Friday, November 19, 2010

New FEMA Rules Shift ESA Consultation Requirements to Developers

The Federal Emergency Management Agency (FEMA) on Oct. 1 enacted new rules that apply to many developers in flood-prone areas that provide habitat for threatened and endangered species. The new rules, contained in Procedure Memorandum 64, were issued in response to several successful lawsuits by environmental groups against FEMA for not appropriately considering its responsibilities under the Endangered Species Act (ESA) when allowing development to take place. Now, FEMA is shifting those responsibilities to the landowners themselves.

When a project is proposed for a parcel of land within a floodplain, FEMA can issue a Conditional Letter of Map Revision (CLOMR) to state that the project, if built as proposed, would sufficiently modify the floodway, base-flow elevation and/or 100-year floodplain as shown on FEMA's Flood Insurance Rate Maps. Similarly, a Conditional Letter of Map Revision based on Fill (CLOMR-F) is used by FEMA when the parcel or proposed structure will be elevated by fill material to be above the base, 100-year floodplain.

The change indicated by Procedure Memorandum 64, requiring private landowners to provide proof that they are complying with the provisions of the Endangered Species Act before making any requests of FEMA, will likely add time and expense to any project in which property owners need flood map revisions to move forward, because they may first need to complete the Section 7 or Section 10 permit process. The Section 7 process can take 90 to 135 days to complete, while the Section 10 permit process can take about two years.

Going forward, NAHB will be adding clarifying information on this issue to our ESA section of, and we are reaching out to both FEMA and the Fish and Wildlife Service to discuss the implications of FEMA's memorandum.

Read more in Nation's Building News, or contact Matt Watkins (800-368-5242, x8327) for more information.

NAHB Sues Army Corps of Engineers Over Wetlands Classification

NAHB has joined in a lawsuit with the American Farm Bureau Federation and the United States Sugar Corporation that challenges a U.S. Army Corps of Engineers decision to begin treating certain farm fields as wetlands, affecting both the value of the property and the process for developing or building on it.

American Farm Bureau Federation et al. v. U.S. Army Corps of Engineers resembles a suit brought simultaneously by New Hope Power Company and Okeelanta Corporation. Both suits have been before Judge K. Michael Moore of the U.S. District Court of the Southern District of Florida and challenge the Corps’ recent attempts to improperly change a 17-year-old regulation that provides that land used for agriculture since at least 1985 can no longer be treated as wetlands.

In 1993, the Corps adopted a rule establishing that agricultural lands converted from wetlands prior to 1985 — or “prior converted croplands” — would be excluded from regulation under the Clean Water Act. Therefore, if a farmer decides to utilize land that has been excluded from regulation for some other use or to sell it to a residential or commercial builder, there is no need to get a new jurisdictional determination or go through the Clean Water Act permitting process.

However, in a 2009 memorandum, Corps Director of Civil Works Steven Stockton approved a new standard to regulate these agricultural lands when there is a change in their use. The regulatory uncertainty caused by this action is what prompted the lawsuits from NAHB and other industry groups.

In a recent positive development, this October, Judge Moore ruled in the New Hope Power case that the Corps could not change its policy without going through the usual federal process of giving public notice and offering a set time for comments from stakeholders or other interested parties. However, as yet there is no indication whether the government will appeal this ruling to the U.S. Court of Appeals for the 11th Circuit.

HBA of Greenville Holiday Office Hours

The HBA of Greenville offices will be closed Thursday and Friday, November 25 and 26, for the Thanksgiving holiday.

Elimination of Mortgage Interest Deduction, Sales Tax on New Homes Proposed

Recommendations to scale back on the mortgage interest deduction and other housing tax provisions included in two deficit reduction draft proposals released one week apart have raised serious concerns for the nation’s home builders.

A discussion draft unveiled on Nov. 10 by Erskine Bowles and former Senator Alan Simpson, the co-chairs of President Obama's bipartisan Commission on Fiscal Responsibility and Reform, lists options to completely eliminate the mortgage interest deduction or limit it to primary residences and mortgages under $500,000.

Other recommendations would be adverse for the Low Income Housing Tax Credit (LIHTC), the deduction for real estate taxes for home owners, accelerated depreciation for rental housing, energy tax incentives and tax-exempt housing bonds. In addition, the proposals would result in significantly higher tax rates for capital gains and dividends.

However, none of these proposals has been formalized, and they are only listed as potential "options." Moreover, the overall plan, which includes many controversial recommendations on Social Security, health care, defense spending and other issues, must win support of 14 of the 18 commissioners in order for Congress to consider the package. This is a high hurdle and requires the support of both Republican and Democratic members of the commission.

The commission itself has no actual power to implement its official recommendations and many of the proposals put forth by the chairmen are unlikely to garner bipartisan support.

Reactions to the plan from both sides of the political aisle have varied, ranging from outright opposition to cautious interest.

A National Sales Tax and Devaluation of the Mortgage Interest Deduction
On Nov. 17, Pete Domenici, a former Republican Senate Budget Committee Chairman, and Alice Rivlin, former head of the Office of Management and Budget under President Clinton and a member of the president’s debt commission, released their own deficit reduction plan as co-chairs of the Bipartisan Policy Center’s Debt Reduction Task Force.

The Domenici-Rivlin plan to reduce America’s deficits would devalue the mortgage interest deduction by replacing it with a 15 percent refundable tax credit for anyone who owns a home. It would also eliminate several other tax rules related to housing, including the Low Income Housing Tax Credit, real estate tax deductions and deductions for second homes and home equity loans.

