readily accessible throughout the federation and will develop a “new member orientation” program and other tools necessary to reinforce the value of membership in NAHB. This partnership between NAHB and its local and state associations will be periodically reviewed and updated throughout the year, with both NAHB leaders and executive officers of local and state associations devoting whatever time is necessary at appropriate meetings to brief members on progress to date and challenges still unmet in “housing America’s working families.” Working with the enthusiastic and energetic support of the leaders of state and local associations and its grassroots members, NAHB will move forward aggressively in expanding housing opportunities for America’s working families in the year ahead. An Interview With Assistant Treasury Secretary Wayne AbernathyRecent interviews with Assistant Treasury Secretary Wayne Abernathy and NAHB Executive Vice President Jerry Howard on regulation of the housing GSEs find some common ground: both agree that privatization of Fannie Mae and Freddie Mac is a bad idea.
Secretary Abernathy says: "We're not supporting any proposals for privatization." CEO Howard adds: "Efforts to privatize . . . should be opposed." But on other aspects of the debate — issues that will likely decide the future of America's housing finance system — there are some sharp differences of opinion. To read an accompanying interview with NAHB Executive Vice President Jerry Howard, click here. ROBERT PFLIEGER: Mr. Secretary, what do you believe is the mission of Fannie Mae, Freddie Mac and the Federal Home Loan Banks? And do you believe there should be changes in those charters? WAYNE ABERNATHY: Congress was clear when they created the housing GSEs that generally their mission was to harness this nation’s unparalleled financial resources to make the dream of homeownership a greater reality, particularly for those who have been traditionally underserved, like minorities and low-income Americans. The purchase of a home is probably the largest financial allocation that most Americans will make in their lifetime, and GSEs helped make the 30-year, fixed-rate mortgage the bread and butter of our housing finance system. And today many Americans own homes who otherwise would not have had that opportunity. Expanding homeownership is a top priority of the Bush Administration. President Bush has outlined an aggressive housing agenda that includes the American Dream Downpayment Fund, the Single Family Affordable Housing Tax Credit, simplification of the home-buying process and increased home-buying education. Congress has also recognized that homeownership is a priority for this nation and has reinforced that principle on numerous occasions. The Administration has proposed a strong and effective new regulator for the housing GSEs because expanding homeownership is a top priority, and the GSEs play an important role in doing that. Appropriate oversight of them is necessary to ensure that the housing GSEs will be able to continue to play this role now and into the future. MR. PFLIEGER: It has been widely acknowledged that housing has played an incredibly important role over the last couple of years in keeping the economy strong. What, in your view, is housing’s overall contribution to the growth of the economy, recently and over the long term? And what role have the housing GSEs played in that growth? MR. ABERNATHY: There are two parts to that. First of all, let’s talk about the importance of homeownership to the economy. Treasury’s Office of Economic Policy estimates that residential investment accounts for about 5% of Gross Domestic Product overall, and sometimes it accounts for a significant portion of the growth of GDP — over 1% in the third quarter of FY 2003. The building, furnishing and maintaining of homes are extremely important as a share of our economy. But I think probably the most significant impact that homeownership has on the economy is what it does for communities. Go to a community where most of the people rent their home. Compare that with the community where most of the people own their home, and it’s a world of difference. There’s a world of difference in the way the people take care of their homes, the investments they make in their homes, the investments they make in their communities, the roots that they put into their communities and how they participate in the life of the community. Knowing that you own your home means not only that you take better care of your home, but you tend to take better care of your community. MR. PFLIEGER: You mean housing’s social benefits? MR. ABERNATHY: You get more involved in local politics because you figure you’re going to be there a while, and so you’re much more likely to be a participant in the choice for the local alderman than you would be if you were renting there and not planning to be there very long. And there’s a myriad of other kinds of — you’re probably more involved in the schools. You’re more involved in the churches and other good things that take place. People tend to become more involved in the places where they own their property and the home that’s there. That’s what I think is the most significant benefit of homeownership in this country. GSEs play a role by helping to make the 30-year, fixed-rate mortgage into a very commonplace, liquid investment that allows a lot more of our tremendous financial resources to be devoted toward helping people buy their first homes and their second home, or to expand and build upon their homes. Without that, the 30-year, fixed rate mortgage might be seen by lenders as a riskier investment. DAVE CROWE: Why do you describe a mortgage as being a potentially dangerous investment? MR. ABERNATHY: From the lender’s point of view, long-term mortgages are subject to a wide variety of risks, particularly when you’re talking about a fixed-rate loan. When you have a fixed-rate loan, you’re tying up money over a long period of time, and so you increase the amount of exposure that you have to whether or not someone’s going to honor their payments over that period of time. You have exposed the person who provides that money to liquidity risks, and to the risks that financial institutions may need that money for other things because they have a lot of other demands. That financial institution is exposed to interest rate risks that can occur over the life of that particular loan as rates rise and fall. The secondary markets help mitigate a large portion of that risk by spreading it among a greater pool of investors. In a lot of other countries a 30-year, fixed-rate mortgage is a very hard thing to find. In this country, for a long period of time, the 30-year fixed-rate mortgage was something that was hard to find. We needed to find mechanisms by which financial institutions would be willing to commit large sums of money for long periods of time, and the housing GSEs have played a major role in creating those instruments and providing liquidity that allows financial institutions to make those kinds of investments an everyday occurrence. MR. PFLIEGER: And continue to play? MR. ABERNATHY: And they continue to play that role, they certainly do in a variety of ways. And I think it’s interesting the way the different pieces work together. You have, by and large, Fannie and Freddie that are focusing on what you might call standardized, cookie-cutter types of loans, which is what you need to do in order to securitize them. The Federal Home Loan Banks play a very important role in providing liquidity for conforming as well as non-conforming loans. A member of a Federal Home Loan Bank can use these assets as collateral to get funds from a Federal Home Loan Bank to take care of any liquidity needs that institution may have, and thereby make that bank or thrift or credit union more likely to engage in that kind of investment. MR. PFLIEGER: What is Treasury’s view of the wide range of federal policies that support a strong housing delivery system — everything from the mortgage interest deduction, to the low-income housing tax credit, to housing’s share of the federal budget, to the government’s support of the housing GSEs? MR. ABERNATHY: As I mentioned before, the Bush Administration has made increased homeownership a top priority, and has proposed numerous ways to make this dream a reality for more American families. Secretary Snow shares the President’s strong commitment to housing and believes that the housing sector is a crucial component of our economy. Housing is making a tremendous contribution to the current economic recovery. It certainly is no secret that this Administration is a strong supporter of the mortgage interest rate deduction. That has been a key element, a key piece of our tax code for a long period of time and a lot of people rely upon it. It allows a lot of people to get into homes earlier than they otherwise might, and to able to free up the funds they need in order to make their monthly payments. With regard to a number of the other pieces that are designed to help increase homeownership, President Bush proposed the American Dream Downpayment