Monday Morning Briefing
Home Builders Applaud Five-Year Reauthorization of Flood Insurance Program
In an important victory for the National Association of Home Builders (NAHB) and its members who rely on the National Flood Insurance Program (NFIP), Congress has reached an agreement to reauthorize the program through Sept. 30, 2017. In the past few years, the NFIP has experienced several short-term lapses in authorization, forcing many home buyers to delay or cancel closings due to the inability to obtain NFIP insurance for a mortgage. In other instances, builders were forced to stop or delay construction on a new home due to the lack of flood insurance approval, resulting in unnecessary delays and job losses.
“NAHB has been working tirelessly to make sure that this vital program, which was set to expire on July 31, was reauthorized for five years to ensure that the federally-backed flood insurance program operates smoothly and without delay, remains efficient and effective in protecting property owners, and creates more stability in the housing market,” said NAHB Chairman Barry Rutenberg. Congressional negotiators agreed to roll the flood insurance legislation into a larger legislative package that also includes the transportation reauthorization and student loan bill. The legislation was subsequently approved by the Senate and House and is expected to be signed into law shortly by President Obama.
Working with a bipartisan group of senators, NAHB was also successful in removing “residual risk” language from the flood insurance bill, which would have required the mandatory purchase of flood insurance for areas located behind dams or levees. “NAHB believes the local investment in these flood control structures takes into account the risks, and to mandate the purchase of additional flood insurance policies at a cost to the home owner is simply unfair,” said Rutenberg.
“We commend Sens. Mark Pryor (D-Ark.), John Hoeven (R-N.D.), Pat Toomey (R-Pa.), Richard Durbin (D-Ill.) and Bob Casey (D-Pa.) for their efforts in this area.” In addition, Rutenberg thanked Sens. Thad Cochran (R-Miss.), David Vitter (R-La.), Tim Johnson (D-S.D.) and Richard Shelby (R-Ala.) for working towards a resolution to allow the flood insurance bill to move forward. On the House side, NAHB commended the tireless efforts of Reps. Judy Biggert (R-Ill.), Maxine Waters (D-Calif.), Jerry Costello (D-Ill.), Bill Shuster (R-Pa.) and Spencer Bachus (R-Ala.) to push the bill across the finish line.
The five-year extension of the NFIP ensures that the program will remain available, affordable and financially healthy, said Rutenberg. Established in 1968, the NFIP offers affordable flood insurance to home owners and businesses in flood plains and other low-lying areas that otherwise might not be able to obtain coverage. More than 20,000 communities nationwide participate in the insurance program, which currently covers about 5.6 million policyholders.
Contrary to Internet Rumors, Health Care Tax to Have Little Impact on Principal Home Sellers
As the media centers on this week’s Supreme Court decision on the health care law, builders and the residential construction industry continue to wrestle with false rumors circulating the Internet that the new 3.8% Medicare tax on so-called unearned income set to take effect in 2013 is a straight tax on the sale of a home. This is not the case. The tax increase on capital income — such as capital gain and rents — will affect some real estate investments. However, it should have a negligible impact on sellers of principal residences.
The 3.8% Medicare tax will affect high-income taxpayers who report taxable income due to capital gains and other non-wage income. It will not affect income that is currently tax-exempt, including most capital gain due to the sale of a principal residence (due to the $250,000/$500,000 gain exclusion rules). Taxpayers with less than $250,000 in income will not see any increase in tax.
Circuit Upholds EPA’s Removal of the Opt-Out Provision The U.S. Court of Appeals for the District of Columbia Circuit on June 22 ruled that the Environmental Protection Agency had the authority to remove the “opt-out” provision from its lead paint renovation rule. While NAHB is disappointed with the court ruling, we continue to work with Congress to reinstate the opt-out provision. The opt-out provision would have allowed remodelers working in a home built prior to 1978 to forego more expensive work practices according to the owner’s wish if no children under the age of six or pregnant women resided there.
NAHB led a coalition of industry groups to petition against the EPA, arguing that removal of the opt-out rule substantially increases the costs of complying with the lead paint rule without providing a corresponding benefit to the population that it is designed to protect – children under six and pregnant women. Two bills pending in the House and Senate (H.R. 5911 and S. 2148) would reinstate the opt-out provision. In a positive development related to the lead paint issue, the House Appropriations Committee on June 27 approved an NAHB-supported amendment to the EPA’s spending bill offered by Rep. Denny Rehberg (R-Mont.) that would restrict funding for EPA enforcement activities related to its lead paint rule until the agency approves an appropriate “test kit” for ascertaining the presence of lead paint. The measure will next go before the full House.
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- Joanne Loftus