The proposal would further impose a new 6.5 percent national sales tax that would be applicable for new home sales and remodeling projects, but not for the purchase of existing homes. With the average nationwide price of a new home at $257,500, this plan would impose a whopping $16,738 tax increase on a typical new-home purchase and price more than three million households out of the new-home sales market.

While the Domenici-Rivlin and Bowles-Simpson proposals are sparking controversy across the political spectrum, it has become increasingly clear that policymakers are taking a close look at the mortgage interest deduction and other housing incentives with an eye to scaling them back.

Going forward, NAHB stands poised to vigorously defend the mortgage interest deduction and other critical housing and business provisions in the tax code as events unfold.

The NAHB Board of Directors has allocated resources to fight the anticipated assault on the mortgage interest deduction, and an integrated advocacy campaign is being developed in preparation for the Obama commission's final report to be released in December.

Along these lines, in the near future NAHB will introduce a new website that will provide essential data on the mortgage interest deduction and its importance to American consumers, and will facilitate member and consumer outreach to legislators.

It should be clear from these proposals that homeownership, and particularly home building and ownership of new housing, is under attack from Washington. As NAHB works to defeat these proposals, the support of HBA members will be vital. Be ready to respond when asked and call your elected officials in Washington.

Congressman proposes elimination of onerous small business reporting requirement

Senate Finance Committee Chairman Max Baucus (D-Mont.) on Nov. 15 introduced legislation to fully repeal IRS Form 1099 information reporting requirements for small businesses and independent landlords contained in recently enacted health care and small business laws.

Starting in 2012, the Patient Protection and Affordable Care Act will require all businesses to file information returns (generally IRS Form 1099) for payments to entities that total more than $600 in a given year. The Small Business Jobs Act of 2010 further expands Form 1099 information reporting requirements so that independent landlords must now submit 1099s to businesses with which they have more than $600 of annual business as of Jan. 1, 2011.

The Small Business Paperwork Relief Act, S. 3946, would repeal these new and expanded requirements without providing any revenue offsets to cover the $19.2 billion cost over 10 years.

The lack of offsets could prove controversial with some Republican deficit hawks. Senator Mike Johanns (R-Neb.) has reintroduced his own legislation, the Small Business Paperwork Reduction Act, which fully repeals the 1099 reporting requirements but offsets the cost with unspent and unobligated federal dollars. Senate Democrats have opposed this offset in the past, with the Senate previously voting 46 to 52 to reject a similar amendment offered by Sen. Johanns.

Introduction of the Baucus bill is a positive development because both parties are now on record to completely overturn these small-business tax reporting provisions. Senate Democrats had previously proposed a small business carve-out, rather than a full repeal as espoused by Republicans, because they were looking for offsets to make up for revenue that would be lost.

NAHB continues to oppose all the expansions of the 1099 requirements and push for a full repeal because they are a costly and unfair administrative burden for small businesses. NAHB has submitted comments to the Treasury Department opposing the new rule, and is working within a broad coalition of business groups to seek congressional repeal.

In announcing his plans to introduce S. 3946, Baucus said he heard the message from small business owners that these reporting requirements would place too large of a paperwork burden on businesses struggling in a still-recovering economy.

“I have heard small businesses loud and clear and I am responding to their concerns,” Baucus said in a statement.

Builder Review, November 16, Published

Builder Review is the HBA of Greenville's twice monthly newsletter. Builder Review is distributed to all members and subscribers by email.

Download the latest issue of Builder Review by clicking here.

FHFA Announces No Change to Maximum Confroming Loan Limits for 2011

The Federal Housing Finance Agency (FHFA) has announced that, under terms set forth in a recently-enacted Congressional continuing resolution (Public Law Number 111-242), the maximum conforming loan limits for mortgages originated in the first nine months of 2011 will remain unchanged from existing loan limits for 2010 originations. Those limits are generally $417,000 but can be as much as $729,750 in certain high cost areas in the contiguous United States.

The maximum conforming loan limit in all 46 counties in South Carolina is $417,000.

Thursday, November 18, 2010

HBA of Greenville is Conducting a Survey of the Home Builders' Legislative Agenda

Your HBA of Greenville is conducting a survey of the 2011 Home Builders' Legislative Agenda. Among the issues under consideration are extending the Multiple Lot Discount Program, reforming business licenses, and strengthening Home Builders licensing. Please participate in the survey and help your HBA refine the legislative program for next year.

Please click on this link to particpate in the survey.

If "it" affects a builder "it" will affect an Associate

My name is Michael Kurpiel and I am currently serving as NAHB’s National Associate Chairman. I am writing to for a specific reason; I need the help of associate members of the HBA throughout the Federation.

I am requesting for any and all associates, who are experiencing loss of builder business due to the Acquisition, Development, and Construction Lending crisis or appraisals, to share with me any stories you may have that demonstrate the effect that restrictions on lending to Home Builders have had on your businesses. We need to demonstrate to those in power in Washington, DC, that it is not just the builders who are affected, it is the ENTIRE building industry.

Please email me, or the Executive Director of your local HBA, with all information you can share about how the downturn in Home Building has affected your business. I will take all stories you share to NAHB staff in Government Affairs and Public Affairs.

I know how much stress you are all under and that stress is directly tied to lack of building. With the strength of two thirds of our Federation’s members fully behind our builder members, we can move towards a better tomorrow.


Michael Kurpiel, CGA, CGP
Director of Trade Association Relations

National Associate Chairman
National Association of Home Builders