Monday Morning Briefing Letter - 02/27/2006 (Plain Text Version)

By David Pressly, NAHB President and
Jerry Howard, NAHB Executive VP and CEO

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Appearing with Treasury Secretary John Snow

at a press event highlighting the Bush Administration's energy initiatives, NAHB President David Pressly and fellow home builders Steve Temkin and Connecticut State Representative Greg Ugalde were center stage in Torrington, CT on Feb. 22.

The Secretary called attention to the importance of energy-efficient housing and announced new IRS guidelines for tax credits designed to incentivize energy-saving elements in building and remodeling homes. Temkin and Ugalde, the respective CEO and president of family-owned T&M Building Co. in Torrington, had a chance to show off some of the energy-efficient features they incorporate in new homes, including everything from special furnaces to multi-zone heating and cooling systems, Low-E insulated windows and programmable thermostats. Meanwhile, David and the Secretary commented on the need for government and private interests to work together to expand the reach of such market-driven energy-saving devices at a time when U.S. dependence on foreign energy sources is a growing concern.

In a private exchange apart from the press event, David seized the opportunity to consult with the Treasury Secretary on a matter of grave importance to the nation's home builders and buyers. He mentioned our serious concerns regarding unfavorable tax simplification measures that were recently proposed by a presidential advisory panel, and reminded the Secretary that while those proposals are currently under review by the Treasury Department, President Bush has confirmed his support for the mortgage interest deduction in multiple public forums. Not only did the President express this support during NAHB's Fall Board of Directors Meeting in Columbus two years ago, but he reaffirmed that conviction at a town hall meeting in Tampa this month when asked about it by an astute NAHB member who happened to be in the audience. Read the next story to find out what was said in Tampa, or contact Paul Lopez (x8409) for more on the Connecticut event.

Talk about seizing the day...

John C. "Chuck" Fowke, head of Homes by John C. Fowke in Brandon, FL, deserves a warm round of thanks from all his fellow home builders. The past president of the Tampa Bay Builders Association and Florida's current State Representative got a great response from President Bush when he mentioned housing affordability concerns during a town hall event in Tampa on Feb. 17. After identifying himself as a home builder and member of NAHB's Board of Directors, Chuck noted, "We're concerned with the environment just as much as anyone else, but there's got to be a balance to make sure that we can develop land and provide homes — affordable homes. And Congress is working on some things now that have an effect on financing and interest rates for people buying their first homes. Let's make sure that we have affordable homes for people." Responding in the affirmative, President Bush touted the need for this country to be what he called "an ownership society," and mentioned down payment assistance for helping first-time home buyers. Then he said something particularly noteworthy:

"Maybe you're hinting at whether or not the mortgage deduction would be part of a plan. I don't think you have to worry about the mortgage deduction not being part of the income tax law."

Kudos to Chuck for helping get President Bush's reassurances regarding the mortgage interest deduction on record (once again). Astute reporters also picked up on this important quote and mentioned it in their coverage of the event as an indication that the White House does NOT plan to go forward with a proposed tax simplification plan this year that would alter and significantly reduce the mortgage interest deduction as well as other important state and local tax deductions.

Though this is a significant development in the ongoing debate over tax reform, NAHB will remain vigilant and wary of potential future action on this issue. For a transcript of what was said in Tampa, contact Donna Reichle at x8473. [return to top]

The Supreme Court heard arguments in three big cases

this week that will impact water and wetlands regulations for NAHB members. Oral arguments were delivered Feb. 21 in the Rapanos and Carabell cases, in which the court will decide whether features like ditches and storm drains are "navigable waters" for purposes of permitting requirements of the Army Corps of Engineers and EPA under the federal Clean Water Act. Chief Justice Roberts and Justice Scalia led the questioning, during which it was clear that several members of the court were troubled by the federal government's overly expansive assertion of authority. However, Justices Stevens and Souter expressed concern that narrow jurisdiction could lead to widespread pollution.
NAHB's amicus brief for these cases argued that ditches and storm drains must be excluded from "navigable waters" jurisdiction, but polluting activities that have an impact on "navigable waters" should be regulated.

The court also heard oral arguments that day in S.D. Warren, another Clean Water Act case. At issue there was the question of when pollutants are "discharged" or added to navigable waters, thereby triggering regulation. NAHB submitted an amicus brief for this case, as well. Decisions for each case are expected before the Court's session ends in late June. Contact Duane Desiderio (x8146) or Tom Ward (x8230) for more.

NAHB has helped bring Clean Water Act cases like those above all the way to the Supreme Court in hopes of gaining essential clarification of the law, and a more favorable regulatory climate, for our builder/developer members, who have indicated that the difficult permitting process and related high costs of development are among the top 10 critical issues affecting their businesses. If successful, these cases have the potential to reduce development costs and time lost to permitting issues while retaining essential pollution controls to protect the environment. [return to top]

A crucial report on Fannie Mae,

released to the public on Feb. 23, confirms NAHB's belief that management of the housing government sponsored enterprise (GSE) is taking all of the necessary steps to put the company back on the right course. Findings of the congressionally mandated Warren Rudman Report underscore the need to pass H.R. 1461, the NAHB-supported bill to improve oversight of the GSEs. This bill, which was introduced by Reps. Richard Baker (R-LA) and Michael Oxley (R-OH), was approved by a wide margin in the House last year. Furthermore, the report's findings do not support taking draconian actions that NAHB has warned could impede the GSEs' ability to operate and efficiently provide necessary credit to the housing market. Contact NAHB's Government Affairs Area (x8470) for more information on the ongoing debate regarding GSE oversight reform.

