By Jennifer McClure , Director of Public Affairs
Sometimes, the legislation that doesn’t pass is as important as that which is “truly agreed and finally passed” by the Missouri General Assembly. Consider this list of proposed legislation that didn’t pass:
• Statewide Uniform Building/Fire Code
• Missouri County Planning Act
• Recording Fee Increase
• Troublesome TIF/TDD provisions
• Mandatory Home Warranties
• Problematic Statutory Lien on Real Estate Language (SB 1074)
• Licensing of Electrical Contractors
• Statewide mandate for CO2 and smoke detectors for homes
• Missouri Catastrophe Fund (residential housing insurance mandate)
• Uniform Planned Community Act
• Mandatory Green Building Standards for residential construction
• Homeowner Recovery Act & Statewide Contractor Licensing
• DNR storm water permit fee increase
Mandates that make new homes too expensive
Making sure provisions which add to the cost of doing business and increase the price of building a home DO NOT PASS takes a great deal of time and resources but it has an important impact. Let’s say the uniform fire code bill passed and required all newly constructed homes to have fire sprinkler systems. In its brochure for consumers titled “Protect What You Value Most”, the Home Fire Sprinkler Coalition simply states that adding fire sprinklers will add 1 to 1/½ percent to the cost of new housing. Applying this general rule, say, to a $246,500 new home, that translates into a $2,465-$3,698 increase in its price. Plus, they say the added cost will be offset by insurance savings.
The NAHB has conducted exhaustive study on how much such a provision ACTUALLY adds to the cost of an average sized home and if the savings on insurance premiums offsets that additional cost.
In 2007, the NAHB Research Center collected information on sprinkler costs in a nationwide survey completed by 102 builders who built 5,527 homes with fire sprinklers in 2006. The survey results show that the median cost of installing fire sprinklers in the 5,527 homes was about $5,573. The median size of the surveyed homes was 2,271 square feet, (close to the national median for square footage at the time.)
The extra costs the NAHB Research Center survey was careful to include are the costs of increased permit, tap, and inspection fees, as well as any costs of redesigning the home to accommodate the sprinklers. It’s important to include these items, as costs are not limited strictly to the material and labor used in installing the sprinkler system.
In addition, the increase in price to the home buyer will generally be more than the increase in the construction costs. This occurs because, when construction costs rise, other costs such as financing costs and broker commissions also rise. Moreover, normal profit margins must be maintained to keep home building competitive and prevent the capital and entrepreneurship from moving to other industries. Based on these factors, NAHB estimates that a $5,573 increase in construction costs will raise the final price of the home with fire sprinklers to the buyer by $6,677.
A $1,000 increase in the price of a home beyond the median makes it impossible for approx. 400 local families to afford it. Obviously, many families would no longer be able to afford a newly constructed home in our marketplace if it had to have fire sprinklers. I can’t think of any scenario in which it is good for single-family home builders when fewer people can afford the cost of a new home — and yet so much proposed legislation is increasingly designed to create precisely that outcome.
What Did pass – how will it affect our industry?
There were a number of bills which we monitored/advocated for that will hopefully prove to be positive for the home building/remodeling industries.
• Copper Theft: The act makes it a Class C felony to steal or appropriate, without the owner’s consent, any wire, electrical transformer, metallic wire for telecommunications, or device or pipe used to conduct electricity or transport fuels. It requires additional record-keeping and increases penalties for scrap metal businesses in an effort to restrain ability to sell stolen goods/decrease theft.
• Energy & Environment: This bill contained provisions regarding green building requirements for state buildings. The act also creates an income tax deduction for either the cost of a home energy audit conducted by an energy auditor certified by the Department of Natural Resources or for the cost of implementing any of the recommendations made in any such energy audit, or for both such activities. The deduction is limited to $1,000 per taxpayer per year, up to $2,000 cumulative lifetime total per taxpayer. The deduction expires December 31, 2013.
The act creates the “Show Me Green Sales Tax Holiday.” For 2009 and every year thereafter, during the seven day period beginning on April 19th and ending April 25th, all sales of Energy Star® certified new appliances will be exempt from state sales tax. Political subdivisions may opt in/out. The act creates minimum energy efficiency standards for certain new products sold/installed within the state. Your HBA has contacted DNR staff to discuss the provisions for energy auditor certification, which the agency will oversee.
• Workers Compensation: The Schoemehl court decision had the potential to increase our work comp insurance rates. On the last day of session, an employment bill passed negating that court decision. The statute specifies that in applying the provisions of the Workers’ Compensation Law it is the intent of the legislature to reject and abrogate Schoemehl v. Treasurer of the State of Missouri, and all cases interpreting, applying, or following this case and reaffirms that the right for compensation for the permanent total disability of an injured employee terminates on the date of the injured employee’s death.
An immigration bill also passed but is subject to legal challenge by a number of groups. It referred to general contractors on projects using public funds. We’ll take a look at impact from that legislation in a future issue of the newsletter.