A sound housing finance system that provides a stable and affordable supply of credit for home buyers and rental housing is essential to ensure a healthy housing market, spur job creation and maintain a strong and resilient economy.
In the wake of the financial crisis, the private market is clearly not working. The Federal Housing Administration, Fannie Mae and Freddie Mac currently guarantee or insure about 90 percent of all home mortgage activity and private lending institutions have shown little inclination to step up to the plate. Even with the current high level of federal support, fewer mortgage products are available now than in the past, and these loans are being underwritten on much more stringent terms.
NAHB is a strong proponent of comprehensive housing finance reform that would increase the role of private capital in the U.S. housing finance system and maintain a limited federal backstop to ensure that the 30-year fixed-rate mortgage, which has been a staple of the U.S. housing finance system, remains readily available and affordable for working American families. NAHB also backs efforts to update and modernize the Federal Housing Administration and establish a strong framework for preserving rural housing.
NAHB believes the best way to move forward is based on legislation approved by the Senate Banking Committee in the 113th Congress (S. 1217) that would gradually wind down Fannie Mae and Freddie Mac into a private sector oriented system, where the federal government's role is clear, but its exposure is limited.
Flawed appraisals are a major problem for home buyers, owners and builders. Too often, appraisers are using distressed properties – many of which have been neglected and are in poor physical condition – as comparables in assessing the value of well-kept existing or brand new homes without accounting for major differences in condition and quality.
Many home owners seeking to refinance and take advantage of today’s low interest rates are unable to do so because their house appraisals are coming in too low. A move-up buyer is out of luck if the appraisal on their existing home comes in below what they owe on their current mortgage. Likewise, many prospective home buyers have been left out in the cold because their dream house was appraised below the sales contract price. And many home builders have encountered appraisals where a new home was valued at less than the construction cost. Such appraisal practices are unfairly holding down home values, keeping home owners underwater and hindering the housing market recovery.
Moreover, the lower property values associated with such appraisals are shrinking the local tax base in many communities. This is putting further pressure on state and local governments that are struggling to keep essential services at acceptable levels.
Complicating the situation, appraisals are governed by multiple public and private entities and ultimately are enforced by individual states. Standards and requirements can vary greatly, resulting in a system that is inconsistent and confusing and does not serve consumers well.
Major reforms in appraisal practices and oversight are needed to ensure that appraisals accurately reflect true market values and don’t contribute to price volatility, impede the economic recovery or harm aspiring home owners and move-up buyers. Based on more than a year of research by a special Appraisal Working Group and extensive input from stakeholder groups, NAHB has published "A Comprehensive Blueprint for Residential Appraisal Reform," which offers specific recommendations for changes to all aspects of the appraisal system.
3. Fight Onerous Regulations that Hurt Home Builders, Remodelers and Consumers
NAHB is in the forefront in preventing expensive, pointless regulations from impeding home building and remodeling and adding unnecessary costs to consumers. From overly broad stormwater permit requirements that would literally regulate puddles under the Clean Water Act, to far-reaching Endangered Species Act requirements, and lead paint rules that cost remodelers jobs and money, NAHB is leading the fight to rein-in unnecessary and burdensome regulations that harm the industry and consumers. Just reinstating the lead paint rule opt-out provision for homes not occupied by children or pregnant women would save $336 million annually in compliance costs. NAHB-supported legislation (H.R. 2093 and S. 484) introduced in the House and Senate during the 113th Congress would address many of the concerns from NAHB Remodelers and affiliated trade groups about the EPA’s Lead: Renovation, Repair, and Painting Rule. NAHB is urging lawmakers to reintroduce these bills in the 114th Congress.
Meanwhile, NAHB is warning that the Environmental Protection Agency's proposal released in March 2014 to expand the reach of the Clean Water Act could increase the cost of new homes without a corresponding benefit to America's lakes, rivers and other water bodies. Expanding federal authority over water and land use would greatly increase the number of construction sites required to obtain a federal clean water act permit. This would delay or stop construction projects nationwide and slow economic growth.
NAHB supports greater transparency and accountability in the federal regulatory process. Regulations imposed by government at all levels account for up to 25 percent of the final price of a home. NAHB firmly believes that efforts to further regulate the housing industry must be subject to greater public scrutiny, based on sound data, and undertaken only after a careful consideration of the costs and benefits as well as the potential effects on small businesses.
Mindful of the impact of regulations on small businesses, the House moved swiftly to pass NAHB-supported bills H.R. 185, the Regulatory Accountability Act of 2015, and H.R. 527, the Regulatory Flexibility Improvements Act of 2015. H.R. 185 would make the regulatory process more transparent and hold federal agencies accountable for implementing laws in the least burdensome and least costly manner for the taxpayer. H.R. 527 would require federal agencies to review regulations for their impact on small businesses and consider less onerous alternatives. NAHB is urging the Senate to support legislation that would make the regulatory process more transparent, require proposed regulations to be based on sound science and data, and compel agencies to consider the least costly option.
