With DNC coming to town, industry leaders focused on policies

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As Democrats were busy preparing to come to town for the convention, Charlotte real estate industry leaders were busy, too.

In the months leading up to the convention, industry officials were in the nation’s capital trying to make sure federal policies enacted and proposed by Washington leaders are upholding the recovery of the housing market on the home front.

“We stand up in front of them and give them real-life stories of how their policies are affecting our people — homeowners, Realtors, homebuilders, apartment owners, tenants: everybody in our industry — and what can be done and what needs to be done to improve the industry for everybody involved,” said Jennifer Frontera, president of the Charlotte Regional Realtor Association and a Realtor with Wanda Smith & Associates.

Every May, Frontera said, she travels to Capitol Hill on behalf of the CRRA to lobby and meet with legislative leaders.

“We’re cautiously optimistic about our housing market recovery here in Charlotte,” she said, “and we realize the characteristics that always affect the housing industry nationwide, like consumer confidence and the economy, especially in an election year, can have an effect on the market in Charlotte as well.”

Frontera said that, on a federal level, the stability of the housing market depends on, among other things, preserving current housing tax incentives, maintaining low interest rates and continued efforts to reform Fannie Mae and Freddie Mac.

Rick Judson, a Charlotte-based homebuilder and the vice chairman of the board of the National Association of Home Builders, said bills introduced within the past year could improve the U.S. housing market. The Financial Institutions Examination Fairness and Reform Act, known as House Resolution 3461, was proposed to improve the examination of depository institutions and give banks the right to appeal regulators’ decisions about banks’ safety and soundness to a third party, making regulators more accountable for their decisions.

“It’s a directive to the banks to lighten up, use more common sense and loan more money to those who can afford to invest,” Judson said.

Judson will be sworn in as NAHB president in 2013. He served as president of the North Carolina Home Builders Association in 2004. In 2008, he chaired NAHB’s Housing Finance Task Force, which developed association policy relating to Fannie Mae and Freddie Mac, voicing the NAHB’s concerns to federal leaders about the housing market.

Judson said that when Congress is in session, he is in D.C. at least twice a month to meet with legislators or testify on issues affecting the NAHB.

“I don’t think anybody envisioned the depths of the recession that we were in, and the politicians thought the housing market could just pull out the economy like we have done in the past,” he said. “But the mortgage lending system was so broken, the lending standards are so tight, there is uncertainty regarding the future of the housing finance system, and the economy was too much in recovery mode, that there is no single fix out there, and we have to mitigate several issues to help our economy and the housing market.”

This past June, Judson joined more than 700 homebuilders in D.C. to call on Congress to consider House Resolution 1755, the Home Construction Lending Regulatory Improvement Act, sponsored by North Carolina Rep. Brad Miller, and its companion bill, the Home Building Lending Improvement Act.

The two bills provide for a prohibition against compelling lenders to call or curtail loans in good standing; elimination of the 100 percent of bank capital measurement; and realistic, market-based appraisals. They would also prohibit a federal banking agency from preventing a qualified financial institution from making a real estate loan to a homebuilder that has a viable project.

“It encourages lending to qualified builders to build homes for qualified buyers, because lenders are reluctant to make loans because of the draconian rules they’re under,” Judson said.

All three bills have been assigned to a congressional committee, which will consider them before possibly sending them on to the House or Senate as a whole.

Lending money for development projects is also a concern within the apartment industry and for Scott Wilkerson, board member of the National Multi Housing Council and the National Apartment Association, for which he serves as a regional vice president, and chief operating officer of Charlotte-based Gingko Residential, which provides management for 28,500 apartment homes across the U.S. and about 2,500 units in Charlotte and 8,000 across North Carolina.

Wilkerson lobbies in Washington twice a year — in March and September — on behalf of the NAA and NMHC. This past March, the two organizations produced the annual “Apartment Industry Priorities” report, a 24-page book outlining the federal policy priorities for the national apartment industry, and submitted it to representatives and legislative leaders in Washington.

Among other things, the report calls for the enhancement of the Low-Income Housing Tax Credit Program, saying any downsizing of the program would worsen the shortage of affordable rental units. The report also calls for an extension of the current estate tax legislation.

After allowing the estate tax to lapse in 2010, lawmakers passed a bill to reinstate the levy for 2011 and 2012, which maintained a $5 million exemption, a 35 percent tax rate and a stepped-up basis regime for asset valuation. However, without further action, the tax will reset next year to a $1 million exemption and a 55 percent tax rate, according to the report.

The report includes statistics about the state of the apartment industry, claiming there’s a need to produce an estimated 300,000 units a year to meet demand. The industry started a little more than half that number in 2011: 157,835. North Carolina was fourth among top states for new apartment construction in 2011 at 6,840 apartments. Texas was first at 26,311.

The report also states that one in three Americans is a renter, and 17 million households call an apartment home.

“The federal government has been so focused on single-family home ownership that the apartment market has taken a backseat to that, Wilkerson said, “and we spend a lot of time trying to educate Congress on the importance of our market to the average citizen who chooses to rent, which may be the right financial choice for a person at that time of their lives.”

Another means of financing the construction of apartments and homes was the Energy Efficiency New Homes Tax Credit, enacted in 2005. But after being expanded every year from 2007-10, it finally expired in 2011 and was not renewed. Homebuilders were eligible for a $2,000 tax credit for a new energy-efficient home that achieves 50 percent energy savings for heating and cooling, and apartment builders were also eligible for $2,000 per unit if the rehabilitated or built units met the energy-saving standards.

The removal of the tax credit was not welcomed by Wilkerson and Gingko, which specializes in the rehabilitation of apartments and making them energy-efficient for tenants.

One such recent project is the 236-unit Yorktown Club, a 40-year-old multifamily rental property in Durham. Wilkerson’s company is about 80 percent through rehabilitation on that project, but most of the units were completed in 2012 when the tax credit expired.

“They met the energy-efficiency standards, but most completed units came after the deadline, so we didn’t get any tax credits on those unfortunately,” Wilkerson said. “Those credits stimulate economic development and rehabilitation of apartment units, which is very vital to our industry, and there is a need at the federal level to create meaningful financial incentives to encourage the adoption of energy-efficiency technologies and practices in new and existing buildings.”

DNC HQ: Housing the Party
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