| November 19, 2007 |
By Brian Catalde
NAHB President and
Jerry Howard
NAHB Executive VP and CEO |
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Focusing on ways to reduce home foreclosures,
the Federal Reserve Board and other banking agencies have been calling on mortgage lenders and servicers to pursue prudent loan workouts, according to Fed Chairman Ben Bernanke in testimony before the U.S. Congress on Nov. 8.
 Echoing comments made earlier in the week by Fed Governor Randall Krosner at NAHB's Symposium on Housing Affordability, Bernanke told the Joint Economic Committee that rising foreclosures could further threaten the U.S. economy as it moves into a slower phase. With 450,000 subprime mortgages per quarter scheduled to undergo their first interest rate reset between now and the end of next year, the expectation is that more borrowers will experience payment shock and become delinquent in making their monthly loan payments.
"Should the rate of foreclosure rise proportionately, communities as well as individual borrowers would be hurt because concentrations of foreclosures tend to reduce property values in surrounding areas," Bernanke said. "A sharp increase in foreclosed properties for sale could also weaken the already struggling housing market and thus, potentially, the broader economy." Elaborating on efforts the Fed has taken to ward off this possibility, Bernanke noted that "Our contacts with the mortgage industry suggest that servicers recently have stepped up their efforts to work with borrowers facing financial difficulties or an imminent rate reset." Some servicers, he said, have been "pro-active about contacting borrowers who have missed payments or face resets, as experience shows that addressing the problem early increases the odds of a successful outcome."
Similarly, at NAHB's symposium that week, Fed Governor Randall Krosner said that "It is imperative that we work together as a financial services community to look for ways to help borrowers address their mortgage challenges, particularly those who may have fewer alternatives, such as lower-income families." Kroszner noted that the typical subprime mortgage experiencing a first reset in early 2007 had its rate increase from 7% to 9.5%, producing an increase of 25% to 30% in the monthly payment. "This increase translates into an additional debt obligation of $350 per month for the average subprime variable-rate mortgage," he explained. Read more about Bernanke's congressional testimony and Kroszner's presentation at our housing affordability symposium in NBN Online.
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A plan to tax "carried interest" to pay for AMT relief
 is generating substantial opposition from NAHB and more than a dozen like-minded industry groups. Legislation approved by the House of Representatives on Nov. 9, H.R. 3996, would provide temporary relief from the Alternative Minimum Tax and also contains favorable mortgage debt forgiveness provisions as well as extensions for dozens of expiring tax provisions. Unfortunately, however, a plan to tax carried interest to pay for the bill would impose a multi-billion-dollar tax increase on real estate at a time when the industry is already experiencing a downswing, and is therefore the reason for NAHB's opposition. As NAHB President Brian Catalde explained in a letter sent to lawmakers before they voted on the bill, "The nation's home builders share the goals embodied in H.R. 3996 to halt the reach of the AMT for another year and help struggling American families keep their homes. However, the carried interest proposal to offset the cost of this relief is the most significant and potentially disruptive tax on real estate since the 1986 Tax Reform Act and would result in higher prices for multifamily housing, less job creation and lower community development, especially in underserved areas."
The legislation, which narrowly passed the House by a vote of 216 to 193, would tax the return on all carried interest allocable to a partnership as ordinary income rather than capital gains. Because this includes the carried interest held by general partners in real estate investment partnerships, the legislation would have a significant negative impact on the multifamily housing industry and on the bottom lines of companies that use these partnerships.
Looking ahead, despite being approved by the House, the bill is unlikely to be enacted into law as written, and the carried interest provision specifically faces long odds in the Senate, where key members have expressed discomfort with it. Moreover, the White House has threatened to veto the bill. Read more in NBN Online.
NAHB Member Benefit: NAHB is fighting to avoid a massive tax increase on real estate that would disrupt the investment relationship between developers and investors. If enacted into law, the bill would subject capital gains income generated by carried interest to tax rates of up to 35% as opposed to the current rate of 15%. This tax increase of more than 133% on real estate entrepreneurs would have a pervasively damaging impact on jobs, economic growth and the tax base.
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Keeping the latest S&P/Case-Shiller home price data in perspective,
 NAHB points out that while the report shows a 4.4% year-over-year price decline for 20 of the nation's largest metro markets, closer examination of the data reveals that these same markets appreciated in value by an average of more than 50% over the past five years. The message to prospective buyers: Housing remains a solid long-term investment. Moreover, as the data clearly shows, the current housing price correction is most pronounced in the once super-heated markets of California, Nevada, Florida and Arizona. By comparison, most other markets have shown fairly modest price declines. In Chicago, for example, home prices declined 1.3% between August 2006 and August 2007, but posted a 34.2% gain for the five-year period between August 2002 and 2007. Among the 20 markets surveyed by S&P/Case-Shiller, which represent more than 40% of the U.S. population, four posted home price appreciation rates of more than 80% over the past five years and 11 registered gains exceeding 45%. Read more of NAHB's analysis in our press release and NBN Online.
