A New Year brings new opportunities and renewed optimism. Despite the past three years of gloom and doom in the housing industry, 2011 seems to be showing some glimmers of hope among remodelers. The mentality of buying a home simply to sell it in a few years for a fast buck is disappearing. Today’s homeowners are staying in homes longer and are looking to remodelers to ensure the homes meet their long-term needs. Despite the housing-industry downturn, this new mind-set could be a boon for remodelers in the years ahead.
To nurture remodelers’ hope and ensure the housing industry, in general, receives a much-needed boost, the Washington, D.C.-based National Association of Home Builders has stocked its arsenal in preparation for another year of advocating on behalf of its constituents. The organization has several battles ahead: seeking stability in the overall economy; conquering legislative issues that affect housing; talking with banks about lending practices; and ensuring fairness within the U.S. Environmental Protection Agency’s Lead Renovation, Repair and Painting Rule; among other initiatives.
Jerry Howard, NAHB’s chief executive officer, spoke exclusively with Qualified Remodeler to discuss the year ahead and assure NAHB’s members, including the all-important NAHB Remodelers, that the organization is ready for the challenges ahead.
Howard is not the type of person who can represent an industry in which he doesn’t believe. He grew up in Hilton Head, S.C., where he often helped his father, a resort developer, work on projects. “Growing up in the housing and building industry has given me an appreciation for the importance of housing in our society in terms of its economic value and its societal value,” he says. He built on that appreciation by furthering his education, receiving a Bachelor of Arts from the University of Vermont, Burlington, and a Juris Doctorate from the University of South Carolina, Columbia.
Howard took a firsthand look at the home-buying process during a stint in real estate before he delved into government. He served as the chief lobbyist for the National Council of State Housing Agencies, Washington, where he was instrumental in developing the low-income housing tax credit as part of the Tax Reform Act of 1986.
Howard joined NAHB in 1988, serving as a legislative analyst for tax issues. Always interested in expanding his knowledge and contribution to the industry, he has taken on a variety of roles, including chief lobbyist, within NAHB. Howard was promoted to executive vice president and chief executive officer in February 2001. It’s a job he has been happy to maintain.
“I’ve had many opportunities since I’ve been at NAHB to go elsewhere and down other avenues,” Howard admits. “But I have a great sense of pride in coming to work every day and representing this industry.”
Everything Old Is New Again
Howard’s experience in the housing industry serves him well. Despite our nation’s current economic downturn being the worst in his lifetime, many of the issues the industry is dealing with are not new. One of these issues is tax reform.
The state of our federal budget deficit has spurred President Obama to create the National Commission on Fiscal Responsibility and Reform, which released its report of recommendations late last year that are designed to minimize the deficit. In place of current mortgage-interest deductions, the commission recommends homeowners in the 28 percent and higher tax brackets get a 12 percent nonrefundable tax credit regardless of whether they itemize their taxes. The credit, which is capped on interest of mortgage debt up to $500,000, is only for a principal residence—not for second homes or home-equity lines of credit.
A December 2010 report in The Washington Post dissected the changes into easy-to-understand terms: “… under current law and 2011 tax rates, a taxpayer in the highest tax bracket, 39.6 percent, paying $25,000 in mortgage interest per year on a $500,000 mortgage would be able to reduce his tax liability by $9,900. Under the commission’s proposal, that same taxpayer would reduce his tax liability by only $3,000. In effect, his mortgage payments would have just increased by a whopping $575 per month.”
“I cut my teeth as a housing lobbyist during the 1986 tax-reform act. These ideas have been there in the past,” Howard notes. “As far back as ’86 and earlier, NAHB proved its mettle as a voice for the overall housing sector. This threat to do tax reform and take away the deductions that are there, not only for home-mortgage interest but also for home-equity loans that many homeowners use to finance their remodels, is part of our charge. NAHB is going to be out there defending the importance of housing at all levels, again on Capitol Hill, in the media and academically.”
In addition to meeting with Congressional members to express builder and remodeler concerns, NAHB has launched a public-awareness campaign called “Save My MID.” Its corresponding Web site, SaveMyMortgageInterestDeduction.com, shares original research and surveys about the mortgage-interest deduction, home-equity-loan interest deduction and other tax issues. A Facebook page, Facebook.com/SaveMyMID, and Twitter account, @SaveMyMID, create a united front among homeowners and housing professionals interested in the issue.
