News and Updates

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A Wide Disparity in State Property Taxes

There is nearly an $8,000 difference between what residents of the state with the highest property taxes pay compared to those who live in the state with the lowest rate.

NAHB analysis of data from the 2017 American Community Survey and U.S. Census Bureau shows that in 2017, New Jersey continued its perennial distinction as the state with the highest average annual tax bill per home owner. Garden State home owners paid an average of $8,485 in real estate taxes in 2017.

At the opposite end of the spectrum, Alabama ranked 50th among home owners in average  real estate tax paid per year. There, the average real estate tax bill totaled just $678.

The top five states with the highest average annual property taxes are all located in the Northeast:

Rank Average Real Estate Taxes Paid Per Year
1. New Jersey $8,485
2. Connecticut $6,349
3. New York $6,054
4. New Hampshire $5,713
5. Massachusetts $5,192

The states with the lowest average annual property taxes are primarily located in the South:

Rank Average Real Estate Taxes Paid Per Year
50. Alabama   $678
49. West Virginia   $812
48. Mississippi   $967
47. Louisiana $1,005
46. Arkansas $1,012

NAHB economist David Logan looks at the national picture and provides further analysis in this Eye on Housing blog post.

Find out where your state stands on the list.

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Labor Department Issues Proposed New Overtime Rule

The Labor Department has issued a proposed new overtime rule that would raise the overtime salary limit from $23,660 to $35,308.

This means that any professional, administrative and executive employees making under $35,308 would be due time and a half if they work more than 40 hours a week.

However, this proposal has not yet been published in the Federal Register and could be subject to modifications. Once published, NAHB will review the proposed rulemaking and submit comments on the proposal.

NAHB opposed the Obama-era rule that would have raised the overtime threshold to $47,476 because such a drastic jump would result in real hardship for the nation’s small business community. We joined other business groups in filing a lawsuit to challenge this rule. As a result of these efforts, the rule was never implemented because a judge issued a preliminary injunction against it.

Secretary of Labor Alexander Acosta testified at his Senate confirmation hearing two years ago that he would prefer a more modest salary threshold for overtime pay than previously proposed. He suggested a threshold of around $33,000, which would be more in line with inflation.

For more information, contact Felicia Watson at 800-368-5242 x8229.

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New Home Sales Higher Than Expected in November

Sales of newly built, single-family homes rose to a seasonally adjusted annual rate of 657,000 units in November after an upwardly revised October report, according to newly released data by HUD and the U.S. Census Bureau. This is the highest sales pace since March 2018. However, on a year-to-date basis, sales are down 7.7% from this time in 2017.

The sales report was delayed due to the partial government shutdown.

“The sales increase was fueled by a notable uptick in homes sold at the affordable end of the market,” said NAHB Chairman Randy Noel. “There is clearly a demand for new home homes even as builders continue to grapple with supply-side challenges, including shortages of lots and labor and higher building material costs stemming from tariffs.”

“Solid job growth and growing household formations should support future demand for housing even as builders continue to address mounting affordability woes,” said NAHB Chief Economist Robert Dietz. “Builders are doing all they can to hold the line on costs to meet this demand, particularly at the entry-level market.”

A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the November reading of 657,000 units is the number of homes that would sell if this pace continued for the next 12 months.

The inventory of new homes for sale rose to 330,000 in November. The median sales price fell to $302,400, as the market has shifted to lower-cost houses.

Regionally, on a monthly basis, new home sales jumped 100% in the Northeast, 30.5% in the Midwest and 20.6% in the South. Sales fell 5.9% in the West.

NAHB Chief Economist Robert Dietz provides more analysis in this Eye on Housing blog post.

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Fed Holds Interest Rates Steady; What Does This Mean for Housing?

green percentThe Federal Reserve ended its two-day meeting of its policymaking committee by announcing it would hold short-term interest rates steady and signaling that it will carefully evaluate future economic conditions before considering another rate hike.

NAHB Chief Economist Robert Dietz provides the following analysis of the Fed’s decision and how it could affect the housing market in an Eye on Housing post:

“As expected, the Federal Reserve’s monetary policy body, the Federal Open Market Committee, unanimously held steady the federal funds top rate at 2.5%. The Fed’s January statement was consistent with recent policymakers comments suggesting a more flexible stance toward monetary policy at the end of last year and the start of 2019.

“In particular, the statement indicated that the Fed will ‘be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.’ This is a decidely more dovish stance for the Fed relative to commentary from the Fall of 2018, reflecting anchored inflation expectations and economic softness in some sectors, including housing, as illustrated by today’s December pending home sales data from the National Association of Realtors.

“Moreover, the Fed, in an accompanying statement, noted that it could modify its ongoing balance sheet reduction, which reduces its net holding of Treasury bonds and mortgage-backed securities, leading to higher rates (quantitative tightening), if economic conditions warrant such a change. This revision notes that the Fed would ‘be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.’