NAHB Member Benefit: When reports like this one are released to the national media, NAHB seeks to provide the proper perspective and context to the data to discourage sensationalized and negative press coverage and avoid discouraging prospective home buyers. In addition, NAHB does extensive media outreach when such figures are released and offers assistance with media inquires to our members and affiliated HBAs. Contact Paul Lopez (x8409) for help with related media outreach.
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Helping you fight inclusionary zoning battles
is the objective of a new policy manual for NAHB members. The "National Survey of Statutory and Case Law Authority for Inclusionary Zoning - Policy, Practical and Legal Challenges to Inclusionary Zoning" is a resource manual geared to home builders, developers, local HBAs and communities grappling with the issue of housing affordability. The guide includes a comprehensive list of critical policies that association members can adopt and questions they can ask in response to any proposed inclusionary zoning ordinance. Also included in the manual is a limited case law summary as well as a helpful review of statutory authority for inclusionary zoning, identifying how various states enable this approach to be used. The new manual is available free to NAHB members online by clicking here. Meanwhile, NAHB has retained nationally known consultants to do further research on this topic, with the findings expected to be available by the end of this year. Additional resources are available to association members in NAHB's Housing Affordability Toolkit, which has been recently updated. Contact Debbie Bassert (x8443) or Ed Tombari (x8309).
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OSHA's final rule on employer-paid personal protective equipment
 was issued on Nov. 15. Under the rule, all personal protective equipment (PPE), with few exceptions, must be provided at no cost to employees. However, the rule only addresses who pays for PPE, not the types of PPE that must be used. Specifically, the rule states that the employer is required to pay for any PPE used by its own employees to comply with the PPE requirements of an OSHA standard. This means that, for example, when employees are in danger of head injury from impact or from falling or flying objects, the employer must pay for hard hats to comply with the OSHA safety standard. The final rule does, however, contain a few exceptions. Employers are NOT required to pay for:
-non-specialty safety-toe protective footwear, including steel-toe shoes or steel-toe boots;
-non-specialty prescription safety eyewear;
-ordinary clothing, such as shirts, pants, street shoes, and normal work boots; or
-weather-related gear, skin creams or other items used solely for protection from weather, including winter coats, jackets, gloves, parkas, rubber boots, hats, raincoats, ordinary sunglasses and sunscreen.
The rule also does not require employers to pay for uniforms, caps, or other clothing worn solely to identify a person as an employee, or for items worn to keep employees clean for purposes unrelated to safety or health, such as jeans, aprons or other apparel. As for replacements of PPE, the rule states that employers must pay for that equipment EXCEPT when the employee has lost or intentionally damaged the PPE. Employers will be required to pay for the covered equipment used by their own employees no later than May 15, 2008. Read more in the next NBN Online, or contact Rob Matuga, x8507.
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The mammoth task of preparing a national green building standard
 got another step closer to completion at the end of last month with the conclusion of a second round of hearings in which our stakeholder committee reviewed and voted on about three-fourths of the 1,100 public comments that have been received on a wide range of topics within the standard. Reacting to concerns that first-time home buyers may be priced out of the market, the committee, led by NAHB and representatives of the International Code Council, worked to ensure that the threshold for the bronze level of the green building certification will be appropriate for more affordably priced homes. Committee members were in agreement that the entry level of the standard must account for cost considerations while remaining as robust as possible to result in real benefits to the home owner and environment. Meanwhile, the addition of an "emerald" level above the bronze, silver and gold levels of green building certification will keep the bar high for those who can afford the full array of green features. Reaching a consensus on a scoring system that will deliver the greatest reward for the practices and strategies that provide the greatest benefit has required a great deal of work, but so far everything is proceeding on schedule. At this point, the committee still has work to do on the chapters dealing with points, water conservation, indoor environmental quality and other subjects, and will therefore meet for a third public hearing on Dec. 3-4 in Washington, DC. They will release a second draft standard for final comment following that meeting.
NAHB Member Benefit: NAHB is committed to helping our members take advantage of arising opportunities in green building while avoiding inflexible, unworkable and costly mandates. For the latest developments in our efforts to create a national green building program, visit www.nahb.org/greenbuildingprogram, or contact Calli Schmidt at x8132.
