Washington Update - 07/21/2006 (Plain Text Version)

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NAHB Concerns Highlighted in Fed Testimony

Federal Reserve Board Chairman Ben Bernanke last week testified before Congress that the housing market is cooling and moving toward a “soft landing.” In delivering the Fed's semiannual monetary report to Congress, the Fed chairman appeared before the Senate Banking Committee and House Financial Services Committee. Prior to Bernanke’s testimony, NAHB sent letters to lawmakers on both panels urging them to focus on two key areas: The Fed's position on the downside risks to the interest-sensitive housing sector stemming from recent rate-increases, and the Fed's reliance on what NAHB believes to be deficient inflation measures to rationalize the interest rate hikes that have caused the recent downtrend in housing demand.

While questioning Bernanke, Senate Banking Committee Ranking Member Senator Paul Sarbanes (D-MD) quoted directly from NAHB's letter about the impact of rising interest rates on housing affordability. Sarbanes also specifically noted NAHB's observation that rising rates, set in motion by the Fed's monetary tightening, have had the effect of firming up rental markets and raising the "owners' equivalent rent" components of core inflation measures that the Fed is trying to contain. Such questioning is in large part a testament to NAHB's credibility and clout on Capitol Hill, and solid evidence that our concerns about housing's "soft landing" being threatened by overly aggressive monetary tightening are in fact being heard by lawmakers as well as the Fed chairman himself.

For his part, Bernanke acknowledged that Sarbanes' "point about equivalent rent is a good point" but contended that "the increase in inflation we've seen is a much broader phenomenon than that single component." Even so, his awareness of the issue and Sarbanes' pronouncement that "it seems to me to have some validity" indicate it won't likely be forgotten as the Fed looks to the future.

In testimony before the House Financial Services Committee the following day, NAHB was once again successful in pressing this line of questioning with the Fed chairman. At NAHB's request, Rep. Gary Miller (R-CA) launched into spirited questioning on both themes. Chairman Bernanke responded in a similar manner; however, the exchange highlighted the positive results from the previous day. For more information, e-mail Scott Meyer or call him at 800-368-5242, x8144.

Appropriations Bills Move Forward in the Senate

The Senate Appropriations Committee last week approved fiscal 2007 funding for two major appropriations bills -- the Transportation, Treasury and HUD Appropriations bill (T-THUD) and the Labor/Health and Human Services/Education Appropriations bill. Neither bill has been given a timeframe for Senate floor consideration. The HUD bill would fund the following programs as follows:

HUD overall funding: $36.6 billion
HOME program: $1.9 billion
HOME formula grants: $1.8 billion
Downpayment Assistance Program: $25 million, as a set-aside within HOME
Housing Counseling Assistance Program: $41.75 million, as a set-aside within HOME
CDBG: $4.1 billion
CDBG formula grants: $3.9 billion
Section 8 tenant based vouchers: $15.9 billion
Section 8 project based vouchers: $5.7 billion
HOPE VI: $100
FHA Multifamily Loan Commitment Authority: $35 billion
FHA Overall Commitment Authority: $185 billion
Youth Build: $0, the committee recommends moving the program to the Department of Labor

The Labor/HHS/Education bill would fund the following programs of note to NAHB members:

Job Corps: $1.629 billion
Workforce Investment Act funding, total: $5.089 billion
Apprenticeship: $21.4 million
Carl D. Perkins Vocational Education program: $1.3 billion
Responsible Reintegration of Youth Offenders program: $60 million
Prisoner Re-entry Program: $0
OSHA (total): $491 million
OSHA enforcement: $181 million
OSHA Susan Harwood training grants: $10 million

Senate leadership has indicated that it is extremely unlikely that either of these bills will be enacted prior to the end of the fiscal year on Sept. 30, 2006. As a result, Congress is expected to approve Continuing Resolutions in late September that will fund the government through the November elections, when legislators are expected to reconvene for a lame-duck session. For more information, e-mail Jenna Morgan Hamilton or call her at 800-368-5242, x8407. [return to top]