Monday Morning Briefing Letter - 05/28/2007 (Plain Text Version)

By Brian Catalde, NAHB President and
Jerry Howard, NAHB Executive VP and CEO

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Fire sprinklers will remain optional

under the International Residential Code for all single-family homes, thanks to the help of NAHB members and building code officials who turned out at the ICC Final Action Hearings in Rochester.

Early word from the hearings indicates that the case for keeping sprinklers as a voluntary option in new homes was strong and successful. In light of the improved safety features of new construction, the high costs of sprinkler installation and maintenance, numerous questions about the systems themselves that still need to be addressed, and the demonstrated effectiveness of smoke alarms for saving lives, advocates for mandated sprinklers were unable to get the votes necessary to overturn an earlier ICC decision to keep sprinklers out of the main body of the residential code. This is a significant win for housing affordability and consumer choice in home safety decisions. Had our efforts been unsuccessful at the Rochester code hearings, fire sprinklers would have been required in all new one- and two-family homes and townhouses wherever the IRC was adopted – something that would raise the cost of building a typical single-family home by as much as $6 per square foot or more and raise the threshold for homeownership significantly. With this decision, fire sprinklers will remain in the appendix of the IRC, where local jurisdictions can still adopt them if they so choose, and certainly home buyers will always have the option of choosing to have fire sprinklers installed in their new homes, as is appropriate.

While the battle to maintain fire sprinklers as optional rather than mandated equipment in new homes can be expected to continue in subsequent code development cycles, that does not diminish the great accomplishment that our NVPs, State Reps, EOs, HBAs, members and staff achieved in explaining our concerns about mandates to building code officials so that they could understand the many questions and potential problems surrounding this issue. Ultimately, their input convinced voting code officials to make the most appropriate and balanced decision on fire sprinklers. Going forward, those who helped with our campaign are strongly encouraged to build upon the good working relationships that they developed with code officials through this effort, so that we can keep the channels of communication open and foster even greater understanding among all parties involved in the code development process.

Apart from the sprinklers issue, news from the Final Action Hearings in Rochester was still coming in as of press time for this report – see the next NBN Online for the latest details. But we do know that NAHB was successful in opposing several proposals that would have mandated carbon monoxide alarms in the IRC and that NAHB prevailed on its proposal to allow the wind exposure category for new homes built in a housing development to be based on the exposure that will exist a year after the start of construction rather than the more restrictive value that exists at the start of construction. Another positive development was the elimination of onerous anchorage requirements at the top of basement foundation walls – something that had been approved in the last round of code hearings despite NAHB's opposition.

NAHB Member Benefit: NAHB's representation of our builder members at the code development hearings will collectively translate to the most appropriate, cost-effective building codes that you build by every day to provide for occupants' safety and health, while keeping consumer choice and affordability concerns in mind.

A GSE reform bill that works

and that has the full support of NAHB was passed by the House of Representatives on May 22. The bill, H.R. 1427, would establish a strong regulatory framework for the housing Government-Sponsored Enterprises (GSEs), including Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Because of the importance of this issue to the nation's housing finance system, NAHB designated passage of the legislation as a "key vote" and sent a letter to every representative urging their support prior to its final passage. In the end, the measure was approved by a solid bipartisan margin of 313 to 104.

In the hours leading up to final passage, NAHB successfully supported a key amendment offered by Reps. Randy Neugebauer (R-TX), Melissa Bean (D-IL), Dennis Moore (D-KS) and Gary Miller (R-CA) that clarifies that a new regulator must base its evaluation of the risk of Fannie Mae's and Freddie Mac's portfollio holdings solely on mission and safety and soundness considerations, and not on broader concerns, such as systemic risk. This amendment would preclude a new regulator from assessing an overly broad interpretation of risk that might unnecessarily constrain portfolio activities of Fannie Mae and Freddie Mac - which could disrupt the mortgage markets and impede the GSEs' pursuit of their housing mission. Other positive provisions within the bill relate to capital requirements, an affordable housing fund, conforming loan limits, program approval and regulatory structure. NAHB also prevailed in defeating several anti-housing amendments that were offered prior to the final vote. Read more in our press release or in the next NBN Online, or contact Scott Meyer, x8144.