Just as tax reform was an issue in the ’80s, so was recession. The early 1980’s recession affected the housing industry and the sectors that supplied it for years afterward. Howard points out that NAHB was there representing its constituents and will build on its experience advocating during those difficult years to achieve its goals following our nation’s latest recession.
"I’ve had many opportunities since I’ve been at NAHB to go elsewhere and down other avenues, but I have a great sense of pride in coming to work every day and representing this industry."
“NAHB is doing everything it can at all levels to cement stability in the economy. By all levels I mean not only on Capitol Hill, but we’re also talking to the banking industry about loans. Remodelers and their clients take out loans to remodel their homes. They’re finding trouble getting access to capital, and we want to help fix that.”
For example, the Federal Housing Authority’s 203k loan, which is used for purchasing and remodeling a home, can be difficult to work with if a bank is unfamiliar with the loan. NAHB has worked with FHA and banks to advise remodelers about the availability of the loans and provide guidance for working with the loans.
Strength in Numbers
Any good military expert will say wars are won with diplomacy, information, personnel and economic resources. NAHB’s remodeler members have been an essential contributor to the organization on all fronts. In fact, remodelers are the largest member growth group within NAHB. The results of the most recent NAHB member census (2009) found that remodeling was the primary business activity of 27 percent of the builder members, and 54 percent of the builder members did remodeling as a primary or secondary business activity.
“This growth underscores the fact that NAHB is as much a remodelers association as it is a new-home-construction association. First of all, you must remember the vast majority of NAHB’s builder members are small, family-owned businesses. When times get difficult, they shift their business models away from new-home construction and into remodeling. NAHB, as a full-service trade association, is prepared to provide them the same expertise in their remodeling endeavors as we are in their home-building endeavors.”
"[CAPS is] an awesome opportunity—even in a down economy—for people in our industry to stay viable and make some money. That’s why remodelers are growing and why their involvement in NAHB is even more important now than it is when times are good."
Howard notes NAHB ensures its members are armed with education to set them apart in the industry. For example, the certified aging-in-place specialist, or CAPS, program is geared to remodelers, teaching them how to change the functionality of a home so the owners can live it in it the duration of their lives. “It’s an awesome opportunity—even in a down economy—for people in our industry to stay viable and make some money,” he says. “That’s why remodelers are growing and why their involvement in NAHB is even more important now than it is when times are good.”
Just as NAHB supports its members, NAHB remodeler members have brought many new ideas to the organization for tackling the challenges ahead. Howard explains: “Many remodelers take part in our strategic and tactical decisions, which has opened up several different fronts in the war against this economic downturn. For example, we’re trying to explore new and innovative routes to capital for the entire industry.”
NAHBR members also are sharing their experiences—positive and negative—with the organization to help it ensure fairness in the Lead RRP ruling. One of NAHB’s biggest concerns regarding the ruling is the extra cost to contractors who follow it. NAHB submitted comments in November 2010 to the U.S. Senate Committee on Small Business and Entrepreneurship, stating the rules “negatively impact small businesses that are dutifully trying to comply.” NAHB asked the committee to oppose the forthcoming clearance-testing rule amendment, which would require a remodeler to send labs samples from surfaces in the work area and immediately outside it or hire a certified testing specialist to examine the home after work is complete. NAHB also wants EPA to undertake a rulemaking and new economic analysis to demonstrate the full cost of compliance because there currently is no qualifying test kit. Finally, NAHB has asked that EPA restore the opt-out provision for homeowners without small children.
NAHB also testified on Dec. 6, 2010, before an EPA science advisory panel that is considering lowering the hazard level for lead in homes. The association is concerned about lowering this level because it would make remodeling in pre-1978 homes even more complex and add more costs.
Membership Has Its Benefits
As with any association, it is NAHB’s members who make the decisions about where their industry is headed and how they collectively get there. Howard says NAHB takes great pride in the number of members, including the remodelers, who have shared input during these difficult times.
“I want your readers to know that the remodeler component of NAHB is a cornerstone of our organization,” he says. “We’ve been servicing remodelers as a separate constituency since the early 1960s. We look forward to welcoming more of them to our ranks and providing them the same level of service for which NAHB is known.”