Fund in 2002, and Congress enacted it a few days ago. This program will help low-income Americans overcome what is sometimes the number-one obstacle to buying a new home — amassing the money for the downpayment. A lot of people are making rent payments that are the same or more than what a mortgage payment would be and they would love to own their own home, but they can’t put together the downpayment. They’re paying all their money in rent. They can’t put aside enough money in savings for a downpayment, but they have demonstrated the ability to make a regular monthly payment, they just do it in rent. If they can find help to get that downpayment in place, they could turn that rent into equity and homeownership. The Administration estimates that this new program will help approximately 40,000 families a year with their downpayment and closing costs. MR. CROWE: Can you elaborate on the Administration’s homeownership goals? MR. ABERNATHY: President Bush has set very aggressive housing goals. In June 2002, he announced that he was setting a new minority homeownership goal of at least 5.5 million new minority home owners by the end of the decade. But even though homeownership levels are higher than they have ever been before, the President is still not satisfied. He has recognized that there are still segments of the population that are below the overall national level of homeownership that we can reach with various types of assistance. That’s why this Administration has put forth numerous programs to help serve minority populations in particular. Sometimes it’s just outreach. You get folks and help them understand that homeownership is within their reach, but they just don’t have the knowledge or the understanding to put together all the different pieces. So there’s a lot of outreach being done to show them just what the steps are. I think that the proposal that the Department of Housing and Urban Development is looking at to try to simplify RESPA and all of the processes involved with settlement are excellent ideas to try to make that whole process — which can be very bewildering to people — a lot simpler and more understandable. People hear these horror stories about home buyers going into settlement and having surprises, and they are never pleasant surprises; they’re always unpleasant. If people knew before they walked into that settlement room what their expenses were going to be, you would be taking away one of the additional obstacles to homeownership today. MR. CROWE: Looking at the Administration’s goal to increase homeownership rates among minorities, would Treasury be willing to support federal initiatives designed to address the problems you just mentioned and expand homeownership opportunities? MR. ABERNATHY: President Bush and this Administration are committed to helping more Americans, especially communities that have been traditionally underserved, such as minority Americans, own their own homes. In addition to the housing programs which the President has put forth that I have already mentioned, part of the package that Secretaries Snow and Martinez have proposed to Congress would give HUD additional resources to enforce the various housing goals, and part of that is to break the housing goals into some segments. This would help us achieve not just the overall goal of increasing homeownership among all Americans, but also concentrate on the sub-goals that focus on increasing levels of homeownership among various minorities. With regard to innovation that helps us reach those goals, one of our concerns is that the GSEs, as they grow, continue to stay focused on their mission, which is to expand the envelope of people who can get their homes, who can buy homes, who can purchase homes and not that the GSEs go experimenting in other things that may have only a tangential connection to homeownership. MR. PFLIEGER: Do you believe that the GSEs have gone beyond their mission? MR. ABERNATHY: I don’t know if they have or not. That’s something that the supervisor would need to be able to look at. We want to make sure the supervisor has full authority to be able to look at that, so if they see a proposal that somebody wants to put forth, the supervisor needs to be able to say, “Well, that might be a very interesting proposal and it might increase the financial resources of the entity, but it doesn’t have a whole lot to do with housing. We would prefer that you did your innovating on how you can find new ways to put people into homes as opposed to new ways to increase your bottom line, which may or may not have a direct bearing upon housing.” MR. CROWE: It could be argued, however, that a profitable balance sheet also puts the GSEs in a position to expand their support for the housing market? MR. ABERNATHY: We are all in favor of innovation. Increasing profits isn’t the sole or the primary responsibility of the GSEs, however. In fact, there may be situations where the GSEs should be obtaining a below-market return to provide additional funding to housing markets. That might not bring the full 15% return that they might be accustomed to. It might bring them only a 5% or a 10% return, but it’s still a positive return, and that’s the kind of market that Congress said they ought to be involved in. MR. PFLIEGER: You have been quoted in the media recently questioning the financial condition of Fannie Mae and Freddie Mac, and, let me quote you directly,“we really don’t know what’s going on.” Do you believe that taxpayers face an imminent threat? MR. ABERNATHY: No, I don’t think they pose an imminent threat. I think if there were an imminent threat, there would be certain signs that we would see. But the real issue is that we need a strong, credible regulator that will be able to detect developing problems before they become major problems, and currently we don’t have the kind of regulator or the kind of disclosure from the GSEs that would allows us to do that. For example, Freddie has yet to live up to its commitment to register under the 1934 Securities Exchange Act, and they said that they most likely will not do so until 2005. They have finally put forward their annual report, but they said they aren’t going to give any quarterly data for 2003 until at the earliest June of 2004. I can’t imagine that investors are well served by a major corporation like Freddie Mac conducting business that way. While Fannie Mae was able to register under the 1934 act almost a year ago, Freddie has not, and until Freddie does that, there are important elements of disclosure that are not available, and so our ability to catch problems early on is compromised. MR. CROWE: Would you say that’s a major concern? MR. ABERNATHY: I am concerned that there could be significant problems developing, and the current level of disclosure does not allow regulators to catch those problems before they become disruptive to the role the GSEs play in the housing markets and the financial system. This is a further reason that we need a new, strong and credible regulator. MR. PFLIEGER: Isn’t that OFHEO’s job right now? MR. ABERNATHY: I think it is, but OFHEO, doing the best they can with what they have, were still caught by surprise when Freddie had its accounting problems. I think that suggests that over time, in spite of the people at OFEHO doing the best they can, they just do not have the resources, focus, stature and authority to do the job that needs to be done. MR. CROWE: Do the GSEs pose an imminent threat? MR. ABERNATHY: No, I have no reason to believe that is the case, but that being said, we don’t have the same disclosure for those corporations as we do for other corporations in America, and certainly not the world-class disclosure rules required for financial institutions. In fact, if you look at corporations in America, the level of disclosure we have for financial corporations is even greater than what we have for corporations in general. The reason why you need that is because, as we saw — as we have seen in many financial institutions that have melted down in the last 20 years or so — when they go bad, they can go bad very quickly just because of the nature of financial institutions. Money is so fungible and it moves so quickly, and because confidence is such an important part of the health of any financial institution, that’s why, perhaps more than a corporation that’s in the manufacturing business, we need to be able to have the confidence that they’re operating in a safe and sound manner early on. MR. PFLIEGER: That leads me to another question. Wall Street doesn’t seem to have expressed any lack of confidence in the GSEs. It seems, though, that you have lost confidence in them. MR. ABERNATHY: I would say that we are concerned that the level of supervision and disclosure is not adequate, and we believe that the housing finance markets will be better served if there is a new, credible regulator. I believe that the market has responded to the problems at Freddie differently and perhaps not as severely as if similar problems had been uncovered at a non-GSE. That may be due to the fact that many market participants believe that the federal government