NAHB Member Benefit: NAHB's actions on GSE oversight reform are aimed at safeguarding a reliable and affordable flow of capital to the nation's housing markets. This is beneficial to our members because affordable credit is the lifeblood of the housing industry, allowing both for the development of much-needed affordable rental housing and for a large portion of the American public to obtain mortgages in the pursuit of homeownership. [ [return to top]

The new immigration reform bill needs a massive overhaul

and NAHB is opposing the measure in its current form. While it sounded like positive news this time last week when word came of a deal that had been reached by the Bush Administration and Senate negotiators, unfortunately the actual language in the legislation – once it was drafted – was a disappointment. Of particular concern for NAHB members are employment verification provisions in the Senate bill that would give the government latitude to prosecute an employer who hires an illegal alien without knowledge that the person is unauthorized to work, and inadequate safe harbor protections that require complete adherence to all immigration regulations no matter how obscure. In addition, legislative language would give the Secretary of the Department of Homeland Security a wide berth to enact rules that would make general contractors responsible for the legal status of all of their subcontractors' employees.

The subcontractor and employer liability issues are just two among many other troubling provisions in the massive immigration bill, which runs several hundred pages long. For example, NAHB believes that the program to provide a future flow of immigrant workers for the construction industry is unwieldy and unworkable, and that the legislation would increase opportunities for frivolous lawsuits against employers. Read more about the concerning aspects of recently proposed immigration reform in last week's NBN Online, or contact Jenna Hamilton (x8407) for more information.

NAHB Member Benefit: As more than 20% of the construction industry labor force is foreign-born, congressional action on immigration reform is extremely important to our members. NAHB opposes illegal immigration and is working with our coalition partners to support comprehensive immigration reform and the creation of guest worker programs that will provide a more efficient system for dealing with those who come to the United States to work. As an industry, home building must be able to recruit foreign-born workers in order to have an adequate supply of labor for building the nearly 18 million new homes that will need to be constructed over the next decade. [return to top]

Urging reforms to spur rental housing opportunities,

NAHB member and Virginia Beach home builder Steve Lawson testified before the House Ways and Means Subcommittee on Select Revenue Measures on May 24. Explaining ways to improve the Low Income Housing Tax Credit program (LIHTC), he told Congress that LIHTCs have facilitated the construction or preservation of nearly 1.4 million homes over the past 20 years, making them the foremost tool for the production and rehabilitation of affordable housing in this country. Even so, Lawson said, "The need for affordable housing greatly outpaces even this significant level of production and the existing supply of units." The tax credit provides a critical incentive for the production of affordable rental apartments by supplying a dollar-for-dollar reduction in tax liability to investors in exchange for equity financing. Unfortunately, current restrictions on acquisition of the tax credits prevent LIHTC owners from rehabilitating dilapidated housing units and reduce the tax credit developers' ability to receive an allocation of LIHTCs in areas of the country where the cost of land is prohibitive for providing affordable housing.

Two key ways to improve the efficiency and effectiveness of LIHTCs have to do with the methods by which annual rents and utility allowances are determined for rental properties. Ultimately, a reasonable annual increase in rent for residents has to be considered against the outright loss of affordable housing units in the near term and decreased production of new affordable housing in the long-term, Lawson told lawmakers. Moreover, Congress should allow state Housing Finance Agencies to convert utility allowances into a percentage of maximum gross rent at the time of underwriting. Read more about changes that NAHB is seeking for improving the LIHTC program in our press release, or contact Greg Brown, x8421. [return to top]

Preliminary pledge results from National Membership Day

are extremely encouraging, and indicate the growing strength of our national association. While some might be surprised at the great numbers we're looking at this year, builder Keith Butz from Des Moines, IA put it this way, "The networking and benefits membership offers are especially valuable when buyers are being more scrupulous and builders are being more cost-conscious. It's times like this when we need membership the most, and these numbers prove it." More than 400 local associations called in their pledges on May 22. Webcast hosts Duane Bickett and Diane Symbol had a great time interviewing fellow members, EOs and staff during the event, while NAHB's Senior Officers and other VIPs took turns congratulating callers on their campaign participation. Whirlpool, the official NAHB Membership Sponsor, and many of NAHB's affinity partners also contributed prizes that were awarded to Webcast viewers throughout the day. So, what was the final tally? (Drum roll, please)

