NAHB girds for a busy spring on Capitol Hill

Professional Remodeler magazine sat down with NAHB's chief lobbyist Joe Stanton and his top regulatory aide Elizabeth Odina to discuss new legislative threats to an already embattled housing and remodeling industry and the forces his team is marshalling to keep the interests of remodelers front-and-center on Capitol Hill.

February 04, 2011

At the winter meetings of the NAHB Remodelers held in conjunction with the International Builders Show in Orlando last month, NAHB chief executive officer Jerry Howard made a visit to the general session to sound an alert — the new Congress would soon be looking for ways to reduce the federal deficit and that many of the long-held tax benefits bestowed to housing would part of the discussion of how best to close the deficit. Howard warned that “everything” would be “on the table” during tax-reform talks to be held this spring including the mortgage-interest deduction.
Headquarted in Washington, D.C. with a legislative and policy staff of nearly 100, the NAHB is a reliable indicator of what’s coming from the federal government. With that in mind Professional Remodeler magazine sat down with the organization’s chief lobbyist Joe Stanton and his top regulatory aide Elizabeth Odina to discuss new legislative threats to an already embattled housing and remodeling industry and the forces his team is marshalling to keep the interests of remodelers front-and-center on Capitol Hill.

PR: The deficit reduction commission recently came out with a recommendation that we do-away with the mortgage interest deduction. Is something as dramatic as this possible?
Stanton: Yes. I think anything is possible. The election we just had is all about the deficit and the debt we have taken on. The fact of the matter is that the mortgage interest ceduction cost the government about $104 billion in 2010. That being said, we will vigorously fight any attempt to reduce or eliminate it. We do believe that the mortgage interest deduction has opened up the opportunity for people to be homeowners, and has made homeownership more accessible and affordable than before. So we will continue that fight. Not only that, but any other of the slew of recommendations that the commission put forth — second homes, home equity lines of credit, which would have a significant impact on remodelers, as well as property-tax deductions. So we are going to have this on all fronts. We have been looking at this since June. And these came out naturally as people talked about the debt, and how we were going to get it under control. We have to look at the big spending numbers and that is at the forefront.

PR: I have heard that the second-home deductions are more vulnerable than deductions on primary residences. What are you seeing?
Stanton: In the end, I think the primary residences will be preserved. It really depends on the dollars associated with each item. Obviously, we have looked at coalition building on the Hill, certainly with the Realtors. Furthermore the home-equity deduction impacts not only the remodeling industry, but certainly the way the law is written that there are other uses. People use it for their car. People use it to help defer costs for college. That is what buying the home was meant to do. It is your largest purchase ever. You build up equity in your house, and that is what it is there for.

PR:  Beyond preserving the mortgage-interest deduction, what are some of the legislative priorities of the NAHB right now?
Stanton: As we get into early next year I do believe the president will put forth his GSE reform legislation (Government Sponsored Entities, specifically Fannie Mae and Freddie Mac) and we are going to take a close look. We have already started that process. We, the NAHB, believe that the GSE’s do provide liquidity into the market. It is not just there for the consumer.
Are there going to have to be changes? Sure. There needs to be some sort of public/private partnership with government backing so the market can again weather something like what we have just been through, something catastrophic. There is a new mindset — certainly with the change in leadership in the House of Representatives, that there is going to be a lot of pressure for changes to GSEs.

PR:  What is the goal of would-be GSE reformers — just reduce the country’s liability or to increase liquidity in the housing market?
Stanton: Well I think improving the housing market would be the goal and how we are going to get to that. The private sector certainly is going to have to step up. The president sat down with 20 CEOs to improve liquidity and spending. We all know that there is $1 trillion sitting on the sidelines that he wants to get into the marketplace so jobs can be created. So I think it is a little bit of a balance of both.
I think we would all agree that it was pretty easy to get a mortgage five years ago and some people should not have been allowed to get them. Those were the standards, and we presented a product but I think that some of the people who were supposed to do the due diligence did not do it. That is what we are finding out now. I think certainly the pendulum has swung all the way to the opposite side. Now you can have an excellent credit score and run it through hoops and everything is good, but you cannot manage to refinance.

PR:  Appraisals are now a big problem. Many successful builders and remodelers often have well-qualified clients with money but the property does not appraise right for the project to move forward.
Stanton:: We have hosted two appraisal summits to start addressing the issue. And this has been going on for 18 months. Joe Robson, our immediate past president, has taken on that challenge. Right from the get go, the problem with appraisals started with one, there were not enough appraisers. Joe Blow from Baltimore would come over to Rockville where he has no idea what the market is. Now we are into the foreclosure issue. They are comparing my house to a neighbors who has been gone for three years. They have not cut the lawn and the copper gutters have been stolen. Appraisers are putting these distressed properties into the comparison set and so that has been a huge issue that we have been trying to address.

PR: What are some of the new regulations coming into effect that will impact builders and remodelers going forward?
Odina: That is going to be a huge thing that we are working on. The  most recent item beyond the complications arising from the implementation of the lead rule is a new coal-ash requirement. EPA is trying to come up with regulations for coal ash saying basically that it should be treated as hazardous waste. But it is actually a recyclable material that is used in a lot of green products. Our green standard uses coal ash as a recyclable material. How can a builder or remodeler explain to the consumer that the EPA thinks this is toxic waste?
I think there are a lot of issues where we are going to see an emboldened EPA come out and regulate greenhouse gas emissions. Under the Clean Air Act, 615 homes would be considered a point source to apply for a permit. Perhaps even more significantly, the most recent version of the energy code that was finalized at a public hearing last fall is substantially above the 2006 and 2009 levels. NAHB went to the code hearings with our own version of the bills in terms of what a 30 percent jump in standards looked like. And DOE said, we don’t like yours, we are taking this one.

PR:  BuildPAC is an effective tool of the organization, how are contributions right now?
Stanton: In light of everything, obviously we’ve taken a hit. We were at a height of $4 million. Right now we have over $400,000 in the bank. Moving forward we will pick that back up. We will make some contributions in January. But, you know, we are just beginning the process in a new election cycle.

PR:  The Supreme Court ruled that corporations can now contribute to campaigns. Will you still able to command attention with BuildPAC, perhaps now that budgets are bigger elsewhere?
Stanton: I think it is going to be different. Over the next two years the money is going to blow away what we have seen in the past.

PR:  Do you think Washington thinks there can be a recovery without housing participating?
Stanton: It is scary but in some parts of Washington, the answer is yes. At the height we were 16 percent of GDP. And you are talking about an industry right now that is at 22 percent unemployment. If we get a permit to put up one house, that is three jobs right there.

PR: I liked the “Fix Housing First” effort that NAHB launched two years ago, which had its own web site and seemed to have had an impact on the congressional debate a couple of years ago. Do you have anything like that in the works?
Stanton: Yes, we’ve got the new one up, to address the importance of home equity. Our packet to the Hill is that it is all-important. Home equity is up there next to MID and second homes.

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