Nation's Building News Online: May 2, 2005Print All Articles Text Version |
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Materials Problems Persist in Robust Housing Market"While wood prices are easing, there is still upward pressure on a number of other materials," said NAHB economist Michael Carliner. Persistently strong demand for new housing has exacerbated the problem, analysts say, but products such as metals and cement have come under the influence of international factors in the global marketplace. U.S government policy has been working to the detriment of Canadian lumber and Mexican cement supplies, and environmental regulations have limited the construction of new cement plants and other production facilities. For the year that ended in February, materials used in construction increased by 9.9%, according to the Bureau of Labor Statistics’ Producer Price Index. The PPI showed a 37.7% annual increase in the price of steel. Concrete product prices were up 9.4%; lumber, 10.8%; and asphalt, 6.3%. While still high, wholesale lumber prices averaging $402 per 1,000 board feet in late April were an improvement over the $450 charged a year earlier. (Prices moved down further at the very end of the month, according to Random Lengths.) They were $289 in April of 2003. Lumber prices were at their most recent peak of $470 last August. Each $1 increase per 1,000 board feet adds about $20 to the cost of a new home. Restrictions on timber sales from public lands are keeping supplies tight. Planned emergency sales of insect-infected timber in British Columbia may put some downward pressure on prices. The futures market indicates an expectation for lumber prices to ease a bit in the coming months. OSB and Plywood Prices for oriented strand board (OSB) and plywood are below their peaks of last April, but they remain high. Both are selling for roughly $12 per sheet wholesale, compared to about $6 for OSB and $8 for plywood in the spring of 2003 and more than $16 at their peak. With some 300 sheets needed for a typical new home, the increase over early 2003 is adding nearly $2,000 to construction costs. In a marketplace anomaly, OSB and plywood prices have been virtually identical since late last year. Plywood, which had sold at a premium over OSB, has been losing market share in residential construction. While OSB is used primarily in home building, housing accounts for only about half of plywood demand; so robust housing production has had a greater impact on OSB. An increase in offshore imports of plywood, mainly from South America, from about 800 million square feet in 2003 to 1.5 billion last year, has also been a factor. Production of OSB and plywood is expected to continue bumping up against capacity for the foreseeable future. A new OSB plant that opened last year is already operating at its full annual capacity of 600 million square feet. Improvements to existing plants have probably added another 500 million square feet, but North American OSB production has remained at more than 95% of its 26 billion square-foot capacity. New plants scheduled to open later this year in Florida and British Columbia are projected to add another 1.3 billion square feet. Even so, as long as housing production continues at its current pace, analysts expect to see very little slack in the market. Pressure on Materials Prices For at least the short term, the outlook for other essential building materials is not entirely encouraging. Global demand — especially from China — pushed up prices of scrap metal beginning late in 2003, and that triggered unprecedented increases in prices for finished steel products, as well as copper and aluminum. Scrap prices have recently eased back somewhat, but product prices remain high, and they are not expected to recede by much, if at all. As with OSB, high demand has pushed production of wallboard and insulation close to capacity. Price hikes for wallboard have been close to 20% over the past year, and there is little evidence that this will be reversed soon. Previous price spikes have often been followed by price declines, but the next significant downturn is not expected to occur until at least 2006. Insulation price increases have not been as sharp as those for gypsum products, but cost pressures are not abating, and builders could see some further upward drift. Energy costs are a bigger factor for wallboard and insulation than for most other building products. Brick and Cement Shortages Yet to be entirely resolved is the disruption of U.S. cement imports that resulted from rising global demand for the product and a shortage of ships in which to transport it. Overall, about 23% of U.S. cement consumption was filled by imports in 2004, up from 20% in 2003. The average mill value of cement production was $85 per ton in 2004, up from $75 in 2003, according to the U.S. Geological Survey. The cement problem has been most severe in parts of the country that rely the most on imports, particularly Florida. But shortages have also been encountered in other areas, including Arizona and parts of California. The Portland Cement Association has found cement producers in more than half the states reporting cement on allocation, but builder accounts of shortages have, so far, been less widespread. Although not yet on the scale of recent cement and steel shortages, an inadequate supply of clay bricks is being reported by builders in parts of the Southeast and Midwest. Brick production is energy-intensive, and rising fuel costs have been contributing to price pressure. An NAHB survey of builders found a big jump in the number reporting cement shortages from May 2004 to July 2004. Since then, however, those shortages appear to have leveled off. Will You Be the Next Winner of a Digital Camera?Sign up three or more of your employees for Nation's Building News and you automatically will be entered in a contest to win a Sony digital camera. There have been two winners already and you could be next. To subscribe your employees to Nation’s Building News and be entered into the "Make Your Business Click" contest, visit our contest subscription page by clicking here. Subscribe your employees and they will begin receiving valuable industry and business news at their desktops beginning with the very next issue. Nation's Building News is NAHB's free, online newspaper. Inside, you'll find the latest lumber prices, industry news, builders' tips, lumber prices, problem-solving floor plans and more. For more information or to sign up your employees, click here.
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 24 hours a day at www.nahb.org. Just click the "Log In" button to get started. Once you log in, personalize the site to reflect your interests. Simply go to the My NAHB>My Profile page and click the “Edit Content Preferences” link. To learn more about how you can customize My NAHB — including how to customize the links that appear on the Home page ― visit the How to Use www.nahb.org section. North Dakota Twenty-Fifth State to Enact NOR LawThe new law requires home owners to give the builder written notice of an alleged defect. The builder then has 30 days to inspect and, if appropriate, remedy the defect within a reasonable time. “We're very pleased to pass NOR legislation in North Dakota's legislature this session,” said Joe Stenvold, president of the North Dakota Association of Builders. “Giving contractors notification and having the opportunity to inspect and repair is an important first step, and we hope it will lessen the number of cases taken to the courts.” "I believe this bill is an important step forward in stemming the tide of litigiousness in our society," said Rep. Kim Koppelman (R, West Fargo), the chief sponsor of the legislation. "Although North Dakota is not a state known for overzealous litigation, contractors here can pay the price for excessive litigation elsewhere, through the incredible increases they've seen in liability insurance rates. That, of course, means consumers must pay more for what those contractors build. This legislation encourages consumers and builders to resolve their differences, without going to court, and reminds insurers that North Dakota is a good place to do business and that our builders are excellent insurance risks. We all hope this legislation will minimize litigation, encourage resolution of disputes and result in lower insurance premiums and that these savings can be passed on to consumers."