“In combination, these changes to the Fed’s monetary policy stance are more favorable for housing market conditions in 2019, which are currently challenged by growing concerns over housing affordability and sluggish growth for home building.

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Existing Home Sales Down Sharply in December

Total existing home sales fell 6.4% to a seasonally adjusted rate of 4.99 million in December, according to the latest figures by the National Association of Realtors. Sales are at their lowest level since November 2015 and down 10.3% from a year ago (5.56 million in December 2017).

Total existing home sales include single-family homes, townhomes, condominiums and co-ops.

Existing home sales remained sluggish in 2018 due to rising mortgage rates, growing home prices and tight inventory.

Meanwhile, the new home sales report for December scheduled to be released on Jan. 25 will likely be postponed due to the government shutdown.

The first-time buyer share of existing home sales slightly declined to 32% in December from 33% the previous month. The December inventory decreased to 1.55 million units from 1.74 million units in November. At the current sales rate, the December unsold inventory represents a 3.7-month supply, down from a 3.9-month supply last month.

Homes stayed on the market for 46 days in December, up from 42 days in November and 40 days a year ago. In December, 39% of existing homes sold were on the market for less than a month.

The December median sales price for existing homes was $253,600, up 2.9% from a year ago. This marks the 82nd consecutive month of year-over-year increases. The December median condominium/co-op price of $240,600 was up 2.3% from a year ago.

NAHB economist Fan-Yu-Kuo provides more analysis in this Eye on Housing blog post.

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How are Jurisdictions Spending Your Impact Fees?

Have you ever wondered if the impact fees your company is paying to various jurisdictions are going toward their intended purpose? Interestingly, they often are not.

Over the last 30 years, the Development Planning & Financing Group Inc. (DPFG) has been working with NAHB, HBAs and various home building companies in reviewing, critiquing, and determining the overall fairness and equity of the impact fees proposed by associated jurisdictions.

Over the last seven years, DPFG has conducted a number of in-depth audits of municipalities’ fee programs and we can now conclude greater transparency and oversight are needed related to the expenditure of fees.

Common misuses of fees

Most jurisdictions attempt to utilize fees for the intended purposes. There does, however, appear to be an almost uniform disconnect between the departments that prepare the fee study (e.g., manager, public works and finance departments) and the departments and/or personnel that collect and expend impact fees (accounting and public works departments).

In states with no fee audit requirement, DPFG’s audit findings have found the misuse of impact fees in four general areas:

  • Using fees to correct existing deficiencies. While reviewing a fee study, it was noted that federal and state authorities had cited a jurisdiction for not having sufficient fire stations. The jurisdiction was required by the authorities to use its own non-impact fee funds to construct a second fire station to adequately serve its existing population. During the peer review of the impact fee accounts, we discovered that the jurisdiction expended approximately $935,000 of impact fees it was collecting for fire stations 3, 4, and 5 for the construction of the second fire station.
  • Using specific impact fees to fund non-authorized capital facilities. During a review of a jurisdiction’s water impact fee accounts, for which separate impact fees were being collected for water capacity and water distribution, DPFG uncovered that the jurisdiction had utilized $4.1 million collected for water distribution to finance water capacity projects. The same jurisdiction also expended approximately $2.2 million in impact fees specifically for sewage collection facilities to fund the wastewater treatment plant, for which it was collecting a separate fee.
  • Using fees for the payment of non-capital assets. A jurisdiction funded more than $2.1 million in public works and park department salaries, payroll taxes, health insurance, vacation pay, overtime pay, and even retirement benefits. Fees were used to fund departmental office supplies, cellular service, travel, and meals.
  • Using fees for the repair and maintenance of existing facilities. In another jurisdiction, approximately $218,000 in funds were used to repair and replace existing park facilities rather than to construct new park facilities. The city has agreed to replenish the funds taken from the fee accounts through their general fund.
Ensuring proper expenditure of fees

Most state impact fee statutes are vague and open to interpretation, which often leads to misuse.

A possible solution is enacting impact-fee enabling legislation that outlines specific rules and guidelines for the estimation, collection, and expenditure of impact fees. This legislation should also provide a means for independent third parties knowledgeable in impact fees, public infrastructure, accounting and finance to audit the jurisdiction’s expenditure of impact fees.

As a starting point, industry associations may want to consider a broader effort to implement more specific legislation related to the estimation, collection, and expenditure of impact fees. By providing more detailed guidelines and implementing regular peer reviews of fee accounts, both the public and private sectors can feel more confident that jurisdictions are utilizing impact fees for their intended purpose, which is to provide necessary infrastructure for new growth.

Carter T. Froelich, CPA, is managing principal of the Southwest and Mountain Regions of Development Planning & Financing Group IncThis post was adapted from an article in the Fall 2018 issue of Best in American Living. Read the full article here

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March 5 Webinar Helps Members Understand Impact of Tax Reform on Their Bottom Lines

The landmark tax reform legislation that took effect Jan. 1 created significant changes in the tax code that will affect the housing industry and our small business members.

