New Floodplain Rules Would Limit Construction

Your Home Builders Association is digging into a new Executive Order that could have a significant impact on how and where our members develop, build and remodel homes and communities near coasts and rivers.

On Jan. 30, President Obama signed Executive Order (EO) 13690, part of the Administration’s plans to improve climate resiliency as directed by the President’s Climate Action Plan.

It updates a 1977 EO that required federal agencies to do what they could to preserve the nation’s floodplains — areas subject to a 1% chance or greater of flooding in any given year — and limit their development where possible.

The new EO creates a new Federal Flood Risk Management Standard (FFRMS) for all federally approved or funded projects and significantly expands the areas to be protected. Federal agencies will have three options for establishing the new FFRMS elevation and flood hazard area:

• Climate-informed Science Approach. Using the best-available data and methods to forecast changes from flooding.
• Freeboard Value Approach.Adding an additional 2 or 3 feet to the base flood elevation of the 100-year flood (see right).
• 500-year Elevation Approach. The area subject to flooding by the 0.2%-annual-chance flood.

And while the Administration has stated that the EO is targeted to federally financed projects, your Home Builders Association is concerned that the scope could be much broader: A strict reading implies it could include homes built under FHA and HUD housing programs and the National Flood Insurance Program. And conceivably it could affect permitting under the Clean Water Act — if all waters in floodplains are subject to federal jurisdiction, if the new Waters of the United States definitions are finalized as proposed — and the Endangered Species Act, because the floodplain is identified as critical habitat for many listed species.

The Administration said it wants to hear from those affected by the EO and plans a series of “listening sessions” around the country. The first one will be held in Ames, Iowa on March 3, with additional sessions scheduled through the remainder of the month.

Members can comment in writing, too, and those comments are due April 6. Get details from this Federal Register notice and this FEMA fact sheet.

How the President's Proposed Budget Affects Home Builders

President Obama on Feb. 2 unveiled a nearly $4 trillion fiscal 2016 budget proposal that includes $650 billion in tax increases to pay for infrastructure and tax breaks geared toward middle class households. The administration is also proposing to eliminate sequestration and increase non-defense and defense discretionary spending. To pay for this, the White House is proposing $1.8 trillion in tax hikes and other offsets and savings, including $400 billion in healthcare expenditure reductions.



We have heard the pundits discuss the proposal, mostly in terms of the political impact.  But how does the President's proposal affect Home Builders?

HUD

• Proposes $49.3 billion in funding, an 8.7% increase over the fiscal 2015 approved appropriation.
• Increases funding for the HOME program from $900 million in fiscal 2015 to $1.06 billion.
• Decreases Community Development Block Grant funding from $3.07 billion to $2.88 billion.
• Restores approximately 67,000 Housing Choice Vouchers lost in 2013 due to sequestration.
• Supports a shift of Section 8 Project-Based Rental Assistance funding from a fiscal to a calendar year basis.
• Estimates that FHA’s Mutual Mortgage Insurance Fund, which supports FHA single-family programs, will grow by $14 billion over the next two years.
• Describes the recent decrease in the annual mortgage insurance premium for FHA-insured single-family loans from 135 to 85 basis points, which the administration estimates will allow an additional 250,000 low- and moderate-income borrowers to become home owners.
• Business and Individual Tax Provisions
• Limits the amount of capital gain deferred under section 1031 from the exchange of real property to $1 million (indexed for inflation) per taxpayer per taxable year.
• Characterizes carried interest as ordinary income.
• Recommends extending the exclusion from income for cancellation of certain home mortgage debt until the end of 2017.
• Limits the value of certain tax expenditures to 28% of exclusions and deductions that would otherwise reduce taxable income in the 33%, 35% or 39.6% tax brackets.
• Increases the highest long-term capital gains and qualified dividend tax rate from 20% to 24.2%. The 3.8% net investment income tax would continue to apply. The maximum total capital gains and dividend tax rate including net investment income tax would thus rise to 28%.
• Imposes a new minimum tax, called the Fair Share Tax (FST), on high-income taxpayers. The tentative FST would equal 30% of AGI less a credit for charitable contributions.
• Recommends increasing the estate, generation-skipping transfer (GST) tax, and gift tax top tax rate to 45% with an exclusion amount of $3.5 million for estate and GST taxes, and $1 million for gift taxes. There would be no indexing for inflation.
• Requires a contractor receiving payments of $600 or more in a calendar year from a particular business to furnish to the business (on Form W-9) the contractor’s certified taxpayer identification number (TIN). A business would be required to verify the contractor’s TIN with the IRS.
• Repeals Section 530 of the Revenue Act of 1978, which provides an explicit safe harbor for employers when classifying workers as employees or independent contractors.

