New-home production and remodeling contribute billions of dollars to the nation's economy each year, and with the right policies in place housing can serve as a catalyst to boost job and economic growth, the National Association of Home Builders (NAHB) told Congress recenlty.
"How lawmakers and regulators deal with tax reform, home energy codes and the availability of building materials will go a long way to ensure a robust, long-term recovery for housing and the economy," said NAHB Chairman Rick Judson, a home builder and developer from Charlotte, N.C., in testimony before the House Energy and Commerce Committee's Subcommittee on Commerce, Manufacturing and Trade.
NAHB supports the goals of many in Congress to reform the tax code and believes that lawmakers should maintain existing housing tax incentives because homeownership remains the major path to wealth for the middle class.
"Any policy change that makes it harder to buy a home, or delays the purchase of a home until an older age, will have a significant long-term impact on household wealth accumulation and the makeup of the middle class as a whole," said Judson.
"As most home owners benefit from the mortgage interest deduction, and most of that benefit flows to younger families, weakening the deduction and making homeownership less accessible is likely to diminish the financial success of future generations," he added.
NAHB is urging building code officials to reinstate energy-neutral equipment efficiency trade-offs in the performance path of the International Energy Conservation Code to allow builders to more cost-effectively construct energy-efficient homes.
Energy efficiency tax credits such as the Existing Home Retrofit Tax Credit (25C) that provides consumers a tax credit of up to $500 for the purchase of qualifying energy-efficient products and the New Energy Efficient Home Tax Credit (45L) available to builders who construct energy-efficient new homes are important policy tools to provide home owners and builders with incentives to perform energy efficiency upgrades on homes, he added.
Meanwhile, the rising cost of building materials - most notably for framing lumber, oriented strand board and gypsum - are decreasing affordability and preventing builders from meeting the growing demand for new homes.
"Any effort to ease escalating price pressures, help rebuild the supply chain and support a continuing housing recovery is effective economic policy," said Judson.
Labor Shortages Hamper Housing Recovery
Edward Martin, president and CEO of Tilson Home Corp. based in Austin, Texas, and president of the Texas Association of Builders, also participated in the congressional hearing. He told lawmakers that worker shortages in residential construction are impeding the housing recovery.
"My company is experiencing delays due to the lack of qualified framing crews to begin work on the structure of our homes," said Martin. "We are also struggling to find master plumbers and rough-in crews, which run the pipes in the foundation before the concrete is poured. As a result of the shortage of skilled labor, on average, it is taking my company a month longer to build a home."
A recent survey of NAHB members shows that since June 2012, residential construction firms have been reporting an increasing number of shortages in all aspects of the industry - from carpenters, excavators, framers, roofers and plumbers, to bricklayers, HVAC, building maintenance managers and weatherization workers.
Forty-six percent of the builders surveyed experienced delays in completing projects on time, 15 percent had to turn down some projects and 9 percent lost or cancelled sales as a result of recent labor shortages. Fewer homes built will harm the property tax base of local communities, which is vital to fund local schools, police and firefighters.
"With congressional attention shifting to immigration reform, I believe strongly that this debate provides an important opportunity for the country to implement a new market-based visa system that would allow more immigrants to legally enter the construction workforce each year," said Martin. "This would complement our skills training efforts within the nation's borders, and fill the labor gaps needed to meet the nation's housing needs."
Onerous Regulations Harm Remodeling, Job Growth
On the remodeling front, William Shaw, founder of William Shaw and Associates, a residential remodeling, design and build company located in Houston, said the federal government's regulatory process is hampering the ability of remodeling firms to do business and impeding job growth.
"Housing serves as a great example of an industry that would benefit from smarter and more sensible regulation," he said.
Shaw urged lawmakers to support the Lead Exposure Reduction Amendments Act of 2013 (H.R. 2093), bipartisan legislation recently introduced by Rep. Tim Murphy (R-Pa.) and 21 original co-sponsors that would make much-needed improvements to the EPA's Lead: Renovation, Repair and Painting (LRRP) Rule.
The measure would restore the opt-out provision for homes without children or pregnant women; allow remodelers to correct paperwork errors without facing full penalties; provide an exemption for emergency renovations; and make it easier for remodelers to obtain recertification training.
By removing the opt-out provision in July 2010, EPA more than doubled the number of homes subject to the LRRP rule, adding an estimated $336 million per year in compliance costs to the remodeling community without making young children any safer, Shaw said.
For the small contractor, these additional costs have to be passed on to the consumer, which increases the chances that a home owner will likely hire another uncertified contractor to do the work, or worse, do the work themselves, which would actually increase the likelihood of disturbing lead-based paint.
Officials from Kohler Co. and Louisiana-Pacific Corp., major suppliers and manufacturers of kitchen and bath products and building materials, also testified at the hearing. Most of the products used in home construction and remodeling are manufactured in the United States and home buying typically generates a positive economic ripple effect. When a family moves into a new home, they spend $7,400 more than usual on appliances, furnishings and remodeling.