North Dakota joins 21 states — Alaska, Arizona, California, Colorado, Florida, Georgia, Hawaii, Idaho, Indiana, Kansas, Kentucky, Mississippi, Montana, Nevada, Ohio, Oregon, South Carolina, Texas, Tennessee, Washington and West Virginia — that have passed NOR laws in the last three years. Three other states — Michigan, Louisiana and Virginia — have had NOR laws on the books for several years. “It’s worth noting that half the states now have enacted notice and opportunity to repair laws,” said NAHB President Dave Wilson. “This is not a coincidence. Across the country, state legislators and governors are recognizing that contentious litigation is not the best way to resolve construction defect disputes.” “Notice and opportunity to repair laws provide a common-sense approach to dealing with construction defect problems,” Wilson added. “It’s an approach that has received widespread support across the country.” For information on notice and opportunity to repair laws, NAHB members can click here. For more information, e-mail Sam Leyvas at NAHB, or call him at 800-368-5242 x8326.
Owners Hold Off on Sales of Homes
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Las Vegas Condo Conversion Rate Among Highest in U.S.
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Rate of Minority Homeownership Hits New High
The Strength of Straw
The Axis of Eco Out of the Box Mobile Homes
Deal May Help Marina Heights
Functional, Solid Neighborhoods a Growth Issue
Famous Names Design New Luxury Condos
March New Home Sales Smash Record“This surprisingly good number shows there’s still plenty of demand in today’s new-home marketplace,” said NAHB President Dave Wilson. “It may be that higher mortgage rates pushed more fence-sitters to go for it last month, which often happens when further rate gains are expected.” “The strength of this market continues to surprise most experts, and March’s big acceleration in new-home sales was both unexpected and unaccounted for by our own builder surveys and other market signals,” acknowledged NAHB Chief Economist David Seiders. “Given the pace of sales to date and the slimmer inventories of unsold homes, clearly the production side of this business remains exceptionally healthy. We are, however, keeping a close eye on investor activity in some extremely hot markets.” The number of new homes for sale fell about 1% in March, to a relatively thin 3.6 months’ supply at the current sales pace. Sales in March climbed 22% in the Midwest, 13.8% in the South and 10% in the West. They declined by 9% in the Northeast. The Commerce Department last week also reported substantial upward revisions to its nationwide new-home sales figures for December, January and February. “Looking to the future, it will be difficult to sustain as quick a sales pace as we’ve seen in March,” Seiders noted. “However, given the fact that long-term mortgage rates have actually fallen since then and that inventories are in such good shape, it’s likely that new-home sales for all of 2005 will challenge last year’s record 1.2 million units.”
Register Today for the Spring Construction Forecast Conference See what's on the horizon for the housing industry at NAHB's Spring Construction Forecast Conference on Thursday, May 5, in Washington, D.C. Get the latest forecasts on housing starts, projected budgets and other economic bellwethers and developments in the housing industry from some of the country's premier economists and finance experts. To register or for more information, click here. There will also be a Webcast of the conference for those unable to attend in person. For more information or to register for the conference Webcast, click here.
“HousingEconomics Online,” the online publication from the NAHB Economics Group, is your single source for market analysis, forecasts, housing statistics and more. Updated regularly, “HousingEconomics Online” combines scientific research with practical applications in order to provide housing-oriented insights for builders, manufacturers and housing finance professionals and to assist in their business planning. Available at two levels — Pro and Executive — subscribers can choose the one that best meets their needs. To learn more or to subscribe to “HousingEconomics Online,” visit www.housingeconomics.com. Builders’ Tip: Self-Centering Router BaseI recently built and wired a gazebo. I didn’t want conduit intruding on the woodwork so I buried the electrical supply in a post. That meant cutting a groove in the post for the wire — a good job for my router and a 1⁄2-inch straight bit.
It would have been even easier if I’d had a self-centering router base. Because I didn’t have one, I put one together:
The pins’ shoulders rest on the top of the base, where I secured each one with a couple of drops of adhesive. As shown in the drawing, rotating the router so that the pins bear against the sides of the workpiece centers the bit as it plows its groove. — Edward Sprouts, Columbus, Ohio Tips & Techniques provided by Fine Homebuilding.
To request a reprint of this feature, e-mail Mary Lou von der Lancken at Fine Homebuilding.
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Creating Effective Incentive Compensation ProgramsCompensation systems have three components ― base salary, benefits and bonus compensation ― that must be competitive in order to successfully recruit talented employees. Of the three, the bonus or incentive compensation has the most potential for retaining superior producers and rewarding employees for what they actually accomplish. They have potential to be great reward systems and excellent management tools. This article will discuss in detail the process of creating a successful incentive compensation system that rewards employees for what they produce and ties together employee goals and company performance benchmarks. Base Salary and Benefits Should Be Competitive The base salary and the benefits package offered to employees must be, at least, competitive. They must be on the high side of average for the position. The base salary preferably should be a range that allows you to recruit both experienced and raw talent. The prime determinant of what base salary to offer a potential recruit is the salary he or she currently is earning. Candidates must feel that they are making a positive move based upon base salary and benefits when they first learn of the company. Components of an Incentive Compensation System The following procedures and strategies are important components of incentive compensation systems:
Benchmarks Should Be Quantifiable Measures of Performance Benchmarks are quantifiable measures of performance. Examples include time of construction (also known as cycle time), number of sales, customer satisfaction ratios, percentage of profit, etc. As “quantifiable” measures, they can be reduced to an easily understood and measured number or percentage. There are four things that can be measured and used as part of the benchmarking process:
Time can be measured in number of days, hours, etc. Quantity is the number or percentage of something. Cost is the dollars spent or earned during a buying or selling procedure. Quality measurements can be based upon performance benchmarks from the points-of-view of the customer, manager or general public. Suggested Benchmarks for Specific Postions Some positions (like sales and construction management functions, for example) lend themselves to easier and more plentiful performance benchmarks. Other positions, like receptionist and administrative positions, have fewer opportunities to measure quantifiable performance. Some specific performance benchmark examples are listed below. Superintendent measures:
Gathering Performance Measurements Some data is gathered through the normal home building back office and accounting software systems. These data normally include profit and dollar figures measured by small- to moderate-volume builders’ operational systems and side spreadsheets. Other data are measured by surveys, special management reporting systems or inventory counts. These systems are developed internally for the specific performance benchmarks established by the builder. Data from a builder’s reporting systems should be measured consistently. They should be used regularly in management team meetings to stay abreast of performance in the field and sales and back offices. These are the benchmarks on which employees should pattern their daily behavior. These performance benchmarks should be emphasized in the builder’s business plan. They are the measures that tell you when you are winning and when you are losing. The popularity of sporting events generally is well accepted throughout the world. Sporting events generally appeal to the public because we all love to know who is winning. And, when we understand the rules of the game, it’s easy to determine who is winning and who is losing. Games that always result in ties or draws diminish the satisfaction of the fans. Similarly, people are less likely to attend and follow a game if they don’t understand its rules. The same concept describes job satisfaction and your employees’ ability to enjoy teamwork within an organization. If employees understand the ground rules and have easily understood measures of success, they will know when they are winning or losing. They will be more apt to recognize unacceptable behavior and will be self-motivated to do something about it. Finally, they will understand their roles and those of their teammates and will be more willing to sacrifice for the team when they share mutual goals and celebrate victories together. Measurement Reports Reporting sources include:
Averages and trend measurements are better applied to incentive compensation systems than single-event or single-job measures. Rewarding an employee for performance on individual homes may cause the employee to “pad” one home for a reward and ignore another home where the reward may be more difficult to earn. This is counter-productive. We want employees to concentrate their efforts on the hard-to-solve issues. Including each home or single-event measure in the overall employee performance average keeps the employee concentrating on doing the best possible job on each home or measurable event. The good and the poor performances are averaged together and can be monitored over a given period to determine the incentive (quarterly is ideal). They also can be used as cumulative measurements on a rolling 12-month or calendar-year basis. Rewards should be based upon a sliding scale, with better performance measurement results yielding a higher incentive. All-or-nothing programs can be very discouraging once the reward is in doubt. Compensation incentives based on a sliding scale enables as many employees as possible to benefit from the incentive program. This motivates them to improve performance during the ensuing measurement periods. Budgeting for Incentive Compensation The development of an incentive program should start with the question, “How much am I willing to pay (in total dollars or per employee or department) in incentive compensation this budget period?” It’s best to predetermine this amount and then develop the compensation rewards around it based on the projected level of closings or revenue dollars. The incentive is generally not fully earned ― as employee performance is rarely perfect and the best programs reward on a sliding scale. However, more than 100% of the incentive can be earned if the closings or revenue volume greatly exceeds the amount projected in the budget. This, then, would make the incentive a variable amount based on volume. Any incentive program budget overruns would be more than offset by the revenue exceeding projected amounts. The ideal reward limits are tied to variables like revenue and closing volume. These make the company’s potential compensation liability easily measurable. Rewards can be pooled, and unearned monies can be carried over into future periods to increase the potential rewards and therefore stimulate even more intense performance awareness. In Summary Incentive programs must be well designed and simple to administer. They should also be simple to understand. Remember, employees want to know and understand the rules of the game. This motivates them to participate to the fullest extent possible in the game — or, in this case — the program. Benchmarks must be measurable via quantity, quality, time or cost. They must be consistently measured and reported in consistent formats at regular intervals. When in doubt, the incentive program and its measurements should err on the side of the employee. You never want the program to be demoralizing. The programs can be altered from year to year to emphasize new measures or to improve employee response to the incentives. Incentives can be paid quarterly, or a percentage of the earnings can be held until the end of the year or full measurement period to help employees manage their money. Bob Whitten is vice president of SMA Consulting, which offers operational and financial management consulting services to home builders. For more information, contact SMA Consulting at 909-420-0200 or by e-mail at info@smaconsulting.net. Additional Resources
NAHB Has More Than 170 Resources to Help You Run Your Business More Profitably Go to NAHB's Business Management Tools Web pages (available to members only) for instant access to more than 170 timesaving, moneymaking and cost-cutting business resources to help you run your business more profitably. Get guidance on accounting and financial management, business strategy, computers and information technology, customer service, human resources and more. Resources are added weekly, so bookmark www.nahb.org/biztools to go directly to these vital business management resources. Local and state home builders associations can link directly to www.nahb.org/biztools from their Web site and give their members instant access to these resources. It will make your HBA's Web site the place to go for the information and guidance that members need to succeed.
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, visit www.nahb.org/BoB on the Members Only side of the NAHB Web site.
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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 24 hours a day at www.nahb.org. Just click the "Log In" button to get started. Once you log in, personalize the site to reflect your interests. Simply go to the My NAHB>My Profile page and click the “Edit Content Preferences” link. To learn more about how you can customize My NAHB — including how to customize the links that appear on the Home page ― visit the How to Use www.nahb.org section. Find Out How to Get Started in the Active Adult MarketDo you want to learn more about the fastest-growing segment of the housing market? Attend Building for Boomers & Beyond: Seniors Housing Symposium 2005 on May 16-18 in the Washington, D.C. metro area (Chantilly, Va.). The seniors housing symposium is the premier educational and networking event for industry professionals who serve the burgeoning 50+ market. There’s still time to register online — advance registration runs through Tuesday, May 3. Featured Speakers: Sonkin and Wolfe Featured speakers include Paula Sonkin and David B. Wolfe. Sonkin, who has launched J.D. Power and Associates customer satisfaction surveys for airlines, rental car companies and hotels, will discuss findings from the recent J.D. Power Home Builder Survey pertaining to seniors housing; share J.D. Power methodology used to rate customer satisfaction; and shatter myths associated with developing a customer satisfaction initiative. Wolfe, of The Center for Ageless Marketing and the author of “Ageless Marketing: Strategies for Reaching the Hearts and Minds of the New Customer Majority” and “Serving the Ageless Market,” will discuss how aging boomers are more like their parents at comparable ages than commonly believed, and how companies that understand this will be poised for greater success in the seniors market. New Courses Include Design, How to Get Started The symposium will feature more than 20 education sessions covering such topics as amenities, design, multifamily, marketing and sales and the latest research and trends. There will also be a bus tour or several active adult communities in the Washington, D.C. area. New programs at the symposium will include:
Special marketing and design sessions include:
Be a Success in Seniors Housing “The Best of Seniors Housing,” available through BuilderBooks.com, provides builders, sales and marketing directors, associates and anyone involved in the seniors housing market with the best articles from Seniors’ Housing News. Together, this collection of articles serves as a guidebook on seniors housing for people just getting into the industry. To view or purchase this publication online, click here, or call 800-223-2665. Builders Prepare for When Condo Boom Starts to FadeAvoiding the go-go high end of the condo market where prices have been zooming from $500 a square foot and up, up, up in such cities as Miami and population centers along the East and West Coasts is one strategy that some builders believe will shepherd them through the cyclical downturn headed their way. “We believe that the affordable side is more protected when the current condo market starts to go away,” said Leonard Wood, president of Wood Partners. In the Atlanta market, where Wood’s company is based, affordable means 900- to 1,000-square-foot apartments selling in the $275-$300 per square foot range. Wood’s building experiences testify to the strength of the shift in today’s multifamily market dynamics away from rentals to the for-sale side. Encountering softness in the rental market, Wood chose to switch from leasing to selling the 500 units in the twin towers of his first high-rise project in mid-town Atlanta. One hundred homes were sold in the first month and the project was sold out after 10 months, which was “amazing for a place that hadn’t been a big condo market,” he said. “We were getting full price for condos,” Wood said, instead of having to give away free rent and make other concessions to bring in prospective residents. And “we are now embracing pure for-sale because rental economics wouldn’t support the property.” Wood is now building his fifth major condo tower in Atlanta, and he said he believes that “infill has some real legs to it” because people don’t like traffic, but they do like infill amenities. “There’s some depth to the market for a high-quality, affordable product,” he said, and demand for entry-level housing should hold up. Wood said that there are virtually no traditional garden apartments being built in Atlanta today because with land prices sky-high it’s just too hard to bring them on line. The story is true just about everywhere, he added, with some major exceptions, such as Houston and Dallas. About 60% of the units currently in the company’s pipeline are headed for the condo market, he said, and everything that is being built or converted is concrete construction. Bruce Duncan, president and CEO of Equity Residential, said that land prices are headed for a correction in overheated markets. “Land prices will come down,” he said, “and there will be much more volatility.” Duncan advised builders that they should be cautious at the high end of the market, but more confident about moderately priced product. Panelists at the NAHB conference weren’t too concerned about the 10% investor share of buyers that typifies today’s condo market nationwide, but they did express wariness of places — such as South Florida and Washington, D.C. — where rough estimates of the investor share range from 20% on up. “The minute that the flippers can’t flip,” Duncan said, “it changes the psychology” of the marketplace. Those who view today’s high land prices as a benchmark are probably mistaken, said Tom Baum, president of Bozzuto Development Company in the Bozzuto Group. He said that “current prices are unsustainable” in the Washington, D.C. market, where contractors have also been boosting their prices, by about 30% in just the last year. “That’s got to be worked out,” he said. Baum also said that municipalities in the area are making the situation even worse. Prince Georges County, Md., just east of Washington, has been piling on fees at an appalling rate: $12,000 per unit for schools, $8,000 for fire and police protection and $8,000 for tap fees. Baum noted that his company has been “through the ups and downs of good times and bad,” so it hasn’t “dived head-first” into the current condo frenzy. Bozzuto most recently has been focusing on suburban four-story elevator buildings targeted to empty nesters, which he described as “a strong niche” on the edge of the explosive high-rise boom. Baum’s company has built rental properties, but “trying to find apartment deals that make sense is becoming more difficult.” To prepare for the less vibrant future, Duncan said builders should be looking at their price points. “Look at rent vs. buy,” he said. At $160,000-$175,000, “you’re not out of kilter at that level.” As you go up the price scale, however, and the cost of owning becomes increasingly higher than the cost of renting, the viability of that product becomes increasingly untenable when times turn down. Avoiding Lawsuits On an issue that has been a top concern for condominium developers — lawsuits for construction defects — panelists reported that things are going fairly smoothly, largely because they are acutely aware of the potential for litigation and have been doing whatever they can to prevent it. “People in business today are taking a pro-active approach,” said Steve Patterson, CEO of ZOM, Inc. in Orlando, Fla. “They are going out and fixing things they really may not be responsible for fixing.” Wood said that his company has yet to be hit with any lawsuits from angry home buyers. “The quality of the product has been great,” he said. “We try to deliver a defect-free unit, and we won’t close until the buyer signs-off that there are no defects.” “We have been doing a good job of capitalizing the home owners association, so they don’t have to make an assessment the first time a problem arises,” Wood added. “Time will tell if they use the money to turn against us.” To ensure that he stays in the good graces of his customers, Wood said he sets monthly assessments realistically so they carry the property and don’t have to be increased. He lets his residents know that he wants to sit down and talk with them about a problem before anybody calls a lawyer. And he follows a philosophy that emphasizes selling out a property more than moving up prices aggressively, “giving the buyer more appreciation for gains.” Baum said that Bozzuto has had only one customer lawsuit over the last 20 years because it has focused on customer service. “We service, service, service, and that is what you have to do,” he said, and that is what some condo converters are not doing a good job of providing. They could pay the consequences when owners turn sour as the market settles down. Baum added that today’s condo builders and converters are able to cover up their mistakes, such as underestimating their costs, because of the good market. “But when the pricing cushion goes away, will you still be disciplined enough to bring that product to market?” he asked.
'Residential Property Management' Available Through BuilderBooks.com “Residential Property Management,” available through BuilderBooks.com, is the savvy property management guide to success. This comprehensive reference tool is the core text of the Registered Apartment Manager (RAM) program but can also be used to aid property management professionals in managing both market-rate and assisted properties. To view or purchase this publication online, click here, or call 800-223-2665. Relationships Are the Core of the Building IndustryTo succeed in any business, it is imperative to know the industry you are in. And if you’re in the U.S. home building industry, that can be a bit of a mystery because of the many smaller market segments and the diversity of housing product and producers. The graphic of the industry below can help you position your company to maximize its effectiveness. Relationships Develop Through Transactions Relationships are the heart of the building industry, and transactions are the way these relationships develop ― whether with a banker, a trade contractor, a supplier or a real estate agent. Education, information sharing, financial transactions and social interaction are examples of the transactional DNA that is so essential for building relationships in the housing industry. As the value of these cumulative transactions increases, the likelihood of forming a positive relationship increases. Structurally, the industry is comprised of “affinity groups” — manufacturers, media, government, retailers, trade associations, non-profits, academics and the supply chain players. They all interact with each other through established relationships.