The housing GSEs (Fannie Mae, Freddie Mac and the Federal Home Loan Banks) play a crucial role in providing accessible and affordable credit that is the lifeblood of the housing industry. NAHB's continued member-driven involvement in the debate regarding oversight of the GSEs is aimed at safeguarding the nation's sophisticated housing finance system and ensuring that proposed reforms do not impede the GSEs' ability to efficiently operate and create new mortgage products. [return to top]

President Bush's proposed fiscal 2007 budget,

which he presented to Congress on Feb. 6, is being thoroughly reviewed by NAHB staff at this time. While this budget is not legally binding — Congress has the final say in program realignment and spending levels — it's an important starting point for deliberations in which NAHB intends to be involved. Several elements of potential importance to housing are listed below and detailed more thoroughly in the latest edition of NBN Online:

1. Included: a zero downpayment mortgage insurance program
2. Included: A "payment incentives" sub-prime mortgage program
3. Reduced: HUD's overall budget
4. Consolidated: Community Development Block Grant program
5. Boosted: HOME Investment Partnerships program with an additional $123 million
6. Boosted: Section 8 vouchers, by $346 million, with $14.4 billion for voucher renewals

Contact: Jenna Morgan Hamilton, x8407. [return to top]

A big win in Oregon

came with the state Supreme Court's ruling on Feb. 21 in which it sided with home builders on a major property rights case. NAHB participated with the state HBA as an amicus to the Oregon Supreme Court in December 2005, arguing in favor of the constitutionality of "Measure 37," which was passed by the state legislature. Measure 37 requires state and local governments to compensate private property owners for reductions in fair market value to their real property when those reductions occur because of any land use regulations that restrict the use of said property. As an alternative, in lieu of paying just compensation, the legislation allows the government to "modify, remove or not ... apply the land use regulation[s] if the use was permitted at the time when the owner acquired the property." A lower court had previously agreed with a citizens group lawsuit challenging the constitutionality of Measure 37, but on Feb. 21 the state's Supreme Court disagreed with that trial court and reversed on all points. A complete copy of the decision is available online, or contact Felicia Watson (x8229) for more info.

Private property rights is a classic "pocketbook issue" for NAHB members, who have fought for many years to secure their right to just compensation when a government action affects the use or value of their property. Oregon's case could set a valuable precedent for future arguments on this issue, and NAHB's legal assistance in the case at hand is a prime example of the value that our national federation provides to affiliated HBAs and their members. [return to top]

And the nation's most affordable housing market is...

...Indianapolis, IN, where nearly 89% of all new and existing homes sold during 2005's fourth quarter were affordable to households earning the area's median income of $64,000. That's according to the latest NAHB/Wells Fargo Housing Opportunity Index (HOI), which was released to the media on Feb. 23. Yet, on a nationwide basis, higher interest rates and rising home prices caused overall housing affordability to slip for a fourth consecutive quarter to its lowest level on HOI record. In fact, only 41% of all new and existing homes sold nationwide at the end of 2005 were affordable to families earning the national median income — that's down from 43.2% of homes sold in the third quarter and 52% of homes sold in the final quarter of 2004. The most and least affordable major housing markets (metros with over 500,000 people) are as follows:

Most affordable Least affordable

1. Indianapolis, IN                  1. Los Angeles-Long Beach-Glendale, CA
2. Youngstown, OH                2. Santa Ana-Anaheim-Irvine, CA
3. Detroit, MI                            3. San Diego, CA
4. Grand Rapids, MI               4. Stockton, CA
5. Dayton, OH                          5. New York-White Plains-Wayne, NY-NJ

"Availability of Affordable Housing" has been rated among the 10 most critical issues for NAHB members nationwide, and the latest HOI results provide good data to support our concerns. Though rising interest rates and strong house-price appreciation through the fourth quarter were the main contributors to declining affordability as measured by the HOI, many local jurisdictions can do more to improve housing affordability by reining in high impact fees and certain land-use restrictions. See the HOI tables online, or contact Gopal Ahluwalia (x8480) or Ashok Chaluvadi (x8482) for details. [return to top]

Professional remodeling slowed a bit at year-end 2005,

due in part to higher interest rates that may have helped curb homeowner refinancing used to fund major projects. NAHB's latest Remodeling Market Index (RMI) for the fourth quarter, released Feb. 21, showed that remodelers' perceptions of both current and future market conditions were less optimistic than in previous quarters. Index components gauging such perceptions fell several points to below 50, which is the mark at which an equal number of remodelers view conditions as improving rather than deteriorating. Regionally, professional remodelers in the West indicated improving expectations, but their brethren in the South, Midwest and Northeast could not say the same. See the RMI press release and tables online, or contact Gopal Ahluwalia (x8480) or Jim Lapides (x8451) for more. [return to top]