would step in if one of the GSEs were to default, even though the bonds state on their face that they are not guaranteed by the federal government. MR. CROWE: Do you think that’s what’s supporting the stock prices of Fannie and Freddie? MR. ABERNATHY: I don’t know if it affects their stock prices as much as it affects their bond prices. Their cost of funds certainly benefits from that assumption. Their stock prices, I think, have been influenced to some degree. If you compare Freddie’s stock prices with Fannie’s, there is a very significant difference in terms of the price-to-earnings ratio. I think Freddie’s is about half of what Fannie’s is in terms of price-to-earnings ratio, reflecting at least some unease, some disquiet, about Freddie’s condition. MR. PFLIEGER: During a Senate Banking Committee hearing on Sept. 23, Senator Sarbanes asked all the panelists to express their views on the idea of privatizing the GSEs. Let me ask you the same question. Does the Treasury Department — the Administration — support privatizing the GSEs? MR. ABERNATHY: We don’t have any plans to promote privatization. We’re not supporting any proposals for privatization. That has not been on our agenda or even in any of our discussions. MR. CROWE: What about the line of credit extended to Fannie and Freddie? MR. ABERNATHY: The discussion that we have been engaged in and our focus over the last several months have been on establishing the appropriate supervision for Fannie and Freddie. We’ve been focusing on getting the right regulatory structure. But let me just point out that, with regard to a line of credit, you have to understand that it is not really a line of credit, but rather the opportunity — the authority that the Treasury has to purchase the securities of Fannie and Freddie. But we have also said on multiple occasions that if Congress wants to look at other issues and would like us to engage in discussion with them, we will do that. But the discussions that we have initiated and our focus are on getting the regulatory system right. MR. CROWE: But opening that door does suggest you might be amenable to it. MR. ABERNATHY: It means if Congress wants to open the door we will have that conversation, and then we will have to decide what kind of policy we have on it. We have not taken a policy position on it nor have we had a policy discussion about whether that is a good idea or a bad idea. But if Congress thinks that there is merit to it and wants us to engage in that, then we will engage in a policymaking process and see if we have a view on it. MR. PFLIEGER: Have you encouraged Congress? MR. ABERNATHY: In that regard, no. I think if you look carefully at what Secretary Snow said when he testified before the House and I think re-echoed when he testified before the Senate, he emphasized that the most important thing we need to do is get the regulatory system right, and that’s what our main focus has been. But again, if Congress wants to deal with this issue or others, we’re certainly open to engage in that conversation. MR. CROWE: Let’s shift to a discussion about who should regulate the GSEs. Recently, there’s been speculation in the press and elsewhere about appointing a totally independent regulator. And you have stated previously that Treasury’s first priority is setting up a solid, world-class regulator for the GSEs. What are the characteristics of a truly independent regulator that you would feel comfortable with? Is this a point where the housing community can find some common ground and reach a compromise? MR. ABERNATHY: What’s most important is that we get the details of the regulator right. The supervisor has to have all the authorities that are needed to carry out its job. That includes full authority over both elements of capital, with minimum capital and risk-based capital. It includes authority over all of the elements of prudential supervision, including authority over new activities. And it includes having an independent source of funding. It includes being able to go to the courts on its own dime, on its own ticket, without having to solicit permission to do that from the Justice Department. Then people want to get into the question of where to put that entity. We have made it clear that if you want to put it in Treasury, there are certain requirements that need to be met, but that’s only if people want to place that entity into Treasury. MR. CROWE: Those are the only conditions for an independent regulator? MR. ABERNATHY: Well, again, the Administration has consistently said that there are certain elements that are essential to an effective, prudential regulator. Secretary Snow outlined those elements in his testimony before the House of Representatives Financial Services Committee in September. The Administration’s requirements for this new regulator are drawn from the powers and authorities that other world-class regulators have in this country and elsewhere. MR. CROWE: And you said new program activity? MR. ABERNATHY: Yes, we believe the new regulator must have authority over new activities. MR. PFLIEGER: You’ve reportedly taken the position that new program authority for the GSEs should be placed under the new regulator, that it cannot remain at HUD and that that position is non negotiable. Is that correct? MR. ABERNATHY: One of the essential elements of an effective regulator is the ability to approve new activities, not just new programs. You cannot point to an effective, world-class regulator of financial services that doesn’t have that authority. MR. CROWE: The regulator’s ability to essentially veto a program on financial safety and soundness grounds is not sufficient? MR. ABERNATHY: It’s not just safety and soundness. There are other elements that tie into it. There are a whole variety of risks that financial regulators look at when they’re looking at the activities of the institutions they are regulating. There are certainly the safety and soundness issues with regard to the financial aspects, but there’s also reputational risk, there are legal risks that they look at, there are management risks. Does this institution have the ability to manage these activities and how do these activities interact with the other activities of the institution? Do they have appropriate ability to understand all the aspects of the activity and where it might lead? All of those things need to be taken into account and looked at. It’s done in a very effective way with those agencies that have that power, and it’s done in a way that doesn’t slow down the ability to bring to market new products. If you look at America’s banks today, they are the world innovators. When it comes to financial services, it’s the United States that develops the new financial services, and they do it within a system where the bank regulators have authority over those new products. MR. CROWE: Could you see this independent regulator — independent of Treasury —operate as a “board,” with equal standing between HUD and Treasury? MR. ABERNATHY: As you know, the type of regulator, whether it is within the Treasury Department or a separate agency entirely, is still an issue that Congress is examining. MR. PFLIEGER: As part of this discussion over how the new regulator is set up, is there an opportunity for industry to participate? MR. ABERNATHY: There is, particularly for those who are the users and beneficiaries of Fannie’s and Freddie’s products. MR. PFLIEGER: Like the home builders. MR. ABERNATHY: Yes, like the home builders, like home buyers and people who supply other aspects of that, the financial institutions that originate the mortgages; all of those need to be looked at. I think there need to be some conversations with Fannie and Freddie, but keep in mind that these institutions were created by Congress to serve certain purposes of Congress. Therefore, Congress, the government, will play the major role, because these are government-sponsored enterprises, and the government ought to have the significant say in how they’re going to be supervised. And so, while they ought to be consulted with, I don’t think their views ought to determine what the final product is. MR. PFLIEGER: So you might see a role for the housing industry in that dialogue. Again, I don’t want to put words in your mouth, but in the event that there is a discussion about creating an outside agency board to regulate the GSEs, you see a role for the housing industry to have a seat at the table for those discussions. MR. ABERNATHY: I think whatever we do with regard to GSE supervision that that process ought to include a discussion with those who rely upon the services of the GSEs to make sure that what we’re creating is going to be able to meet their needs. And as I say, that includes the people who build the homes as well as the people who sell the homes as well as the people who buy the homes and the ones who finance them and originate the mortgages. I think all of those people ought to be involved in that process to make sure that we’re having a system that will be robust enough to continue the great benefits we have of this wonderful financial system for housing and finance. MR. CROWE: Fannie and Freddie both supply capital to the multifamily market as well as the single-family sector. Do you envision a major a role for Fannie Mae and Freddie Mac in facilitating the flow of capital to the multifamily market? MR. ABERNATHY: I think in our discussion we have been talking about basically the context of single homes, but the GSEs do play an important role in the multifamily market as well. And frankly, if you include the Federal Home Loan Banks, a lot of that money also goes into providing rental homes, and that’s important as well. There are a number of people for whom, for whatever reason, their best option is a rental home, and we don’t want that segment of the housing market to be neglected either. MR. PFLIEGER: You have stated a preference for regulating the Federal Home Loan Banks under the same regulatory umbrella being proposed for Fannie and Freddie. Does this make sense given the significant differences in the structure and operation of Fannie Mae and Freddie Mac versus the Federal Home Loan Banks? MR. ABERNATHY: They are different. They’re similar in the markets that they serve, but I think they’re complementary in many ways as well. But I think you can accommodate supervision of Fannie and Freddie and the Federal Home Loan Banks in the same agency, provided you have two divisions within that agency. There is some area for overlap, but there are also separate structures. You have 12 institutions that are cooperative in nature. They are created as mutuals, mutual institutions in essence, in effect. And then you have two that are for-profit entities, and they have different structures and different market forces that affect what they do. There’s also a good deal of overlap. Certainly in the backroom operations, making sure you have your legal team, your financial analysts, your accounting staff and your examination staff. You could have that same set of staff to provide you the kind of resources you need, whether you’re looking at the Federal Home Loan Banks or Fannie or Freddie. In fact, one of the benefits of putting them together in one institution is you would address one of the problems you have with examination staff for Fannie and Freddie today. If you’re a career examiner at OFHEO, your whole career you’re going to look at either Fannie or Freddie, and it’s hard to discover what best practices might be. The examination process is a give and take. The examiners are on the one hand coming in with a jaundiced eye, with a critical eye to see what can be improved, but they’re also learning. They’re learning about the good practices underway in one place that they can then carry to the next institution they look at. That happens in the banking world all the time. When you’re dealing with Fannie and Freddie, they are so much alike it’s hard to bring anything new to one or the other. But if your examiners are examining Fannie Mae this year, and next year they’re looking at the Federal Home Loan Bank of San Francisco, there may be some good lessons that they can learn from those different reviews that they can benefit each of them. MR. PFLIEGER: One reason you have given for having new GSE programs approved by the safety and soundness regulator is to eliminate the bifurcation of Fannie and Freddie’s oversight by HUD and OFHEO. But under your proposal, HUD would still continue to establish and enforce Fannie and Freddie’s affordable housing rules. Doesn’t this also represent a bifurcation of mission oversight if new program approval powers are moved to a different regulatory entity? Why are you concerned about bifurcation in one case but not in the other? MR. ABERNATHY: The best place for housing goals to be set and monitored is with the experts at HUD. The goal setting is not part of the supervisory process. But, while Fannie, Freddie and the Federal Home Loan Banks help us meet those goals, they are ultimately financial institutions. The new supervisor should have all the powers necessary to be a world class financial regulator, including new activity approval. The benefit in keeping goal setting and new activity approval somewhat separate is that HUD can look at those goals without being subject to the day-to-day supervisory responsibilities and concerns and worries. HUD can focus on what the housing market needs, and whether or not the GSEs need to stretch a little bit to meet these goals. The supervisor will look and say, “Go ahead and stretch, but as you’re stretching we’re going to make sure you’re not snapping. My job is to make sure you don’t snap and that you stay focused.” HUD sets the target, the supervisor looks at it to see whether or not the bow you were using is a good bow, whether your arrows are straight. But let HUD set the target. MR. PFLIEGER: Let me conclude by thanking you for participating in this interview. Before closing, are there any other points you would like to leave with NAHB’s 215,000 members? MR. ABERNATHY: Well, perhaps — and the only thing I would add that we haven’t covered here yet is our view that the need for having a good, effective supervisor is not going to go away. The need is probably going to increase, the mission responsibility that they have is so important that we can’t allow ourselves to get by much longer with inadequate supervision of these housing GSEs. We have to make sure that they’re safe today and that they will be safe tomorrow to be able to continue their mission. To read an accompanying interview with NAHB Executive Vice President Jerry Howard, click here. An Interview With NAHB Executive Vice President Jerry HowardRecent interviews with Assistant Treasury Secretary Wayne Abernathy and NAHB Executive Vice President Jerry Howard on regulation of the housing GSEs find some common ground: both agree that privatization of Fannie Mae and Freddie Mac is a bad idea.
Secretary Abernathy says: "We're not supporting any proposals for privatization." CEO Howard adds: "Efforts to privatize . . . should be opposed." But on other aspects of the debate — issues that will likely decide the future of America's housing finance system — there are some sharp differences of opinion. To read an accompanying article with Assistant Treasury Secretary Wayne Abernathy, click here. DAVID CROWE: What does the housing industry believe is the mission of Fannie Mae, Freddie Mac and the Federal Home Loan Banks? Should there be changes in their charter? JERRY HOWARD: I find it interesting that the Administration has been so critical of Fannie Mae, Freddie Mac and the Federal Home Loan Banks recently. The fact of the matter is that Fannie Mae, Freddie Mac and the Federal Home Loan Banks play an integral role in implementing the Administration’s federal housing policy. These entities have evolved into extremely critical components of the nation’s housing delivery system. Their mission is to provide liquidity and stability to the housing credit markets, particularly in areas that otherwise would not be adequately served. By their Congressional charters, these government-sponsored enterprises (GSEs) receive several privileges and legal exemptions to assist them in achieving their housing mission. With the help of these GSEs, more than two-thirds of the nation’s households are home owners. In addition, these GSEs play an important role in the financing of affordable rental properties. Much of this is due to the public/private partnership established by Congress more than a half-century ago. Efforts to diminish their GSE status or misguided attempts to overhaul their regulatory oversight could impair the ability of these enterprises to perform their critical role in the housing finance system. Changing the GSEs’ agency status or removing the housing perspective from their regulatory oversight could have negative ramifications on the housing finance system. Some of these negative impacts could include higher mortgage rates, increased volatility in the cost and availability of mortgage credit (especially for affordable housing), lower homeownership rates, fewer affordable rental units and reduced mortgage product and technological innovations. MR. CROWE: It has been widely acknowledged that housing has played a particularly important role over the past couple of years in keeping the economy stronger than it would otherwise have been. How has government policy contributed to this effort? And what role do you think the housing GSEs have played? MR. HOWARD: Housing has been huge, and NAHB is pleased there is such wide recognition that the housing market has been the key engine of growth in recent years. The housing sector continued to excel in 2003, with new home sales achieving a record performance of more than a million closings. Single-family home construction totaled nearly 1.5 million units in 2003 and multifamily activity, while more subdued, still posted a respectable showing, pushing total housing starts above 1.8 million units. While low interest rates and favorable demographics spurred demand, these results would not have been possible without the support of the finance system for housing. The effectiveness and resilience of this system is the result of a steadfast