Cultivating Relationships Is Important to Business And it is easy to see why cultivating these relationships is so important in our business. It’s a lot easier to get a loan from a banker who you know than sending an application through the Internet. The trade contractor you know is far more likely to make an emergency service call than the one you find in the yellow pages. These are relationships to be valued, and you don’t want to put them in jeopardy by failing to pay a bill or abusing a trade contractor. The stability of your company and its long-term profitability depend upon the relationships you have formed. When you create your business plan, make sure you chart the resources that will be available to move that plan forward. Your financial assets will be at the top of that inventory, for sure, but additional resources should include all of the relationships you have in hand. From the model above, you should also make a proactive effort to fill the vacant slots among the affinity groups where relationships do not currently exist. Do you have a relationship within the media? If that’s a relationship that can help further your plans, then that’s probably a relationship you will want to cultivate. The same holds true for the other affinity groups in the diagram and any other groups that may come to mind but have not been identified here. Supporting existing relationships and adding others directly contributes to your company’s resources, and a broad base of resources is your best foundation for a successful business plan.
Bill Asdal is president of Asdal Builders LLC, of Chester, N.J. Asdal Builders has been providing quality building and remodeling services since 1973. For more information, e-mail or call his company at 908-879-4427, or visit the Asdal Builders Web site at www.asdalbuilders.com.
The NAHB University of Housing Offers Designation Programs for Builders and Remodelers The NAHB University of Housing offers CAPS, CGR, CGB and a variety of other professional designation programs and business management courses that set builders and remodelers apart from the competition. To learn more about NAHB’s designation programs, visit www.nahb.org/designations. For a complete list of all current education offerings, click here.
Effective Strategies for Running a Profitable Business “More! Management Ideas that Work,” available through BuilderBooks.com, contains more than 175 ideas on how to help run your home building business more profitably. It’s filled with real-world, practical advice from builders across the country. To view or purchase this publication online, click here, or call 800-223-2665. May Is National Home Remodeling MonthSpring is the most popular time to remodel. So, what better time of the year for National Home Remodeling Month? Many home owners want to try their hand at remodeling their home themselves. This May, with the help of the NAHB Remodelors™ Council's consumer campaign on "How and When to Hire a Professional Remodeler," you can help educate consumers on the importance of hiring a professional remodeler to safely make their house a home for a lifetime. Throughout the month, be sure to take advantage of the opportunities surrounding National Remodeling Month to help publicize the industry and emphasize to home owners the importance of hiring qualified, professional remodelers. Contact your local council to find out about plans for the month and join this important campaign. The NAHB Remodelors™ Council will have downloadable material to help promote National Remodeling Month, including proclamations, public service announcements, press releases and articles. Visit the Remodelors™ Council section of the NAHB Web site for more information.
"How to Find a Professional Remodeler," available at BuilderBooks.com, promotes the professionalism of your remodeling business by offering valuable advice to your customers on the process of selecting a remodeler. The brochure guides consumers from the dream to the reality of having their homes remodeled by skilled and trained professionals. Sections include what to look for in a professional remodeler, what questions to ask and signs of a professional remodeler. To view or puchase this publication online, click here, or call 800-223-2665 to order.
The NAHB University of Housing offers CAPS, CGR, CGB and a variety of other professional designation programs and business management courses that set builders and remodelers apart from the competition. To learn more about NAHB’s designation programs, visit www.nahb.org/designations. For a complete list of all current education offerings, click here.
Who Will Be the Next Remodelor™ of the Month?
The Remodelor™ of the Month (this link is accessible to Remodelors™ Council members only) award program is underway. Don't miss your opportunity to be named the Remodelor™ of the Month.
Subscribe your employees to Nation’s Building News Online. It’s free, easy and NAHB members who sign up three or more employees will be entered into the "Make Your Business Click" contest to win a digital camera. To learn more or sign up your employees, click here.
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 24 hours a day at www.nahb.org. Just click the "Log In" button to get started. Once you log in, personalize the site to reflect your interests. Simply go to the My NAHB>My Profile page and click the “Edit Content Preferences” link. To learn more about how you can customize My NAHB — including how to customize the links that appear on the Home page ― visit the How to Use www.nahb.org section. Basement From Hell Chosen as Basement of the Year
Five years ago, Balmer Bros. was voted the winner of the Concrete Foundation Association’s (CFA) Basement of the Year for building a 29,000-square-foot basement that was as complex as it was mammoth. This year, Balmer Bros. has earned the award again — with an even bigger and more complex basement. The company is building a more than 34,000-square-foot basement for a house in Gladwyne, Pa. ― and that does not include the house’s nine-bay garage. The winning structure boasts 2,210 linear feet of wall. Many of the walls were curved with curved window bucks and wells along with piers and offsets that were tangent to the curves. “The curves, the various heights and the vast amount of steel, hundreds of fillers and vise grips and miscellaneous equipment all made this foundation challenging,” said Balmer. Balmer Bros. was selected for the Gladwyne home because of the company’s reputation and experience. In addition to the award-winning project five years ago, the company also has tackled numerous projects of more than 10,000 square feet each. For the 34,000-sqare-foot project, the crew poured approximately 967 yards of concrete for the walls and concrete footings. “Since it was a labor-intensive job, we took it piece by piece and compared the cost to past jobs,” said Balmer. However, this basement from hell is not quite complete. Balmer Bros. will return to the project to pour garden and terrace walls, a waterway for a moat — that's right, a moat — and another three-bay garage. The company was started in 1973 when the two Balmer brothers began spending their summer months pouring sidewalks and curbs. It has grown to become a successful builder of upscale large and complex foundations in the Philadelphia area. The Basement of the Year is selected by a peer vote during the annual World of Concrete, the annual trade show featuring the latest products, equipment and services for concrete and masonry professionals. The Balmer Bros. basement was chosen from among six projects that met the criteria for judging. The formal award presentation will be made at the awards banquet luncheon during CFA’s annual summer meeting in San Francisco on July 6-9. The Concrete Foundation Association was established in 1974 to improve the quality and acceptance of cast-in-place concrete foundations. CFA provides promotional materials, educational seminars, networking opportunities and technical meetings in 26 states and Canada. Balmer Bros. has been a member of CFA since 1978, and Jerry Balmer was on its board of directors in the 1980s. For more information about the CFA, visit www.cfawalls.org or contact Talia J. Nelson at 866-232-9255. Register for the 2005 Concrete Technologies Tour
Gain a superior understanding of the residential concrete construction market, contacts for all types of cement-based building systems and a free resource manual full of concrete tips, tricks and research during NAHB’s new Concrete Technologies Tour. Attendees will be able to successfully integrate concrete systems to increase their bottom lines and meet rising consumer demand ― the total number of homes built with above-grade concrete wall systems has increased from 3% in 1993 to 16% in 2003. The 2005 Concrete Technologies Tour will be in Kansas City, Mo., on June 26-28. For more information or to register for the Concrete Technologies Tour, visit www.nahb.org/concretetour or contact the Concrete Home Building Council at 800-368-5242 x8362.
