June 28, 2014

Simply Put, Opportunities to Make $$$

Sometimes we go through our day to day business of building homes or enhancing homes and don't realize there are "magical powers" delivering our opportunities. Same could be said for associates who supply a trade, supply or service to deliver and new or improved home to the builders end user. We just don't wake up in the morning and have business opportunities handed to us. Quite a bit of work goes into delivering those opportunities and, while not magical, it's exactly what you pay for when you invest in your association dues; a return. 
The latest legislative victory from our engaged members and amazing staff, the "magic" of our industry, is outlined below. But first, here is the original NAHB position: Home Builders Seek Legislative Fix for Soaring Flood Insurance Premium Rates (click here)

As Albert Einstein states above, I needed to get a better understanding and, with the help of NAHB government affairs staff, through back and forth questions, answers, observations and a "ah, I understand"  here is the outline:

Demonstrate Actual Value of Victory
(AKA business opportunities for members)

 This year alone, NAHB economists estimate:
·         $755 million more in new home construction because it is now easier for potential new home buyers to sell their existing home and buy new.
·         $361 million a year in additional remodeling activity because there is no longer added insurance expense for certain remodeling jobs.

The flood legislation benefited several groups with provisions that go beyond the scope of this discussion, but below I’ve included two sectors important to our members:

Prior to NAHB’s involvement in flood insurance legislation:
·         Renovated properties that would “substantially improve” the value of one’s property by 30% would incur a phase-in of 25% of the full-risk rate, each year, over the next four years. Assuming one’s property is valued at $100,000, improving the value by 30%, perhaps through a bathroom or kitchen renovation, would force such a homeowner to incur massive premium flood insurance increases. NAHB successfully argued that homeowners would elect to delay or suspend these renovations, including popular energy efficiency improvements, if the homeowner would realize increases in flood insurance premiums.
·         NAHB was successful in amending the legislation to increase the remodeler’s threshold from 30% to 50%. Therefore, only renovated properties that would increase the property’s value by 50% would be forced to incur premium increases. 

(For builders) Sale or transfer of property:
Prior to NAHB’s involvement in flood insurance legislation:

·         The sale or transfer of property would trigger a shift to the full-risk potentially resulting in flood insurance premium increases into the thousands of dollars. We had examples of individuals going to settle on the purchase of a home, and at settlement they were presented with massive increases in their flood insurance premiums.

As a result of NAHB’s lobbying efforts the following changes were made:

·         Primary Residences (Homes built before 1974, also known as Pre-Flood Insurance Rate Map or FIRM) – Instead of an immediate shift to actuarial rates, NAHB’s efforts limited increases to 5-15% increase of the average per premium class but put a cap on individual policies at 18%
·         Non-primary residences (Second homes, build before 1974), non-residential (businesses), and Severe Repetitive Loss (SRL) properties – NAHB’s lobbying limited increases to 25%
·         Post-FIRM primary residences: NAHB’s lobbying prevented increases and grandfathered rates would continue 

·         Post-FIRM primary, non-residential, and SRL properties: NAHB’s lobbying prevented increases and grandfathered rates would continue.

What does this mean for our members? More opportunities for our businesses. 

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