For additional information about lead paint rule enforcement and compliance, visit nahb.org/leadpaint. Learn more about NAHB resources on stormwater permits and programs here. View the latest Endangered Species Act developments at nahb.org/esa.
4. Protect the Mortgage Interest Deduction
Americans overwhelmingly oppose any action by Congress to tamper with the mortgage interest deduction, but it could be eliminated or scaled back as federal lawmakers and the Administration are looking at tax increases in light of deficit concerns. The consequences would be devastating for home owners, the housing market and the nation’s economy.
Any attempts to tamper with the mortgage interest deduction would raise taxes on millions of home buyers and home owners and further depress home values, leaving more home owners with mortgages larger than the value of their property (“underwater”) and fueling even more foreclosures. It only takes a 5 percent drop in home values to wipe out $1 trillion in household wealth.
This cornerstone of American housing policy has been in place since the inception of the tax code 100 years ago and supports the aspirations of families at all income levels to become home buyers. Almost 35 million home owning households directly benefit from the mortgage interest deduction and more than 70 percent of the benefit goes to middle-class home owners who make less than $250,000.
Building 100 single-family homes creates nearly 300 full-time jobs and generates $11.1 million in federal, state and local tax revenues. Scaling back the mortgage interest deduction will shrink the tax base of local communities. It will cause already cash-strapped state and local governments to further cut essential services -- including jobs for local school teachers, police and fire departments.
NAHB economist Robert Dietz testified in 2013 before the House Ways and Means Committee during a hearing on tax reform and residential real estate. He called on Congress to maintain support for vital homeownership and rental housing incentives in the current tax code, including the mortgage interest deduction. For more details, view Dietz's testimony or see NAHB's press release. NAHB was also a major contributor to a Democratic Governors Association white paper released in September, 2013 that highlighted the association's policy arguments on the need to retain the mortgage interest deduction and Low Income Housing Tax Credit.
The association’s efforts to elevate housing on the national agenda have sent a powerful message to the media and members of Congress: Americans value homeownership and lawmakers need to support pro-housing policies that will create jobs, help local communities to flourish and make it easier and more cost-effective for buyers to purchase homes and builders to construct homes.
Moreover, NAHB is positioned – and prepared – to be highly engaged in the debate if threats to the home mortgage deduction and other housing tax incentives materialize. To educate the public on the importance of preserving the mortgage interest deduction as a cornerstone of American housing policy, as well as to enlist their support to urge policymakers to make sure creditworthy consumers and small businesses can get mortgages and loans, NAHB has created a consumer-oriented website, ProtectHomeownership.com. The website contains frequently asked questions, statistics, polling data and other important information to allow consumers to stay informed.
The home building industry, with the contribution of a substantial immigrant workforce, plays a critical role in sustaining the national economy and meeting the nation's housing needs. It is estimated that more than 20 percent of the building industry's workforce is foreign-born, making the immigrant population key to meeting housing demand and sustaining growth in the industry.
As Congress turns to a broader conversation on immigration reform, NAHB is urging lawmakers to take steps to make a system that is workable. Specifically, NAHB strongly urges Congress to focus on the direct employer-employee relationship so that U.S. employers remain accountable only for the identity and work authorization status of their direct employees, and not for the employees of other businesses.
In addition to establishing a fair employment verification system, NAHB also supports comprehensive immigration reform that will safeguard our borders and create a market-based visa system that will allow more immigrants to legally enter the construction workforce as the housing industry gains momentum and the demand for workers increases.
As the legislative process moves forward, NAHB stands ready to work with Congress to craft a final bill that best meets the needs of the housing industry.
6. Recognize Housing’s Important Role to the Economy
As policymakers begin debate on housing finance and budget issues that will impact job creation and future growth, they must understand the important role that housing plays in the U.S. economy. Considering the enormity of the total number of jobs attached to housing, a sector that accounts for more than 15 percent of the nation’s Gross Domestic Product, now is hardly the time to step back from the nation’s long-standing commitment to homeownership.
Testifying before the Senate Banking Committee's Subcommittee on Economic Policy during a May 7, 2014 hearing examining the drivers of job creation, NAHB economist Robert Dietz said that home building and remodeling have generated 274,000 jobs over the past 2 1/2 years.
"This expansion has direct economic benefits," said Dietz. "Housing provides the momentum behind an economic recovery because home building and associated businesses employ such a wide range of workers."
Employment from new construction and remodeling has a wide ripple effect. About half the jobs created by building new homes are in construction. They include framers, electricians, plumbers and carpenters. Other jobs are spread over other sectors of the economy, including manufacturing, retail, wholesale and business services.
Perhaps more than any other consumer product, housing is “Made in America.” New homes and apartments don’t arrive in this country on container ships from Europe or Asia, and most of the products used in home construction and remodeling are manufactured here in the United States.