BuilderBooks.com Offers More Than 250 Books that Help You Build Your Business
BuilderBooks.com is your source for training and education products for the building industry. The official bookstore for NAHB, BuilderBooks.com offers award-winning publications, software, brochures and more available in both English and Spanish. To view these publications online click here or call 800-223-2665. Concrete Tour Mixes Demos, Networking, Six Plant VisitsThis summer's 2005 Concrete Technologies Tour, “Building With Concrete: The Basics and Beyond,” in Kansas City, Mo., includes educational programs, networking and behind-the-scenes tours of cement-based building materials and manufacturing facilities. The tour will be held on June 26-28 and visit six plants and a subdivision: Monday, June 27
Tuesday, Jan. 28
A new annual offering from NAHB’s Concrete Home Building Council, the Concrete Technologies Tour shows attendees the basics of residential and light commercial concrete. The three-day event also includes a golf tournament at the St. Andrews Golf Club and several receptions. For more information or to register for the Concrete Technologies Tour, visit www.nahb.org/concretetour or contact the Concrete Home Building Council at 800-368-5242 x8362.
BuilderBooks.com Offers More Than 250 Books that Help You Build Your Business BuilderBooks.com is your source for training and education products for the building industry. The official bookstore for NAHB, BuilderBooks.com offers award-winning publications, software, brochures and more available in both English and Spanish. To view these publications online click here or call 800-223-2665. Lubbock Building Affordable Concrete HomesContinuing its leadership role in using concrete wall systems for affordable housing, the City of Lubbock over the last four years has replaced more than 90 substandard and deteriorating homes with new homes built with insulating concrete form (ICF) exterior walls. The project is part of the city's Affordable Housing Reconstruction Program, which is partially funded through a combination of state, federal and private partnerships, including Community Development Block Grants (CDBGs) from the Department of Housing and Urban Development. Under the terms of the program, residents are provided with temporary housing until their new concrete home is constructed. The residents assume a mortgage based on the hard cost of the home, after any grants have been taken into account. The homes have proven to be so energy-efficient and disaster-resistant that the city no longer accepts bids for wood-framed housing. As of March, the city and three ICF distributors had trained and certified 13 local contractors to build with ICFs. Although the affordable concrete homes built by the city have received most of the attention, the majority of ICF homes in Lubbock are being constructed for the private housing industry. The Cement Council of Texas has documented more than 200 ICF homes built in Lubbock over the last five years, in all price ranges. At a February, 2004 field hearing in Lubbock in preparation for legislation on wind hazard mitigation, Rep. Randy Neugebauer (R-Texas), a member of the House Science Research Subcommittee, toured two city-built ICF homes, which he cited as excellent examples of safer residences being constructed for the affordable housing sector. For more information, contact the NAHB Concrete Home Building Council; or e-mail Dawn Faull at NAHB, or call her at 800-368-8141 x8362. New Course Looks at Insulating Concrete Forms“Building With Insulating Concrete Forms” will be offered for the first time on Wednesday, May 25, in Richmond, Va. The full-day course provides traditional home builders with the information needed to evaluate the potential of ICFs and begin using them, including looking at whether they make sense for a particular business and how to make the transition into becoming an ICF builder. The course also highlights the advantages and costs of ICF construction, the components and materials used, design, and important business and marketing considerations. Also included are details of ICF walls, floors and roof decks. Created by NAHB’s Concrete Home Building Council (CHBC), the inaugural course offering is being co-sponsored by the Virginia Concrete Advisory Council and the Home Building Association of Richmond. For more information about the CHBC, e-mail Dawn Faull, or call her at 800-368-5242 x8362. For information about the May 25 course, click here; or e-mail Keith Beazley, or call him at 804-347-7003. National Leadership Conference Comes to TexasAchieving Excellence — National Leadership Conference will be held in conjunction with the Sunbelt Builders Show this year on Oct. 15-16 in Grapevine, Texas. The conference ― for association presidents, vice presidents, council and committee chairs and other association leadership — will feature sessions designed to improve on existing leadership skills as well as enhance new ones. Among the sessions included will be Beginning and Advanced Spokesperson Training and Team Planning. All sessions will provide essential skills, information and resources needed to enhance and build leadership skills. Registration for the National Leadership Conference will also include a free Expo-Only pass to the Sunbelt Builders Show valid from Thursday, Oct. 13 to Saturday, Oct. 15. For more information about the National Leadership Conference or the Sunbelt Builders Show, visit www.sunbeltbuildersshow.com.
Learn More About the University of Housing Whether you’re new to the industry, hope to make your next career move or want to improve your company’s bottom line, The University of Housing can assist you in your education pursuits. Visit www.nahb.org/education for a comprehensive listing of courses throughout the country. Be sure to visit often in order to view the most up-to-date information in your area.
Subscribe Your Employees to Nation’s Building News — and Earn a Chance to Win Digital Camera Subscribe your employees to Nation’s Building News Online. It’s free, easy and NAHB members who sign up three or more employees will be entered into the "Make Your Business Click" contest to win a digital camera. To learn more or sign up your employees, click here.
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 24 hours a day at www.nahb.org. Just click the "Log In" button to get started. Once you log in, personalize the site to reflect your interests. Simply go to the My NAHB>My Profile page and click the “Edit Content Preferences” link. To learn more about how you can customize My NAHB — including how to customize the links that appear on the Home page ― visit the How to Use www.nahb.org section. Education Calendar
Learn More About the University of Housing Whether you’re new to the industry, hope to make your next career move or want to improve your company’s bottom line, The University of Housing can assist you in your education pursuits. Visit www.nahb.org/education for a comprehensive listing of courses throughout the country. Be sure to visit often in order to view the most up-to-date information in your area.
Subscribe Your Employees to Nation’s Building News — and Earn a Chance to Win Digital Camera Subscribe your employees to Nation’s Building News Online. It’s free, easy and NAHB members who sign up three or more employees will be entered into the "Make Your Business Click" contest to win a digital camera. To learn more or sign up your employees, click here.