To help NAHB members understand how these changes could impact their business, NAHB is hosting a members-only webinar, Tax Reform and Your Bottom Line, at 1 p.m. ET on March 5.

The webinar will feature NAHB tax experts and outside tax counsel who will focus on the specific changes that will most directly impact small businesses, including the 20% pass-through deduction, limitations on the business interest deduction and new depreciation guidelines.

Register for the March 5 webinar at nahb.org/taxwebinar (log-in required).

If you are not able to join the webinar, a replay will be posted on nahb.org.

You can learn more about the new tax law, and NAHB’s influence during the legislative process, at nahb.org/taxreform.

Supreme Court WOTUS Ruling a Win for NAHB

Supreme CourtThe Supreme Court today ruled that litigation over the controversial 2015 definition of what constitutes “waters of the United States” (WOTUS) must be brought in to the federal district courts rather than circuit courts ─ a decision that will finally allow litigation over the rule to move forward.

In 2015, the Obama Administration issued a new definition of WOTUS when referring to that term in the Clean Water Act (CWA). That definition was immediately met with litigation around the country.

Unfortunately, the Environmental Protection Agency and U.S. Army Corps of Engineers erroneously believed that any litigation must be brought in the federal circuit (or appellate) courts, as opposed to the district (or trial) courts.  This mistake forced litigants to file cases both in district court and circuit court.

Eventually, the circuit court cases were consolidated in the Sixth Circuit Court of Appeals, which ruled that it did have jurisdiction over the challenges to the 2015 WOTUS rule. The Sixth Circuit also issued a nationwide stay of the rule.

Numerous litigants, including NAHB, disagreed with the Sixth Circuit and took the question over jurisdiction to the U.S. Supreme Court.  Today, that court unanimously agreed with NAHB’s position.

The government had asserted many arguments to support its belief that the Sixth Circuit had original jurisdiction over the cases challenging the rule. The Supreme Court, however, explained that the text of the CWA simply did not support any of the government’s arguments.  Therefore, the litigation over the 2015 WOTUS rule must begin in the federal district courts.

Now that the court has answered this question, it will issue a “mandate” to the Sixth Circuit in February and the Sixth Circuit will eventually dismiss all of the circuit court cases.  At the same time, the nationwide stay of the 2015 WOTUS rule will disappear.

However, the North Dakota District Court has enjoined the EPA from enforcing the rule in 13 states and that injunction remains in place.  Therefore, in the next month, NAHB will focus on convincing a district court to issue a nationwide stay of the 2015 WOTUS rule.

This decision may lead to some confusion in the coming days and weeks. It’s conceivable that the 2015 rule could take effect in some states unless the courts, Congress or the agencies take action.

The Trump Administration continues its efforts to rescind the 2015 WOTUS rule and replace it with a new definition that will seek to provide needed clarity and narrow federal CWA authority.

In addition, both the House and Senate fiscal 2018 Interior Appropriations bills and the fiscal 2018 House Energy and Water Appropriations bill include language that would allow the EPA to withdraw the 2015 rule without subjecting this action to judicial review.

This would help the EPA quickly finalize the withdrawal of that rule, ending any uncertainty and allowing all parties to focus time and efforts on creating a new rule.

For additional information, contact Tom Ward.

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Chuck Fowke, Florida, Elected as New NAHB Third Vice Chair

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Chuck Fowke, Florida, Elected as New NAHB Third Vice Chair FHBA is proud to announce Chuck Fowke was elected as NAHB Third Vice Chair on Thursday, January 11, 2018, during the NAHB Board of Directors meeting at the International Builders Show in Orlando, Florida.

“Florida has many issues that are relatively unique for our state including hurricane related building code issues, wetland challenges and flood plain requirements,” states Greg Matovina, FHBA President. “Given the unique challenges that the home building industry faces in our State, having a member from Florida serve as NAHB Third Vice President provides a golden opportunity for our issues to be placed front and center for discussion and resolution at the national level.”

“Chuck has demonstrated the leadership and commitment to serve in the NAHB leadership to ensure that Florida’s concerns are well represented.”

Fowke is a past President of the Tampa Bay Builders Association and is a Life Director. Notably, he served as President of the FHBA, is a past NAHB State Representative and is currently serving as the Area 5 National Area Chairman and is an NAHB BUILD PAC Gold Key contributor.

Congratulations, Chuck! FHBA is proud to have you represent Florida’s building industry at the national level.

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Lobbying Tax Deduction for 2018 NAHB Dues

Federal law states that taxpayers cannot deduct from their federal income taxes any portion of an association dues attributable to that association’s “lobbying activities” as an ordinary and necessary cost of doing business.

For 2018, NAHB estimates that the non-deductible portion of national dues—the portion that is applicable to lobbying—is 19%.

Read the full 2018 NAHB Lobby Percentage memo.

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