commitment of federal policy makers to improving the nation’s housing conditions and opportunities. The bedrock of the housing finance system is a liquid and vibrant secondary market that is the product of the activities of Fannie Mae and Freddie Mac. These enterprises have not only contributed to the affordability of housing credit, but also have taken the lead in expanding the menu of affordable housing programs and products. The Federal Home Loan Banks also continue to play an important role both by providing liquidity to housing lenders and by developing innovative programs to address housing needs. MR. CROWE: What is the housing industry’s view of the wide range of federal policies that support a strong housing delivery system — everything from the mortgage interest tax deduction, to the Low Income Housing Tax Credit, to housing’s share of the federal budget and the government’s support of the housing GSEs? Are there ways in which the federal government could improve its support? MR. HOWARD: The United States’ housing delivery system exemplifies a healthy balance of private and public resources that provides greater housing opportunities for all. The federal government’s support of the housing finance system, in partnership with financial institutions, and via the provisions of mortgage insurance and guarantees, is crucial to a stable and growing secondary market. As I mentioned, government-sponsored enterprises provide critical links between the national and global financial markets and the housing finance system, further enhancing stability and growth. And direct federal expenditures serve to reduce the cost of decent and safe housing to affordable levels. Finally, the U.S. tax system has been used for decades as an effective and efficient policy tool that expands housing opportunities without elaborate and expensive bureaucracies. Tax incentives distill public policy goals into economic terms, and tax payers react in the marketplace as they would to any other economic signal. While we are the best-housed nation, there’s always room for improvement. For example many well-intentioned federal regulations, primarily aimed at environmental concerns, have unintended adverse impacts on housing affordability. We believe that environmental protection can be equally effective if the economic impact of these laws and regulations is evaluated against the environmental benefit. This is not currently required, but should be. Also, housing policy should undergo review and refinement as housing and community development needs shift and evolve. The housing “rocket scientists” have come up with an idea for a new tax credit to spur minority homeownership and economic revitalization of downtrodden communities, and legislation to establish such a program is now before Congress. We need to continue to add new housing policy tools, as well as fine tune the proven mechanisms. MR. CROWE: To what extent are you concerned about the current condition or operation of Fannie and Freddie? MR. HOWARD: We are not aware that anyone, even Fannie’s and Freddie’s harshest critics, is claiming that a crisis is looming. These companies are in solid condition, as OFHEO continues to certify. The accounting problems at Freddie Mac certainly are real, but it’s a case of being more profitable than previously stated. Both companies continue to meet very tough capital tests with flying colors and we see no evidence of erosion in their financial health. We wish other companies were in as good a shape. MR. CROWE: The housing industry has been adamant in its opposition to taking control of the GSE programs away from HUD and putting it in the hands of the Treasury. Why is it so important for this authority to remain at HUD? MR. HOWARD: It’s quite simple — HUD is the only cabinet agency with a thorough understanding of, and extensive involvement in, housing-related issues. I have a high regard for the Treasury’s ability to oversee the safety and soundness of Fannie Mae and Freddie Mac’s operations. But those who care about housing are extremely skeptical of Treasury’s intentions in volunteering to be a “world-class” housing-GSE regulator because, time and again, they have expressed an anti-housing bias in their policy statements and actions. This is a historic bias that goes back for decades and has been apparent in both Democratic and Republican Administrations. That just doesn’t seem like the kind of regulator you want to have in charge of deciding the types of things Freddie, Fannie and the FHLBanks can and cannot do. NAHB strongly believes that Fannie Mae’s and Freddie Mac’s ability to spur innovative solutions and to develop new products that increase homeownership will continue only if the mission of these corporations is regulated by an agency that understands and is immersed in housing-related issues. HUD has proven itself to possess the capacity to adequately evaluate the potential benefits to housing from the GSEs’ innovation and advancement in products and to ensure that the GSEs do not stray from their statutory mission. To make a good thing better, HUD’s program oversight could be strengthened through the establishment of an independently funded office within HUD. Having an office within HUD dedicated to mission oversight of Fannie and Freddie would be preferable to the current situation where GSE oversight is conducted through the Office of Housing with few dedicated staff and staff from other HUD offices are detailed on an ad hoc basis for GSE oversight duties. Of course, there would be staffing, administrative and operational costs to achieve this increased regulatory scrutiny. One way to minimize the costs to taxpayers is to handle it by assessing Fannie Mae and Freddie Mac to fund the new HUD office. The new program approval process is another area where it seems like people are trying to substitute regulatory bureaucracy for common sense. The current process rightfully limits prior approval to new programs, which are defined as very broad undertakings unlike what is currently being done. Others are proposing to significantly broaden what would have to be approved to include any new business activities. Submitting each new activity to the approval process envisioned by the Administration would result in such micromanagement of the GSEs’ innovations that they would be unable to respond to changing market conditions in a timely fashion. The result would be to stifle or severely inhibit development and implementation of valuable new mortgage products and technological innovations that have helped to dramatically expand homeownership in the country. MR. CROWE: There has been speculation in the media and in Congress about what an independent regulator would look like and that it could possibly be a board. Is there possibly room there to compromise? Given that there are some strong differences between the Administration and the housing industry and within Congress about the role of a new independent GSE regulator, particularly over the issue of program oversight, do you perceive any common ground between these two views that might suggest the possibility of a compromise? MR. HOWARD: The discussions about who should regulate the housing GSEs have been like performing exploratory surgery on the central nervous system of the housing industry and the economy in general. No one wants to jeopardize the housing finance system that is the envy of the world. But, many people feel passionate about their views. And rightly so. After all, we’re not talking about widgets, we’re talking about peoples’ homes. Here is NAHB’s perspective plain and simple: the regulatory framework for the GSEs should be credible and effective to ensure these organizations fulfill their mission in a safe and sound manner. If every policy maker focuses on this goal, I’m certain the outcome will be a world-class regulator. Things get bogged down when people focus on protecting their turf. I’m pleased that the Administration, lawmakers and key policy makers have resumed discussions. As I mentioned before, NAHB strongly believes that HUD is the appropriate agency to regulate the mission of Fannie Mae and Freddie Mac, including approving new programs and establishing affordable housing goals. However, we’d be willing to explore the feasibility of establishing an independent GSE regulator outside of Treasury so long as that entity has a thorough understanding of and extensive involvement in housing-related issues. The regulator could be structured with a governing board of directors that includes HUD officials and representatives from the housing sector on the board to ensure the GSE regulator possesses sufficient housing-related expertise. MR. CROWE: Treasury Assistant Secretary Wayne Abernathy has suggested that there might be a role for the housing industry in the discussion over how the new regulator is set up? What do you believe the industry’s role should be and what points do you believe need to be emphasized if that dialogue should arise? MR. HOWARD: I wouldn’t say there “might” be a role. I’d say there must be a role. It would be a huge mistake to turn discussion on GSE regulation into