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 24 hours a day at www.nahb.org. Just click the "Log In" button to get started. Once you log in, personalize the site to reflect your interests. Simply go to the My NAHB>My Profile page and click the “Edit Content Preferences” link. To learn more about how you can customize My NAHB — including how to customize the links that appear on the Home page ― visit the How to Use www.nahb.org section. Site Plans Preserve Natural Settings, Raise Density“Site planning is where you can really make the difference,” said Marty Mitchell, vice president for land acquisition and development for Mitchell & Best Homebuilders, which is located in the Washington, D.C. metropolitan area. Working closely with Montgomery County, Md., to preserve the natural characteristics of the countryside, Mitchell said he was able to build 44 units on 101 acres in his Bancroft community in Sandy Spring, leaving 70% of the property as open space. The project was built at an overall density of 4.4 units per acre and used “Rural Neighborhood Cluster” zoning, in sharp contrast to the more typical two-acre lots that “are chewing up the land” in the rural outskirts of the Washington market. The Bancroft site had previously been used, and abused, by a tenant farmer, Mitchell said. In its reclamation, “we preserved forested areas as much as 600-feet wide and protected streams running through the property.” Although the development’s large homes were close together, open spaces in front and back of them provided an offset that customers said they enjoyed. Community streets, accessible from two access points, were built 18-feet wide on 22-foot easements; turnaround areas were minimized. Farmland was protected along the entrance road, and a meandering bike path helped cut down on pavement required along the roadway. “You have to be in constant contact with the excavator in efforts to protect trees,” Mitchell cautioned. On a forested, sloping 5-1/2-acre location inside the Washington Beltway, Mitchell was able to build eight homes in his Endicott Hill infill project, locating them around pockets where few trees grew to leave the forest intact. Stone walls were used extensively to protect the trees. The attention to tree preservation did not go unnoticed by buyers at Endicott Hill. “Every home owner said, ‘I bought for the trees,’” Mitchell said. Despite the success of the two projects, Mitchell said that the densities allowed on each were still insufficient to meet the needs of the area’s growing population, and they added unnecessarily to development costs. Both projects were winners of last year’s Building With Trees Awards of Excellence by the National Arbor Day Foundation in cooperation with NAHB. Green Branding Pursuing Traditional Neighborhood Development and various approaches to green building can help builders establish a good working relationship with municipalities, said Jackie Benson, managing director of Benson Miles TND, the Atlanta division of Milesbrand. Conservation communities are “up and coming,” she added. One example is a community built around a 90-acre farm. On the consumer side, Benson, who worked with the Greater Atlanta Home Builders Association and Southface to develop the EarthCraft House program, said that builders can brand themselves as green by focusing more on the benefits than the features themselves. “It’s really about the performance of the house,” she said, and she advised green builders to ask their customers to compare their homes with those of other builders. Other advantages of green building, she said, are that it sets new standards for quality that are quantifiable; it establishes core values for employees and reduces turnover; and there are fewer callbacks and more customer satisfaction. For more information on green building, e-mail Marie Yarroll at NAHB, or call her at 800-368-5242 x8132. NAHB’s Model Green Guidelines Making NewsThe voluntary guidelines, introduced at the International Builders’ Show in January, are designed to move environmentally friendly home building concepts further into the mainstream. NAHB has partnered with the Green Building Initiative to help facilitate the adoption of green home building practices and the formation of additional local green building programs. Below are highlights of the articles:
Profit from Building Green “Profit from Building Green: Award Winning Tips to Build Energy Efficient Homes,” available through BuilderBooks.com, provides specific examples and tried-and-true techniques to create successful green building practices ― from choosing green building products through marketing energy-efficient houses. To view or purchase this publication online, click here, or call 800-223-2665. Wisconsin's Largest Builder a Green Building ProponentEvery 10 of the roughly 560 homes Veridian built in 2004 save enough energy to light one additional home. “Even more impressive is the fact that 100% of their homes earn Wisconsin Energy Star and Green Built Home certification,” said Eric Borsting, chairman of NAHB’s Energy Committee and a judge in this year’s awards program.
In fact, many of Veridian’s homes exceed those standards. The innovative Welcome Home boasts an energy savings of approximately $1,000 annually, compared to a home built to state code requirements. “It’s an ultra energy-efficient home, particularly for the Midwestern extreme climate changes,” said David Simon, the company’s president.
Pushing the limits of production green building, the prototype Welcome Home includes features such as a solar hot water system, an energy monitoring system to determine real-time and historical energy use, and an outdoor rain garden. The home’s energy efficiency, as verified by an independent consultant, exceeded its 40% energy reduction goal.
To reduce wood and other construction and demolition debris, which are responsible for a third of all material in Wisconsin’s landfills, Veridian obtained an exemption from the Wisconsin Department of Natural Resources to grind oriented strand board and dimensional lumber into landscaping mulch. This measure alone diverted nearly 2,000 tons of wood from the state’s landfills last year, and the company’s overall recycling practices reduced its disposal costs by 20%.
While the company goes to great lengths to build homes that operate efficiently and make the best use of limited resources, it does not lose sight of the important role of the home owner in the conservation process.