Energy Tax Provisions

• Calls for extending and updating the current 179D deduction for energy-efficient commercial buildings, including multifamily buildings.
• Recommends extending the Section 45L tax credit for energy efficient new homes.

Low Income Housing Tax Credit Proposals

• Allows states, based on a formula, to convert up to 18% of their private activity bond volume cap into 9% credits.
• Allows LIHTC projects to serve individuals earning up to 80% of area median income (AMI) as long as the average income of all tenants remains no more than 60% of AMI.
• Opposes fixing the 9% credit rate. Instead, recommends a new way to calculate the floating rate for both the present value applicable percentage and the 30% present value applicable percentage, but only with respect to allocated LIHTCs. Under the proposal, the discount rate to be used would be the average of the mid-term and long-term applicable federal rates for the relevant month, plus 200 basis points.
• Adds the preservation of federally assisted affordable housing as an eleventh selection criterion that qualified allocation plans must include.
• Allows HUD to designate as a qualified census tract (QCT) any census tract that meets the current statutory criteria of a poverty rate of at least 25% or 50% or more of households with an income less than 60% of AMI. That is, the proposal would remove the current limit under which the aggregate population in census tracts designated as QCTs cannot exceed 20% of the metropolitan area’s population.
• Occupational Safety and Health Administration
• Provides a 7% increase over the 2015 enacted level to $592 million.
• Requests 40 new OSHA staff to support the investigations (i.e., inspections) resulting from the new injury reporting requirements, which require employers to report work-related hospitalizations, amputations and losses of an eye.

Labor/Immigration

• Emphasizes the need to strengthen worker misclassification programs, including new penalties for recordkeeping violations and a focus on “high-risk” and “fissured” industries, such as construction. The budget seeks $10 million to strengthen worker misclassification programs at the state level.
• Calls on Congress to act on comprehensive immigration reform this year. The administration supports the Senate approach taken in 2013, which includes the limitation of a workable visa plan for the construction industry.
• Includes $2 billion for the Paid Leave Partnership Initiative to assist up to five states that wish to launch paid leave programs. Participating states would be eligible to receive funds for the initial set-up and half of the benefit costs of the program for three years. The budget also includes a $35 million State Paid Leave Fund to provide technical assistance and support to states that are still building the infrastructure they need to launch such programs in the future.

It is important to note that no Executive Budget is ever enacted “as is” by Congress and this budget may not be enacted at all because Republicans control both the House and the Senate. Given the size, cost, complexities and major policy overhauls that this blueprint entails, the battle ahead is likely to be contentious as lawmakers on both sides of the aisle debate its merits on an array of fronts — from social spending to energy policy to taxes.

Your HBA will remain deeply engaged as the budget process moves forward, fighting to strip out any provisions that will harm housing and promoting elements that will help small businesses and the housing sector.

President Obama Signs Jobs Training Bill Into Law

President Obama on July 22 signed into law H.R. 803, the Workforce Innovation and Opportunity Act.

Championed by NAHB, the legislation will help alleviate labor shortages in the housing industry by providing investment and resources to train workers for careers in home building and other industries.

Further, the law reauthorizes the Job Corps and Youthbuild programs as federal programs operated through the U.S. Department of Labor.

In partnership with NAHB and Job Corps, HBI, formerly the Home Building Instutute, is a national leader for career training and job placement in the building industry. HBI’s Job Corps training programs are national in scope, but implemented locally using proven models that can be customized to meet the workforce needs of communities across the United States and internationally.

At the signing ceremony, Obama said the bill “will give communities more certainty to invest in job-training programs for the long run. It will help us bring those programs into the 21stcentury by building on what we know works based on evidence, based on tracking what actually delivers on behalf of folks who enroll in these programs – more partnerships with employers, more tools to measure performance, more flexibilities for states and cities to innovate and to run their workforce programs in ways that are best suited for their particular demographic and their particular industries.”

Job Corps prepares students with the skills and experience they need for successful careers through pre-apprenticeship training, job placement services, mentoring, certification programs, textbooks and curricula. With an 80% job placement rate for graduates, HBI Job Corps programs provide services for disadvantaged youth in 73 centers across the country.

View a summary of the bill.

Statement from Home Builder Rick Judson, Chairman of NAHB

On August 5, President Obama delivered a speech in Phoenix, AZ, that focused on the Federal Government's housing-related policies.  Rick Judson, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Charlotte, N.C., issued the following statement in response to the president's speech:

“NAHB applauds President Obama for affirming the importance of maintaining a federal backstop as part of efforts to revamp the housing finance system and protect the 30-year mortgage. This will preserve financial stability, promote investor confidence and limit taxpayer exposure.

“The President also stressed that a healthy housing market is critical to create jobs, build a strong middle class and maintain a vibrant economy. In normal economic times, housing accounts for more than 17 percent of the nation’s gross domestic product. Constructing 100 homes creates more than 300 full-time jobs and generates $8.9 million in tax revenues that help local governments to provide essential services such as schools, roads, and police and firefighter protection.