a free-for-all referendum of our highly successful housing finance system. Decisions that have not been vetted by those who will have to live with them could have catastrophic consequences for housing. NAHB urges a careful and thoughtful approach on GSE regulation and believes such a course will produce tremendous rewards to those with most at stake in the process — America’s home owners and renters. NAHB’s involvement in the discussion over how the new regulator is set up would add the wisdom, knowledge and experience of over 215,000 direct participants in the production of housing and related activities. In fact, here is what NAHB members believe should be the guiding principles of the GSE regulatory reform debate: The first principle is that the GSE status of these institutions must be maintained. Efforts to privatize, withdraw any of the federal privileges and legal exemptions or otherwise diminish the ability of the GSEs to provide housing financing at the lowest possible cost should be opposed. Our second guiding principle is that the GSEs should fulfill their public mission by conducting activities authorized by their charters in a safe and sound manner and by promoting access to mortgage credit to address the needs of affordable housing throughout the nation. Third on our list of principles for reform efforts is that the regulatory framework of the GSEs should be strong and credible, possess adequate authority and resources and reflect the differences inherent in the charters and operating structures of the GSEs. Further, the regulatory framework should foster competition among the GSEs to develop and implement innovative, low-cost funding and other programs to meet the nation’s housing credit needs. Fourth, the mission oversight of Fannie Mae and Freddie Mac (including approval of new programs and enforcement of affordable housing goals) should be conducted by the Department of Housing and Urban Development or another entity with a thorough understanding of, and extensive involvement in, housing-related issues. Fifth, we believe that the safety and soundness oversight of Fannie Mae and Freddie Mac should be conducted by an independent regulatory agency through rigorous examinations, enforcement of regulations (including capital standards) and transparency, without unnecessarily impairing the ability of these GSEs to accomplish their mission. The sixth of our guiding principles is that the recently implemented risk-based capital standards for Fannie Mae and Freddie Mac should be allowed to remain in place for a period of time sufficient to evaluate the effectiveness of the new standards. And seventh, the regulation of the mission and safety and soundness of the Federal Home Loan Bank System should reflect the uniqueness of the system’s mission, cooperative operating structure, charter type and other characteristics. This is best accomplished by having a regulator dedicated solely to FHLBank System oversight or by having a separate FHLBank System oversight division if a single agency regulates all of the housing GSEs. To read an accompanying interview with Assistant Treasury Secretary Wayne Abernathy, click here. Woodyard Golf Tournament Provides Support for Political ActionThe culminating event in NAHB’s year-long golf program in support of BUILD-PAC, the 13th annual NAHB Golf Tournament of Champions, in memory of Jim Woodyard and sponsored by Fannie Mae, was held on Jan. 20 at the Angel Park Golf Course in Las Vegas in conjunction with the International Builders’ Show. Woodyard, who was an active and influential member of NAHB and a long-time supporter of BUILD-PAC, died on Nov. 19, when the single-engine aircraft he was piloting crashed in the Idaho back country. In this pivotal presidential election year where control of both chambers of Congress is hanging in the balance, the golfing program helped to raise thousands of dollars for BUILD-PAC, NAHB’s political action committee, whose mission is to elect pro-housing candidates to Congress. The tournament drew more than 280 builders and associates. Last year, more than 3,700 golfers participated in state and local tournament program to support the housing industry’s political action efforts. “With this level of participation, we were able to raise over $450,000 for pro-housing federal candidates, allowing NAHB to continue to have a powerful and influential voice on Capitol Hill,” said Bob Nielsen, 2003 BUILD-PAC chairman. “I would also like to recognize and personally thank Fannie Mae, our sponsor of this year’s tournament,” said Nielsen. “They helped to make the 2003 National Golf Tour such an exceptional program, and without their great support we would not have been able to host this exciting event.” Free Publication Provides Background on Trends in Homes and ApartmentsThe latest edition of NAHB’s media backgrounder, “Housing Facts, Figures and Trends 2004,” provides a compendium of historical information on home and apartment building in the U.S. The 50-page publication details annual home prices, mortgage interest rates and characteristics of new homes and apartments over the last 13 years. It also lists the top 50 metro markets for housing permits, popular materials used in new homes and apartments, and home buyer preferences. Also featured in the new publication is a listing of the nation’s most affordable housing markets, information on how housing affects the economy and an examination of housing affordability issues. Homeownership rates and historical U.S. demographic data are also provided. Following are just a few of the highlights from “Housing Facts, Figures & Trends 2004”:
To download the publication, click here. Good Self-Defense Strategies Will Help Protect Your Business From FraudThe third in a series about preventing fraud from affecting your business. Several years ago I took a basic self-defense class. I learned effective combat skills, but the most valuable lessons I learned concerned:
Controls are key to self-defense. Several universal concepts come into play whether you’re defending your life, your honor or your assets (on behalf of yourself, your family, employees, vendors or customers). Use the following self-defense strategies to protect your business from fraud.
Develop an Awareness of Danger
This is your first line of defense. You must raise your level of awareness to continually recognize that fraud exists and can happen to you. When you sense danger, trust and act on your “gut response.” For example, if you see an employee furtively slide one sheet of paper beneath another when you walk into the room, or he can’t give you logical answers when you ask specific questions, or she acts defensive when you look in her desk for information you need, don’t ignore your sense of unease. Investigate.
Control Your Environment
You’d plan ahead so you wouldn’t have to walk alone through a dangerous part of town at 2 a.m. Likewise, think ahead about possible fraud scenarios so you can avoid or detect them. For each asset at risk:
Many other assets are at just as much risk as those blank checks. You should apply the six steps outlined above to all your vulnerable assets. Don’t Look Like a Victim Here are some examples of business weaknesses that contribute to fraud or allow it to occur quietly and undetected over time:
If any of these conditions exist in your business, you’re at high risk for fraud. Don’t make the situation worse by advertising these financial weaknesses inside or outside your company. You may need immediate, qualified professional assistance to put effective financial controls in place. Then you can begin to work from a position of true (vs. perceived) strength and internal control. Act Quickly, Find Help, Fight Smart It’s one thing to know you’re vulnerable and another to suspect you’re in actual, immediate danger of losing assets. If you have any evidence of even a minor problem, don’t wait to take action. Many frauds seem insignificant when discovered, but few are actually as small or innocuous as they first appear. Here are pointers for developing an action plan:
Do not try to resolve the problem yourself. You don’t have the expertise to handle it and may make the situation worse or do something that doesn’t produce good long-term results. Instead, ask your professional advisors how to proceed. Unfortunately, you never really “win” when you encounter fraud or any self-defense situation. The best you can do is to cut your losses as quickly as possible and avoid more bloodletting. That’s why front-end prevention is so critical. Diane C.O. Gilson, CPA, CIA, is a Certified QuickBooks ProAdvisor and MasterBuilder ProAdvisor, author, trainer and construction accounting coach, as well as a frequent speaker at The International Builders’ Show and The Remodelers’ Show. Her firm, Info Plus Accounting PC/CPA, offers bookkeeping and support services to help construction companies do more accurate and timely job costing and run better management reports. Contact Gilson via e-mail, or call her at 734-544-7620. Earlier Articles in this Series
