A Letter from HBASC President, Andy White

A word from the President of the Home Builders Association of South Carolina, Andy White:

I want to thank everyone who attended the 46th Annual Bird Supper. I am told we had more than 350 people in attendance and based on reports from legislators our members served our industry well by sharing our legislative agenda. I personally enjoyed the fellowship I shared with other HBA members and the forum to discuss our issues with one another. The mission of the Home Builders Association of South Carolina (HBASC) is to promote and protect the construction industry in S.C. in the legislative and regulatory arenas. We have been very successful in this mission because we act on our member’s concerns. I came away from the Bird Supper that HBA members share in the common theme that South Carolina’s current system of business licensing is in dire need of reform. 

 
The current system of business licensing is overly complex, making it costly and burdensome for businesses to comply with (and for localities to enforce). A single small business that is a local service provider in a metro area like Charleston or Columbia would have to have as many as 70 different business licenses to serve the entire area. On the administrative side, local governments’ waste substantial resources (estimated at more than $20 million annually) in administering the system that could better be used for other more important local government services.

The licensing system has strayed from its original purpose—it does nothing to ensure the quality or legitimacy of a business, but rather exists simply as an administratively costly form of revenue for local governments. The high fees, record keeping burden, compliance costs, and need to maintain licenses in areas that may not even be served in a particular year are a substantial drain on the resources small businesses have to operate and grow as well. 

Because business license fee taxes are based on gross revenue and do not exempt intermediate purchases, they result in double, triple or even higher levels of taxation when one business purchases goods or services from another to be utilized in the production of a final good. If a builder member sells a house for $150,000 he must pay a business license fee for the entire sale price on the home. Each sub-contractor (roofer, plumber, framer, electrician, painter, etc.) must also pay a business license fee for their gross revenues. Building supply companies, manufacturers, delivery companies and Realtors must also pay a business license fee on their gross revenues. In essence, each time the goods or services changes hands, it is subject to additional taxation. A $150,000 house has been taxed as if it were a $400,000+ project. This results in higher prices for consumers and reduced business revenue. In addition, the current system also harms consumers in a second way by lessening competition that would result in lower prices. Therefore, the current system results in a higher cost of living for South Carolina residents. In fact, a recent study on reforming S.C.’s system of business licensing by Dr. Russell Sobel states that the typical household in South Carolina bears an additional $500+ due to these fees.

The current system does not provide a clear and rational link between the fees charged and the public services the license actually provides that are not already covered through other forms of business taxation. The rate differentials across types of businesses are usually based on a census-defined business classification system that has no relation to the true costs or burdens. Because of this, the current system is overly selective and subject to political manipulation. 

Local governments have no incentive to improve the system on their own; it must be done through state-level legislation, for which there is both historical precedent and a constitutional responsibility. Our neighboring states of North Carolina, Georgia and Florida have taken steps to substantially improve their systems by either eliminating business licensing or they only require the fees to be paid where the business is physically located and/or applying to no more than 100% of revenue. South Carolina and especially small business owners now find itself in a severe competitive disadvantage. The HBASC has worked with Rep. Todd Atwater and other elected officials concerned with this issue and small business owners to support a bill that will reform the business license process. 

The HBASC supports bill H.4967 because we must move to a system in which each business must obtain only one license, in the area in which they file their state income tax return, that is then respected by other jurisdictions would result in substantial costs savings for both businesses and local governments, and promote entrepreneurship and competition in the state. A separate bill has been filed with the support of the Municipal Association of S.C. (H.5109) that does not address accountability, but rather provides an additional revenue stream for the Municipal Association to be paid by our members and other S.C. business owners.

Our past achievements have been based on your involvement. Our future triumphs teeter on your actions again.


Andy White, President

Remodeling Market Index Dips in 1st Quarter

The National Association of Home Builders' Remodeling Market Index posted a reading of 54 in the first quarter of 2016, dipping four points below the previous quarter but remaining in positive territory.

An Remodeling Market Index above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than those who report it is lower. The overall Remodeling Market Index averages ratings of current remodeling activity with indicators of future remodeling activity.

“Remodelers were solidly booked for jobs in the first quarter of 2016 but calls and appointments for work slowed down in comparison to the end of 2015,” said 2016 National Association of Home Builders Remodelers Chair Tim Shigley, CAPS, CGP, GMB, GMR, a remodeler from Wichita, Kansas. “Volatility in the financial markets during the first quarter may have impacted consumers’ readiness to commit to projects.”

The Remodeling Market Index’s current market conditions index stands at 55, down a point from the previous quarter. Among its components, major additions and alterations continued gains from the previous quarter, rising to 55 from 54. The smaller remodeling projects component decreased two points to 54, and the home maintenance and repair component of the Remodeling Market Index decreased two points to 56.

At 53, the Remodeling Market Index’s future market conditions index decreased six points: Calls for bids decreased to 51 from 58, the amount of work committed fell to 52 from 57 and appointments for proposals dropped to 52 from 60. Meanwhile, the backlog of remodeling jobs decreased only three points to 58 from the previous quarter’s reading — and high-water mark — of 61.

“Minor declines in the small additions and maintenance categories coupled with a slight uptick in major additions resulted in a flat outcome for current market conditions,” said National Association of Home Builders Chief Economist Robert Dietz. “While the future market conditions of the index dipped slightly, we still anticipate modest growth in the remodeling industry over the course of 2016.”

For data tables on the Remodeling Market Index, visit www.nahb.org/rmi. For more information about remodeling, visit www.nahb.org/remodel.

February 2016 U.S. House Price Index

From the Federal Housing Finance Agency:

U.S. house prices rose in February, up 0.4 percent on a seasonally adjusted basis from the previous month. From February 2015 to February 2016, house prices were up 5.6 percent. For the nine census divisions, seasonally adjusted monthly price changes from January 2016 to February 2016 ranged from -0.7 percent in the South Atlantic division to +1.7 percent in the Middle Atlantic division. The 12-month changes were all positive, ranging from +2.5 percent in the New England division to +8.4 percent in the Pacific division.

The Cost of Constructing a House

The National Association of Home Builders' most recent construction cost survey (conducted in August of 2015) shows that, on average, 61.8% of the sales price goes to construction costs and 18.2% to the finished lot costs. On average builder profit (including owners' salary and return on capital) accounts for 9.0% of the sales prices. Take a look at the table below and read the full report here.

Two-thirds of Home Buyers Seek Single-Story Living

Most home buyers apparently aren’t afraid of doing a little yard work. The majority – regardless of age – say they’d prefer a single-family detached home. A much smaller group of buyers have a preference for townhouses, attached homes, multifamily apartments or condos.

The findings come from National Association of Home Builder’s 2015 study Housing Preferences of the Boomer Generation: How They Compare to Other Home Buyers; other National Association of Home Builders studies also show preferences for home size and community amenities.

A recent Eye on Housing post also noted preferences for home layout. Sixty-four percent of all buyers want a single-story home, but that figure is largely driven by seniors and baby boomers. Less than half of Gen Xers and barely a third of millennials are interested single-story living.

However, the majority of home buyers in each generation can still agree on one thing: lugging laundry to and from the basement is a hassle. Most want the laundry room on the first floor.