A representative from the company’s customer relations department conducts an in-home orientation session with each new owner, covering topics such as:
“Veridian’s homes are a model for energy efficiency in Wisconsin and across the country,” said Borsting. Veridian Homes is one of 11 winners of the 2005 National Green Building Awards, which recognize leading-edge green building development projects and advocates. The winners were announced during NAHB’s National Green Building Conference in Atlanta in March. Other winners will be featured in future issues of NBN. Go to the NAHB Web site to learn more about this year’s honorees and to enter the 2006 awards competition. For more information about Veridian Homes, contact Ceci Anderson at 608-226-3040. How to Gain a Prospect's CommitmentBe not afraid of growing slowly; be afraid only of standing still. ― Chinese Proverb A purchaser’s commitment must be earned. The consumer dictates what gets bought and sold, but it is really up to us — the sales professionals — to help guide, direct, motivate, control, stimulate and educate an interested prospect into becoming an enthusiastic purchaser. The salesperson must take time to get to know and comfort the purchaser by asking questions that will reveal their wants, needs and preferences. There are many studies of human behavior that reveal the importance of establishing a positive bond between the purchaser and the salesperson. Most prospective purchasers are intimidated by salespeople. They are afraid that they will be misled, misguided or taken advantage of by every salesperson they meet. But, as new home salespeople, we know we can build consumer confidence by showing an immediate interest in the prospective purchaser and his family. Be sensitive, compassionate, empathetic, caring, courteous, helpful, considerate and interested — at all times. Listen carefully to each word the purchaser is saying. Take notes and, if you don’t understand a point, ask the customer to repeat that point. Maintain eye contact, and read the prospective purchaser’s body language, too. Above all, be prepared. Know your product, your purchaser’s profile and your competition — new homes, existing homes and apartments. That way, you can properly demonstrate your product features, advantages and benefits. And practice your presentation every day Words to Sell By — and Words to Avoid Years ago, I was fortunate to attend a presentation by Dan Bellus, a nationally recognized sales trainer, about “selling” words. He made a point of teaching us 24 words that “sell” and 24 words that “un-sell.” Here are his words: Words That “Sell”
Words That Don’t
Here are five more “selling” words that came from a Yale University study:
You may also want to incorporate an additional selling word into your working vocabulary — the name of the building company you represent. Going a step further, you may want to put all these positive reinforcing words on the back of your business card under the title, “30 Reasons To Purchase a (builder name) Home Today.” There is no question that your goal is to obtain a fully-executed and signed agreement from the purchaser as soon as possible. This will happen more quickly when you make the prospective purchaser comfortable with the purchasing decision by eliminating any objections with sound, confident judgment and reasoning. Also, be sure to take the time to ask closing questions that will provide you with a commitment for you and the product that you are selling. Don’t Forget Follow-Up One of the biggest errors committed by salespeople is that they believe their product is so special that they don’t bother to follow up with prospective purchasers. Those that don’t follow-up couldn’t be more wrong. The more often a salesperson follows up with the prospective purchaser, the better the odds that a purchase will occur. There are a number of elements of the follow-up campaign that are beneficial to incorporate. One involves phoning a prospective purchaser shortly after you have met with him. Make sure you have answers to a question or two from the prospect. Start the conversation by thanking the prospect for visiting and then add, “You may remember…” or “You may recall…” and offer the information that he is seeking. Always make sure that you are calling at an appropriate time to review the information. This call also may be a good time to schedule an appointment for a second meeting ― to discuss a home site, home, specifications, agreement, options, financing, etc. You should also make follow-up calls when you have something new or exciting to report, such as new financing, special incentives, potential price increases, new marketing campaigns or new designs or specification changes. Stay in Touch by Direct Mail, Too You also should consider keeping your prospects up-to-date with direct mail campaigns — post cards, letters, brochures, calendars and newsletters. These collateral marketing tools should be prepared to convey an ongoing theme of excitement about your fine new homes. The message can be third-party testimonials, and each piece should evoke a call to action encouraging prospects to return to your sales center as quickly as possible. Other effective communication tools are mailgrams, telegrams and e-mail. Take the time to become more proficient with computer technology so that you can be better prepared to communicate with tomorrow’s purchasers more effectively. It is also important to follow up with a purchaser. Every purchaser needs constant communication. Remember, a sale is not a sale until the purchaser takes title to his new home. It is the job of the salesperson to make sure that the purchaser makes it to the “closing table” satisfied and happy. Remember this poem when you are selling your next new home and put its words to work for you beginning today:
Selling is fun, and the more we practice the skills and techniques offered to us, the more we can provide a better lifestyle for the families seeking a better way of life in our communities today and tomorrow. S. Robert August, MIRM, is president and founder of S. Robert August & Company, Inc., a national marketing and public relations firm based in Denver that specializes in providing home builders, developers, manufacturers, Realtors® and lenders marketing/management consultation and sales training. August is the owner of Colorado-based RealtyWorks, Inc. a real estate brokerage company. He is also past chairman of NAHB’s National Sales and Marketing Council and the only person to receive the prestigious Bill Molester Award twice. For more information, contact August by phone at 303-220-8480 or via e-mail.
For additional cutting-edge sales and marketing information, go to www.smimagazine.com to subscribe or order a copy. Click here to learn about membership benefits of the National Sales and Marketing Council and the Institute of Residential Marketing.
Residential Marketing Courses and Designation Programs for Sales & Marketing Professionals The Institute of Residential Marketing (IRM) offers four designation programs for sales and marketing professionals:
For more information on these designation programs, click here or call 800-368-5242 x8192. To locate a MIRM in your state, visit www.nahb.org/MIRM. Ask the Lawyer: About Permit Fee Increases
Q: I’m a single-family home builder and my local government recently increased the building permit fees 200%. I discovered the fee increase when I submitted my paperwork for a new building permit. As far as I am aware, my local building department imposed this fee increase without notifying anyone in advance of the increase. Can they do that? A: The regulatory fees that local governments charge builders for permits, inspections licenses and other basic development review services are escalating with increasing frequency to levels not justified by the level of services being provided. Generally, by law, local governments must set fees that are fair, reasonable and commensurate to the services being provided. While many states have enabling language that authorizes local governments to assess regulatory fee schedules to defray the costs they incur in performing their regulatory duties (e.g. licensing, inspections, plan review), it seems that this authority is being abused nationwide. In a fairly standard scenario, a municipality, either by ordinance or a less formal administrative procedure, doubles or even triples an existing building permit fee, that their builders must pay before they begin construction. Most often, the municipality has done little or nothing to improve its level of services associated with the fee, such as hiring additional permit review staff or otherwise expediting the permit approval process. Further compounding its potential abuse of authority, the municipality, in assessing these “regulatory fees,” merges the revenues generated by the fees with its general operating fund. What the municipality holds out as a legitimate regulatory fee is effectively a masquerade for an illegal tax. As a rule, local governments lack inherent taxing authority and must justify these “taxes” with the backing of express statutory authority. To determine whether a particular charge is a "tax" or a "fee", if the charge is for general revenue raising purposes, then it is a tax. If it is used for purely regulatory purposes or services, that makes it a fee.
If you have questions for Ask the Lawyer, click here. There is no guarantee that your question will be answered in this format, so if you have a particular legal concern that requires immediate attention, contact the NAHB Legal Research Service at 800-368-5242 x8491. "Ask the Lawyer" is a service of the NAHB Legal Action Committee and NAHB Building Products Issues Committee. The information provided is intended to familiarize you with the law in this area. It is not intended to be an exhaustive presentation of legal information on this particular subject, and in no way constitutes an opinion of law. Your own attorney must review this information to determine how it may apply to your particular situation.
OSHA Compliance Assistance Web Page UpdatedThe page provides a public gateway to OSHA resources that can help home builders and other employers meet their responsibility to provide their workers with a safe and healthful workplace. Among the new features:
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