'Accounting with QuickBooks Pro®' Available at BuilderBooks.com "Accounting with QuickBooks Pro® for Home Builders and Remodelers," including a CD-ROM with a trial version of QuickBooks Pro®, is available through BuilderBooks.com. From writing payroll checks to generating up-to-date income statements, this book will help you get the maximum benefit from your accounting system. To view or purchase it online, click here or call 800-223-2665 to order. Business management publications available at BuilderBooks.com BuilderBooks.com also offers a variety of other publications about business management. To view or purchase these publications online, click here. Want more information about effectively managing your business? NAHB’s Business Management Department offers a variety of online resources to help you run your business better and more profitably. Click Business Management Tools for articles about human resources, financial management, sales, production, technology, customer service and other business-related topics. In addition, visit the NAHB Software Users Network Discussion Forum (SUN) to ask technology consultants and other builders what they think of various software packages and applications. Subscribe to NAHB’s Business of Building e/Source NAHB’s Business of Building e/Source is your monthly electronic guide to the hot issues and emerging trends in home building business management. You’ll find practical advice, tricks of the trade and sound business guidance — all delivered monthly, straight to your desktop, in a quick and easy-to-read format. Business of Building e/Source is available free to NAHB members and their employees. To subscribe, click here on the members only side of www.nahb.org. University of Housing Offers Courses on Customer Service and Business Management The NAHB University of Housing offers a course on business management designed to help builders improve their business and profitability. For a list of current offerings, click here. Search keywords: “Introduction to Business Management.” The NAHB University of Housing offers designation programs for builders and remodelers interested in improving their productivity and profitability. Click here for a list of NAHB designation programs. Make Your Connection With www.nahb.org Make your connection to the latest housing industry news and information with www.nahb.org — the official public and members-only Web site of NAHB. Log in today to register for educational seminars, meetings and networking events; find important economic and housing data; and learn the latest developments in NAHB’s efforts to promote housing. It’s all available to you 24 hours a day at www.nahb.org. Just click the "Member Log In" button to get started. If you are a member and need information about NAHB products and services, use the NAHB Staff Contact Directory to look up the direct telephone extensions for NAHB staff experts. New Book Examines Changing Role of Property ManagersMultifamily management used to be “collecting the rent, supervising maintenance and repairs — and sometimes even mopping the floors,” according to David Kuperberg and N. Mike Patellis, authors of “Residential Property Management,” a new book from BuilderBooks.com. These days, though, say the authors, “each residential property is like a branch office, an independent business center with...goals to meet.” That sort of enterprise needs a professional manager, one who’s trained to prepare a budget and understand legal requirements and responsibilities. And beyond that, “the manager needs communication skills, marketing expertise and more,” says Kuperberg, himself a RAM (Registered in Apartment Management) and a CPM (Certified Property Manager). The new publication on property management will be the textbook for the revised and updated RAM course that is being piloted this year, according to Patellis, also a RAM and CPM. With the information the two have pulled together, students will be able to understand the important issues and develop strategies to deal with them in a professional manner. But the book also was designed to serve as a reference for people involved in property management at every level, from the site itself to the corporate office. “There really aren’t any comprehensive property management guides out there that focus only on residential management,” says Patellis. “This is a reference you can consult whenever a question arises. It’s indexed, it has a glossary and it’s as complete as we could make it.” The new book includes information on updated approaches to record-keeping and reporting used by firms who must be accountable not merely to syndicates or shareholders, but to large corporate investors. It includes information on managing condominium communities and co-ops, as well as now-privatized military base housing. It talks about higher-tech methods of communication, and when to use them. The authors note that in the RAM textbook they helped write in 1987, they talked about “this new thing — computers — that might transform the workplace.” In this edition, computer use by professional manager is a given. “If you’re not using computers, you’re not in this business.” The book also addresses the top problem areas — the issues that, if handled badly, can land a company in court or worse. Those include:
Patellis and Kuperberg appeared at the International Builders' Show in Las Vegas last month to answer questions and to sign their new book. To order a copy, click here.
2004 NAHB Multifamily Pillars of the Industry Conference & Awards Gala Don’t miss the Multifamily Pillars of the Industry Conference and Awards Gala, the premier educational and networking event of the year for the multifamily industry, in Palm Springs, CA, March 28-30. Explore both the current and future state of the multifamily industry. Click here for more information. 2004 Multifamily Finalists for Pillars Awards AnnouncedFinalists for the 2004 Pillars of the Industry Awards — which honor excellence in development, design, marketing and management in the multifamily housing industry — were announced recently by NAHB. The awards program was created in 1990 to honor superior achievement and leadership in the multifamily industry and to promote the benefits of apartment living. “These are not your father’s apartments and condominiums,” said Jerry Howard, executive vice president and CEO of NAHB. “This year’s Pillars program proves once again that today’s multifamily communities are better than ever and offer a wide variety of great lifestyle choices to residents.” Finalists were named in 29 categories, including Freddie Mac’s Multifamily Development Firm of the Year and Property Management Company of the Year. Howard noted a huge jump this year in the number of entries in the “Best Mixed Use Community” category, reflecting the growing popularity of rental and condo homes interwoven into communities with retail as well as other commercial space. “These apartments and condos have helped revitalize urban neighborhoods across the country,” Howard said. Winners will be announced at a gala ceremony held in conjunction with NAHB Multifamily’s Pillars of the Industry Conference, March 29, at the La Quinta Resort & Spa in Palm Springs, CA. For the first time, NAHB will present a Pillars Award for “Multifamily Community of the Year,” selected from among the winners in all the builder award categories. Freddie Mac, one of the nation’s largest investors in multifamily housing, will sponsor the 2004 Pillars of the Industry Gala. Freddie Mac is committed to developing new products and processes to keep down the cost of rental housing while providing superior service and innovation. For a list of finalists, click here. Deadline Nears for Building With Trees’ Awards of Excellence CompetitionConservation-minded builders and developers are invited to enter the 2004 Building With Trees Awards of Excellence competition, sponsored by The National Arbor Day Foundation in cooperation with NAHB and Firewise Communities. The deadline for entries is Feb. 15. The Awards of Excellence competition is part of the Building With Trees Recognition program, which was created in 1998 to recognize builders and developers who save trees during construction and land development. Residential, commercial, retail, industrial, public and mixed-use projects of all sizes are eligible. Only completed developments can be entered, with projects of 200 units or more considered complete if at least 75% of the homes have been built. Judging criteria include creativity in, and attention to, protecting and planting trees during planning, design and construction and in providing for long-term tree care; commitment to tree protection by having a tree professional on the development team; inventorying existing trees and using that information to preserve trees; and communication of, and adherence to, tree protection goals throughout construction. Awards will be presented at the Arbor Day Foundation’s national Building With Trees Conference in September. Award-winning projects will also be recognized on the foundation's Web site and in national publications. For entry information, click here or contact the Foundation's Building With Trees program director at 402-474-5655.