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Our new online speaker directory
 is a great resource for HBAs and NAHB members who want to ramp-up attendance at their next meeting or event by signing up an expert presenter to talk about any of the following subjects (and then some):
-trends and forecasting
-professional development
-customer service
-sales and marketing
-50+ housing
-green building
-business management
-builder software and information technology
Motivational and keynote speakers are also available through the Online Speaker Directory. You can search this database by topic, state, last name or keyword, and each listing provides the speaker's area of expertise, contact information and how far they are willing to travel. This is just one more way that NAHB's Web site puts the resources you need at your fingertips, so check it out before your next event!
NAHB Member Benefit: NAHB members can add themselves to the directory free of charge for one year and then enhance their existing directory listing for a small fee. Non-members must purchase a non-member listing online from the NAHB Web site. Contact Maria Nande (x8435) for more information.
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NAHB's Quick Issues Index
 documenting the latest advances on our top Advocacy issues has just been updated in conjunction with this week's Winter Executive Board Meeting in Boca Raton, FL. It's now available to all logged-in NAHB members on our Web site. Readers of this report will recall that this particular resource was first developed last year as an efficient means of updating our leadership and providing contact information and Web addresses telling you where to go for more data on a given subject. The Quick Issues Index can be found at www.nahb.org/issuesindex. Contact: Samantha Ehrhart (x8450)
NAHB Member Benefit: The Quick Issues Index is a handy member benefit that's aimed at updating you quickly and efficiently about the latest developments on housing-related issues and NAHB actions. It is also meant to facilitate communication of NAHB's actions and accomplishments at the HBA level and across our membership. Most importantly, this document, which is updated prior to every meeting of the NAHB Executive Board, provides you essential links and contacts for more information on any given topic, thereby helping connect our members to NAHB's substantial expert resources. [return to top]
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Host a fall protection training seminar
in your community in 2008 by registering your interest at www.nahb.org/fallprotectiontraining. These seminars, which were developed by NAHB and the NAHB Research Center, are aimed at builders, trade contractors, supervisors and workers, and funded under an OSHA grant. Each four-hour course teaches participants how to recognize common fall hazards on residential construction jobsites; how to use safe work practices to reduce the risk of injury; how to comply with applicable OSHA fall protection regulations; and how to develop a written fall protection plan. In addition, you'll learn how to: protect stairways, leading edges, window/wall openings and floors; safely construct rafters and install roof trusses and sheeting; and use a Personal Fall Arrest System (PFAS). Each participant receives a copy of the NAHB-OSHA Fall Protection Handbook and Video in English and Spanish. Training is conducted in English, and can be conducted in Spanish upon request. Contact Lindsay Cather (x8163) for more information.
NAHB Member Benefit: NAHB works closely with OSHA to help educate our members about worksite health and safety requirements, increase compliance with federal regulations and provide valuable assistance and materials to help our members keep themselves and their employees safe on the jobsite.
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Resources to help you in a challenging market
 continue to be updated and expanded as part of our Myth Buster section on the NAHB Web site at www.nahb.org/mythbuster. The Myth Buster Information for HBA Leadership section includes:
- Talking points tailored for specific regions to help you prepare for interviews and better communicate with consumers and stakeholders;
- Op-ed articles to place with local media outlets;
- Customizable print advertisements geared toward improving consumer confidence;
- Q&As to help you address consumer concerns, prepare for interviews and communicate with stakeholders; and
- The latest housing statistics
A variety of additional member resources are also available as part of our overall "Back to Basics: Toolkit for a Challenging Housing Market," so check it out!
NAHB Member Benefit: As our industry continues to experience a significant downturn in many markets nationwide, NAHB leadership is focused on helping our members and associations in any and every way possible, including the development of easy-to-access resources like these. Our Public Affairs team also continues to work with the media to add context to current news stories and, where possible, tone down some of the negative headlines. Contact Gwyn Donohue (x8447) or Jay Shackford (x8406) for more information.
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Three dates to remember:
Dec. 3 - Extended deadline for nominations for the National Housing Endowment Builder Achievement Award for Outstanding Community Service.
Dec. 12 - Free audio seminar: Ramp Up Your Sales & Marketing in a Changing Market
Feb. 13-14 at the IBS - Spokesperson Training - "Presentation Skills" seminar
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Happy Thanksgiving to all our members...
NAHB offices will be closed for the federal holiday on Thursday, Nov. 22 as well as Friday, Nov. 23. Due to the abbreviated work week, the Monday Morning Briefing will not appear the following Monday, Nov. 26 – but keep an eye out for it on Dec. 3!
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