“Among other reforms, the nation’s home builders also support strengthening the FHA to facilitate the flow of mortgage credit to qualified home buyers, cutting red tape and easing tight credit conditions that are preventing creditworthy borrowers from obtaining home loans, and supporting the Low Income Housing Tax Credit to ensure the availability of safe and affordable rental housing. This will help spur job growth, provide homeownership and rental opportunities for all Americans and boost the economic expansion.

“NAHB looks forward to working in a bipartisan manner with the White House and Congress to achieve these goals in the weeks and months ahead.”

Congress votes to extend for five years the National Flood Insurance Program

On June 29, 2012, both the U.S. Senate and House gave approval to extending authority for the National Flood Insurance Program  through 2017.  The authorization was part of the larger Federal transportation bill that was approved shortly before Congress recessed for Independence Day week.  The bill now awaits President Obama's signature.

NAHB, along with the National Association of Realtors and other groups worked hard for a long-term extension of the flood insurance program.  Since 2008 Congress has been extending the National Flood Insurance Program a few months at a time and twice let the program's authority lapse, stalling thousands of real estate transactions in the process and potentially interrupting to the most vital part of our nation's economy: real estate.

Passage of the 5-year reauthorization will bring certainty to real estate transactions in more than 21,000 communities nationwide where flood insurance is required for a mortgage. The bill ensures the program will continue long-term for more than 5.6 million business, and homeowners, who rely on it.  Extension of the program also insures that taxpayers will spend less on federal assistance for flood disasters over the long run.

Did you know: the Affordable Care Act could have been a lot worse for small builders?

Robert Markel, CGR

By Robert Markel, CGR
President, Home Builders Association of Greenville 
President and Owner, Hadrian Construction Company

Now that the U.S. Supreme Court has ruled on the Affordable Care Act (Obamacare), it is worth revisiting the point that this legislation could have been a lot worse for small Home Builders and Remodelers if not for the actions of the National Association of Home Builders.

In the version of the Affordable Care Act that passed the U.S. Senate, the mandate to require employers to offer health insurance to its employees would have been effective for any "construction-related business" with five or more employees, even while other businesses had a threshold of 50 employees.  NAHB aggressively lobbied Congress to remove that requirement that clearly would have harmed construction firms.  NAHB organized its members and together the five-employee mandate was removed before the bill was presented to the President for his signature.

As a member of the Home Builders Association of Greenville, you enjoy a three-in-one membership that includes the National Association of Home Builders and the Home Builders Association of South Carolina.  While locally our mission is broad and includes advocacy, as well as promoting and serving the industry, at the state and national level your Home Builders Association has one central mission: representing Home Builders in the halls of government.

Your membership in your Home Builders Association is a vital part of insuring that all Home Builders and related businesses are properly looked after in Washington DC and Columbia.  Please remember that the next time you receive your membership renewal notice.

About "Builders for" emails from NAHB

HBA members have been receiving emails from NAHB in recent weeks titled "Builders for" followed by the name of a candidate for President of the United States.  The most recent email was from NAHB member Ron Jones on behalf of Builders for Obama.  Another this year came from Builders for Romney.

First, a little bit about membership in your Home Builders Association, just in case you are unsure.  As a member of the Home Builders Association of Greenville, you also become a member of the National Association of Home Builders and the Home Builders Association of South Carolina.  A portion of your dues are paid to the national and state organizations, which focus primarily on national and state government matters.

NAHB does not endorse nor otherwise support candidates for President of the United States.  It does support candidates for Congress through the national BuildPAC political action committee.

However, to insure that members are educated about candidates for the Office of President of the United States, NAHB initiated a program that allows "Builders for" groups, made up of HBA members, to send an email to HBA members around the country about their favorite candidate.  These emails are infrequent and informational.  NAHB has not sold your email address to any third party, including any political campaigns.  The "Builders for" emails are being sent by NAHB on behalf of HBA members who support a candidate for President.

You have the option of opting out of the "Builders for" emails without opting out of other e-communications from NAHB.

NAHB: Good and bad for housing in President's job bill

Earlier this week, the White House unveiled specific details of President Obama’s recent jobs proposal (the American Jobs Act). The proposed $447 billion legislation contains a mix of helpful and worrying proposals for the housing sector.

From a positive perspective, some of the proposals should provide a short-term boost to economic growth and job creation. Without job creation, new households cannot form and housing demand will remain weak. The legislation offers an extension and expansion for 2012 of the payroll tax cut currently in place for 2011. For 2011, the normal 6.2% payroll tax rate on covered wages was reduced to 4.2%. The proposed legislation would reduce this even further to 3.1% in 2012. Such a tax cut should help consumer spending growth, but its impacts will be diluted by ongoing household deleveraging.