2004 National Green Building Conference The National Green Building Conference, March 14-16 in Austin, TX, explores cutting-edge building technologies and looks at the future of green building in America. The conference includes education and networking opportunities and explores why a growing number of home builders are “going green” by making cost-effective business decisions that also help the environment. Click here for more information. Action Kit Promotes Adoption of the International Residential CodeWith the International Residential Code (IRC) now ready for adoption at the state and local level, NAHB has developed an IRC Action Kit to help HBA leaders across the country educate building department officials on the benefits and practicality of adopting this code. Developed with input from NAHB members, the IRC specifically highlights affordability in its purpose statement. The code pertains to the construction of one- and two-family dwellings and townhomes that are no more than three stories. As a stand-alone code, it covers all facets of home construction, which means that builders don’t need to be concerned with meeting multiple code requirements. During an educational seminar at last month’s International Builders’ Show in Las Vegas, Joseph Knarich, an NAHB construction, codes and standards specialist, said that the kit lays out how the IRC compares favorably with other model building codes. “Over 60% of the Council of American Building Officials (CABO) One and Two Family Dwelling Code is incorporated unchanged in the IRC,” he said. “This makes the IRC very builder friendly. Furthermore, NAHB worked diligently to ensure that the concept of affordability is included in the IRC and helped to craft many favorable code changes for builders.” To persuade local jurisdictions to adapt the IRC, Knarich urged HBAs to follow the kit’s guidelines, which provide tips on developing lobbying and grassroots strategies, establishing community support, orchestrating public hearings, communicating the findings to the public and cooperating with local decision-makers. Paul Armstrong, the vice president of architectural engineering services for the International Codes Council, reiterated the advantages of the IRC. “This is the only prescriptive code that is now available, it contains the latest natural hazard mitigation construction techniques, covers all aspects of home construction and is a well-balanced code that was developed with the help of engineers, builders, code officials and other interested parties,” Armstrong said. Local HBAs interested in obtaining NAHB’s IRC Action Kit should e-mail Joseph Knarich or call him at 800-368-5242 x 8366. Builders Report Progress on Zero Energy HomesNew technological advances are enabling more builders across the country to design and construct Zero Energy Homes (ZEH), which use efficient design and renewable energy to produce as much energy as they consume annually. During an educational seminar at last month’s International Builders’ Show in Las Vegas, four builders shared their experiences working on these cutting-edge homes. Centex Homes recently completed its first ZEH home in Livermore, CA. According to project manager Jeff Jacobs, making such a venture a success requires support from management, manufacturers, suppliers and subcontractors. “Our home used solar water heating and photovoltaic cells and was developed using standard construction techniques,” said Jacobs. “Our process consisted of selecting the right home, one with the necessary attic and roof space for solar panels. We added two large gable vents to bring in nighttime air in the evening. The system, developed in conjunction with our subcontractors and field managers, nearly eliminated the need for compressor cooling in the summer.” The single-story prototype home is wired so that all systems can be monitored and includes more than 50 sensors to provide data for a cost-benefit analysis. The photovoltaic system produced 102% of the home's electrical needs. However, Jacobs acknowledged that not all of the home's technological innovations were cost-effective, and he called for continued government funding to encourage new breakthroughs. Combining renewable energy and solar energy with highly energy-efficient products, Robb Aldrich, an engineer with Steven Winter Associates in Norwalk, CT, designed a modular ZEH home in New York City. “Site and orientation have a definite impact on energy production,” he said, noting that a typical home that is oriented from north to south consumes far less energy for heating and cooling indoor air than the same home turned at a 90-degree angle. Aldrich said that solar panels on an affordable home geared to buyers earning 80% of the area median income cut the average monthly electricity cost from $66 to $26. In Las Vegas, Pardee Homes recently constructed a 5,300-square-foot ZEH home, equipping it with a solar water heating system, photovoltaic systems, fluorescent halogen lighting, insulation in the ducts, a highly efficient air-conditioning system, Pella windows and insulation close to R-40 (as opposed to R-21 normally used). “This home’s owners are extremely proud of their ZEH status,” said Rob Hammon, principal of ConSol, an energy consulting firm based in Stockton, CA. In order to further advance the technology, Hammon added that new research is needed to integrate solar energy into homes and to bring costs down. In Tucson, John Wesley Miller Companies' ZEH home — which is part of a 100-home infill development — utilizes solar photovoltaic and water heating technology. “The heating and cooling bill for our typical 2,000-square-foot home is less than 90 cents per day,” said Miller. On hot days, the home owners really get a kick out of watching their electric meter run backwards.” In order for ZEH to take hold in the marketplace, the panelists said:
PATH Unveils Home Building’s Top 10 Advanced TechnologiesThe top 10 new technologies that are ready to be used in the housing industry were announced by the Partnership for Advancing Technology in Housing (PATH) at the NextGen ’04 house that was built in conjunction with last month’s International Builders’ Show in Las Vegas. On the edge of industry acceptance, the technologies are proven, practical, easy-to-use and quickly drawing interest as builders experience the benefits of using them, PATH said. “The top 10 technologies hold the most promise for improving the quality and affordability of our homes,” said General Deputy Assistant Secretary Darlene F. Williams of HUD’s Office of Policy Development and Research. “These technologies are ready now and they can perform in the houses that we build tomorrow.” The “Top 10 Technologies” named by PATH are:
Technologies profiled by PATH are selected for their strength in one or more of the following areas: quality and durability; energy efficiency; environmental performance; safety and disaster mitigation; and affordability. For more information on each of the top 10 technologies, click here. Kitchens Now the Focal Point of Household ActivityKitchens have come out of the closet and are now the hub of family activity. That was the consensus of the four architects and designers who hosted an educational session, "Kitchen Design: Trends & Tools for Today’s Kitchens," at last month’s International Builders’ Show in Las Vegas. Not only have kitchens increased as their household role has expanded, they are now designed to be more flexible in order to accommodate the different heights, ages and numbers of cooks in the kitchen at the same time. They are also more open, inviting and convenient, more centrally located and more diversely decorated. More Room for Socializing “The kitchen has become the Grand Central Station of family life,” said John DiNisio, the creative director at Feinberg & Associates Architects of Gibbsboro, NJ. “They must be placed where the cook can be included in the family’s activities and be able to keep tabs on what’s going on both inside and out of the home.” No longer your grandmother’s kitchen, which usually was isolated from the rest of the house, and where meals were prepared from scratch and the only bow to style was a pair of cheery curtains and some pretty canisters, DiNisio said kitchens today are usually open to the family room, have a wide view of the outdoors and are filled with lots of natural light. “Kitchens today are much larger,” he said. “Food preparation has become a social activity that involves several members of the family.” He also said that many people who like to entertain at home insist on having a “party kitchen,” one large enough to prepare meals, serve guests and be conducive to mingling. Consumers are demanding more architectural interest, DiNisio said, and this is being satisfied by a trend toward higher ceilings; decorative beams and moldings; large, unusual-shaped windows; and ornate cabinetry. The higher ceilings, he said, allow for taller cabinetry, make the rooms look taller and add storage space. Even smaller kitchens are incorporating many of the same characteristics as their larger counterparts, DiNisio noted. He suggested that smaller kitchens be located on an outside wall so they can take advantage of natural light. Locating smaller kitchens there also gives architects and home builders an opportunity to include cathedral ceilings and outside windows to make a narrow space more open, he added. Clever Conveniences and Attitude Inside today’s kitchen you can now find multiple sinks, multiple ovens, oversized or tabletop dishwashers, combination microwave/toaster ovens and |