11,845 new member pledges including:
9,985 builder and associate members
      631 affiliate members
      626 National Sales & Marketing Council members
      272 Women's Council members
      221 NAHB Remodelers members
      110 50+ Housing Council members

The top five performing local HBAs, according to preliminary pledge results, include:

Greater Houston BA - 299
Northeast Florida BA - 280
BA of Greater San Antonio - 279
HBA of Greater Dallas - 223
HBA of West Texas -214

And the top five performing state associations, according to preliminary results:

Texas Association of Builders - 2,100
Indiana BA - 1,370
Florida HBA - 1,293
HBA of North Carolina - 752
BIA of Washington - 423

Stay tuned for details at the Spring Board meeting, or check out the next edition of NBN Online. Contact: Gabrielle Taylor, x8351. [return to top]

New-home sales jumped an unexpected 16.2% in April

as builders pulled out all the stops to work down heavy inventories. Indications from NAHB studies are that the majority of builders are cutting prices and offering substantial non-price sales incentives, and that these efforts are effectively bearing fruit. Also, buyers appear to be gravitating toward lower-priced homes to help them counter their affordability problems. Beyond that, said NAHB Chief Economist David Seiders, "We're viewing the large jump in new-home sales in April with a lot of caution, in view of the large month-to-month volatility historically displayed by these statistics." He also mentioned that the April bulge, to a seasonally adjusted annual rate of 981,000 units, could have reflected favorable weather swings, particularly in the South. On an optimistic note, he said, "The first quarter may well have marked the low point for sales volume in the dramatic housing correction that began in the latter part of 2005. We are currently looking for a gradual recovery process going forward, at least on a quarterly basis." Read the rest of our press release, or see the government figures online. [return to top]

The Secretary of Labor is appealing an important decision

by the Occupational Safety & Health Review Commission that bars the agency from citing home builders for not ensuring the health and safety of subcontractors on the jobsite. Readers of this report will recall that we recently told you* about a significant NAHB win in which OSHA's multi-employer citation policy was essentially struck down by the review commission in the case of Secretary of Labor v. Summit Contractors. Unfortunately, the appeal marks the continuation of what is likely to be a long and detailed process as the industry and OSHA attempt to clarify the limits of the responsibility of a general contractor at the work site. While NAHB legal experts were advising home builders to continue to exercise their usual caution and good judgment regarding the safety of all workers and visitors on their sites even before the appeal was filed, the latest action indicates that it will be some time before there is any change in the way that OSHA currently wields its "controlling employer" policy to cite general contractors for safety violations by their subs. Read more about this in the May 28 edition of NBN Online, or contact Rob Matuga at x8507.

*click on the link and see the fourth story down [return to top]

$1.2 million remains in "Buy Now" ad assistance

for HBAs that haven't yet applied for these special grants. NAHB is encouraging all local associations who haven't yet done so to take advantage of this great opportunity and apply for funds today. To date, 95 local HBAs in 30 states have applied for and received, or been approved to receive, nearly $1.8 million in matching funds for advertising assistance. In all, this program has so far generated over $5.5 million in "matching" advertising dollars. Remember that to qualify for a grant, your HBA's ads must deliver a "buy now" message, be placed in 2007 and be conducted in markets that have experienced a major decline in home sales and housing production. Find out more about this program, eligibility considerations and requirements here, or contact Niki Clark, x8061. [return to top]

Look for our next edition on June 18.

Due to activities leading up to and including NAHB's Legislative Conference and Spring Board of Directors Meeting in Washington, DC, The Monday Morning Briefing Letter will not publish for the next two weeks. Our next edition will include a roundup of the important events and decisions from Spring Board. Also, please note that NAHB offices will be closed for the Memorial Day federal holiday on Monday, May 28. [return to top]