NAHB analysis of the broad impact of new construction shows that building 1,000 average single-family homes generates:
2,970 full-time jobs
$162 million in wages
$118 million in business income
$111 million in taxes and revenue for state, local and federal governments
Similarly, construction of 1,000 rental apartments, including units developed under the Low Income Housing Tax Credit, generates 1,130 jobs while $100 million in remodeling expenditures creates 890 jobs.
More than 1.2 million residential construction jobs have been lost since April 2006. The pace of recovery is debatable, but based purely on population growth and demographics, the U.S. will need to build 17 million additional homes over the next decade.
The gap between current production and potential housing production is about 650,000 homes. That represents nearly 2 million untapped American jobs. This gap is a result of multiple factors, including deferred household formations, a lack of construction financing and flawed appraisal practices under which new homes get compared to distressed and foreclosed properties, thereby distorting true market values.
A strong economy is dependent upon a healthy housing market. The path forward is perfectly clear: Congress needs to take actions to restore the health of the housing industry to put America back to work.
For more information on this topic, click on the following links:
As Congress looks at tax expenditures and all programs come under review, it is important to protect the Low Income Housing Tax Credit (LIHTC), the most successful affordable rental housing production program in U.S. history. Eliminating the LIHTC would bring production and rehabilitation of affordable rental housing to a standstill.
Since its inception, the program has made possible the production of more than two million affordable apartments. In a typical year, it sustains approximately 95,700 full-time jobs, adds $7.1 billion in income to the economy and generates approximately $3.5 billion in federal, state and local taxes annually. In recent years, the LIHTC has produced about 75,000 new apartment homes annually.
The demand for affordable housing is acute and far exceeds the ability of LIHTC projects to keep pace. The program is essential to address the shortage of affordable housing options in our cities and towns.
NAHB economist Robert Dietz testified in 2013 before the House Ways and Means Committee during a hearing on tax reform and residential real estate. He called on Congress to maintain support for vital housing tax incentives, including the Low Income Housing Tax Credit. For more details, view Dietz's testimony or see NAHB's press release.
Home builders have become the latest targets of "patent trolls." Patent trolls send deceptive demand letters to extort licensing fees from businesses. NAHB believes business would benefit from greater transparency in patent demand letters. Requiring specific factual allegations of infringement would equip businesses with the necessary information while preserving the rights of patent holders.
9. Provide Small Business Health Care Relief
NAHB has long supported health care reform that will create an environment which will encourage, support and provide incentives to our free enterprise system through a market-based approach. In light of the serious changes made under the Affordable Care Act that affect employers and employees alike, action is needed to realize lower costs and provide better plan options for individuals and the employer community, such as standalone health reimbursement arrangements. A sustainable health care system must build upon the successes in the private sector and reinforce the strengths of the employer-sponsored health care system instead of imposing mandates, new taxes and penalties, and limiting flexibility.
10.Adopt Energy Policy that Encourages Cost-Effective Energy Efficiency
Building Energy Codes
NAHB urges Congress to enact legislation to improve the development of model building energy codes. NAHB supported legislation (H.R. 5027) in the 113th Congress that called on the Department of Energy to increase transparency in the development of energy codes, ensure that advancements in energy efficiency are cost-effective and support the training of building code officials. NAHB is calling on Congress to reintroduce and pass this important legislation in 2015.
NAHB supports voluntary, market-driven and cost-effective measures that promote energy efficiency in the home and sustainable green building materials and construction techniques. Congress can help remove barriers to green building and create an environment that encourages home owners to invest in energy efficiency. NAHB supports the SAVE Act, which would not only improve appraisals to better reflect energy efficient features, but also encourage the use of energy data/reports to help lenders better assess risk and account for energy savings realized in green homes.
11.Focus Congressional Action on Crystalline Silica
NAHB recently requested that the Occupational Safety and Health Administration (OSHA) withdraw a proposed rule that would drastically lower the permissible exposure limit (PEL) of crystalline silica by 80 percent for the construction industry. The rule also requires impractical medical surveillance of construction industry workers, extensive and costly recordkeeping processes, and restrictions on certain construction site work practices, which contradict existing safety procedures.
OSHA has determined that a rule is needed to substantially reduce the risk of serious disease from exposure to airborne concentrations of silica dust. This, however, runs contrary to data from the national Centers for Disease Control and Prevention that shows a sharp decline in the incidences of silicosis in recent decades. To date, OSHA has not explained how drastically lowering the PEL will effectively reduce the current number of silica-related illnesses and deaths.
NAHB believes the rule is economically and technologically unfeasible for the industry to comply with. OSHA has estimated that the rule will cost the industry approximately $511 million to implement, however, analyses show that this number is grossly underestimated. Economic analysts estimate the cost to be closer to $2.2 billion per year, and likely to increase given the present state of the economy.
Given the many problems associated with the proposed rule, NAHB is urging members of Congress to call or write OSHA and request that the agency withdraws the proposed silica rule until it can put forth a technologically justifiable and economically feasible rule that best aligns with current industry practices.