The bill would also lower the employer-paid portion of payroll tax, normally also 6.2% of covered wages, to 3.1% in 2012 for the first $5 million in wages. This $5 million limit means that this benefit would be targeted to small businesses. The bill would also extend expensing for business property (buildings however do not qualify) placed in service in 2012. The bill also extends the start date of the controversial 3% withholding requirement for contractors doing work for most government agencies. The present-law effective date for this requirement is 2012, and the bill would delay this rule until 2014.

The legislation also contains some additional hiring tax credits, although economists are of mixed opinion on whether such incentives are effective in creating jobs. The bill doubles the current tax credit for hiring disabled, long-term unemployed veterans to $9,600 and creates two new hiring credits; $2,400 for hiring an short-term unemployed veteran and a $4,000 tax credit for hiring any individual who has been unemployed longer than six months.

On the spending side, the legislation provides $15 billion to purchase and refurbish vacant and foreclosed homes. The funds would be allocated by both state/local governments and the federal governments, to for-profit and non-profit developers. Homes refurbished under this program would be required to be sold at a price no higher than the total cost of acquisition and rehabilitation. The bill also provides $25 billion for school modernization and $27 billion for highway and transportation repair and improvement. All spending proposals would be subject to Davis-Bacon wage rules.

President Obama also included a set of revenue raising proposals to offset the cost of the proposed legislation. Unfortunately for the housing sector, many of the proposals would have significant negative impacts on housing. And these proposals have been offered and criticized in previous budget debates, with one even having been significantly expanded.

The largest revenue raiser is to limit the size of certain deductions and exclusions to a 28 percent rate for high-income taxpayers (single taxpayers reporting more than $200,000 in adjusted gross income (AGI) and joint filers who report more than $250,000 in AGI). In previous versions of this proposal, the change would reduce the value of the mortgage interest deduction and the real estate tax deduction. For a middle-call taxpayer who lives in a high cost area and faces a 33 marginal tax rate, the value of the housing-related tax deductions could be reduced by up to 15%, thereby producing significant tax increases. A Tax Policy Center report found that such a move could reduce housing prices in large metropolitan areas by as much as 10 percent.

However, the 28 percent cap proposal as defined by the jobs bill is even larger than previous versions. Now under the proposal, tax-exempt bonds would no longer be tax-exempt. A portion of the bond income would now be taxable for high-income taxpayers, who being a significant portion of bond buyers could produce negative impacts for state and local governments to raise funds. Among the bonds that would be affected would be tax code section 142 multifamily rental bonds and section 143 mortgage revenue bonds, which provide funds for affordable mortgage financing for homebuyers.

Moreover, the proposed 28 percent cap would also affect a number of above-the-line deductions (deductions that can be claimed by itemizers and non-itemizers), such as the adjustment for qualified moving expenses, as well as the section 199 domestic production activities deduction. The reduction of the section 199 deduction, which can reduce taxable income up to 9 percent for home builders and other construction and manufacturing businesses, is particularly troublesome in that it would single out businesses organized as pass-thru entities (such as S Corporations and LLCs) but leave C Corporations unaffected.

Additionally, the bill once again proposes increasing the tax on capital gain due to a carried interest. As we have explained before, the use of carried interest is a common practice for multifamily developers, and would result in lower property tax revenues and reduced job creation for multifamily development. The proposal would increase the tax on some multifamily rental properties from 15% to rates as high as 35%, depending on how the project is financed.

All the proposed tax increases would take effect in 2013.

Given the ongoing weakness in housing, with nearly 1.5 million jobs lost in the residential construction sector, and the fact that home building typically leads the economy out of recession, it is disappointing to see a jobs package that includes tax provisions that would weaken housing’s contribution to economic growth. On balance, the positive effects from job creation offered by some of the proposals are outweighed by the negative tax recommendations that would increase taxes on future homebuyers, current homeowners, and rental housing developers, particularly in high cost areas of the nation. Add to that policy uncertainty from the president’s promised September 19th rollout of a budget proposal for supercommittee consideration, and it is difficult to see much policy support for housing for the duration of 2011.

Bankers, business leaders say credit crunch is regulators' fault

Testifying this week before the U.S. House Small Business Committee hearing, bankers and small business owners told lawmakers that a harsh regulatory environment is responsible for the tight business credit market.

"What we found is that the FDIC regulators are inconsistently applying regulations throughout the banking community," Lynn Ozer, executive vice president of Susquehanna Bank, said in his testimony representing the National Association of Government Guaranteed Lenders.

The hearing focused on the contention from regulators and President Obama that the Federal government does not have any impact on banks' ability to lend money. Witnesses argued that Federal government regulation is impeding banks' ability to lend money to businesses.

Source: American Banker