Florida Fiasco

The Florida HBA's concerns over massive property tax cuts leading to increased impact fees spilled over into a political donnybrook in which prominent state politicians returned campaign contributions to the HBA, and Wayne Bertsch, the trade group's political director, was dismissed.

It all started in June when the state legislature passed a $16 billion property tax reform measure. The new law mandates that cities and counties roll back their fiscal 2007–2008 budgets to 2006–2007 levels, plus reduce spending from 3 percent to 9 percent, cuts that are based on statewide averages for how municipalities levy property taxes.

The public also will vote in the January 2008 primary election on a constitutional amendment that would exempt 75 percent of the first $200,000 of the value of a home and 15 percent of the next $300,000. The maximum property tax exemption would be $195,000. The measure seeks to offer an additional $16 billion in property tax relief to homeowners, many of whom have seen their valuations skyrocket during the real estate boom of recent years.

The state HBA, concerned that reduced revenue from property taxes could prompt municipalities to increase impact fees, lobbied hard for the legislature to cap impact fees as part of the initial legislation. Unfortunately, the legislation was drawn up along the narrow issue of property tax reform, so it would have taken a three-quarters vote of both the House and Senate for the impact-fee component to be considered. BUILDERs' attempts to cap impact fees failed.

Once the law passed, the builders' next move was to work on a proposal to cap fees during the 2008 legislative session. In early July, John Wiseman, president of the Florida HBA, posted a message on the trade group's Web site indicating that the association would only fund candidates who supported a cap on impact fees.

The direct connection between a politician's vote and a campaign contribution set off a political firestorm that led Senate President Ken Pruitt to return $35,000 in campaign contributions. Another politician, Sen. Jeff Atwater, returned $2,500.

“We just don't operate this way,” says Kathy Mears, a spokesperson for Sen. Pruitt. “The state legislature is not an auction for the highest bidder,” she says, noting that Pruitt is a pro-business Republican and has been a longtime supporter of builder issues.

Public interest groups such as Common Cause were appalled.

“This shows how campaign contributions are used to manipulate public policy,” says Ben Wilcox, executive director of Common Cause Florida.

Faced with a public relations disaster, the Florida HBA quickly pulled Wiseman's original message off the site and issued an apology.

“Although it is true that impact-fee reform is very important to Florida's economy and specifically the construction industry, it was incorrect for me to indicate that support of any one bill is the only criteria to be used in a PAC evaluation,” Wiseman's message reads.

The Florida HBA declined to comment on this story.

At press time, cities and counties were slowly making announcements about proposed budget cuts, and public officials were quoted in press accounts saying they were considering impact-fee hikes.

Miami-Dade County, for example, announced $240 million in cuts in early July and said the county could face another $220 to $240 million in cuts if voters approve the additional exemption measure next January.

After years of super-sizing, America's appetite for big houses finally appears to be waning, according to the latest Design Trends Survey by the American Institute of Architects. In the most recent poll, conducted in the first quarter of 2007, 26 percent of residential architects reported an overall decrease in home sizes, versus 21 percent reporting increases. Shrinking households, high energy costs, small lots, high land costs, and a growing consumer interest in quality over quantity are likely factors.—J. Sullivan

SOURCE: ASSOCIATED PRESS

Community development financial institutions serving low-income and low-wealth people throughout the U.S. will be the beneficiaries of approximately $42 million to be awarded over the next five years. The awards are funded by The Wachovia Foundation ($16.75 million) and the John D. and Catherine T. MacArthur Foundation ($25 million), and one of their focuses will be to help provide more affordable housing. The first recipients of the Wachovia Next Awards for Opportunity Finance will be named in Miami in December. One recipient will get $5.5 million, the other $2.75 million.—E. Butterfield

Citing sluggish sales and a downbeat economic forecast, Ennis Homes of Porterville, Calif., has laid off 25 percent of its work-force. The company built around 400 homes in 2006 between Bakersfield and Fresno. The pink slips were issued primarily to workers on construction and operations teams.—S. Zurier

SOURCE: TULARE ADVANCE-REGISTER

International home buyers, and retirees in particular, are an increasingly important market in the U.S., according to a new study from the National Association of Realtors on international home buying activity. The “2007 Profile of International Home Buying Activity” noted that international buyers are more likely to purchase a condo and pay cash than U.S. buyers, and nearly half use their homes exclusively for vacation. Mexico topped the list of countries of origin for buyers, followed by Great Britain and Canada. About half the sales to foreign buyers were in three states: Florida, California, and Texas.—P. Curry

While it could be seen as a sign of desperation, some home builders are trying to sell off excess inventory by offering trade-ins to buyers who can't sell their old homes. “The resale market is slow right now,” says Dan Tartabini, a sales director at KB Home. “We want to make sure people who buy from us, that have a house to sell, get to the finish line.”—S.Z.

SOURCE: TUCSON CITIZEN

Condo sales have propped up Washington residential real estate this year, surging nearly 23 percent for the first four months and accounting for 54 percent of the market. Nevertheless, the large number of condos flooding the market means prices have begun to drop. The median condo price in D.C. this past April was $350,000—4 percent lower than last year.—N.F. Maynard

SOURCE: USA TODAY

After deflecting rumors for months, Lennar let the cat out of the bag in June when officials at its Western headquarters leaked some details about new construction techniques the builder has been testing at the former air base in El Toro, Calif., which Lennar is developing into its Great Park master planned community. A Lennar representative confirmed a report, which appeared in the Orange County Business Journal, that the builder has constructed and torn down about 40 prototype homes, including whole tracts, on the base's runway and inside a giant aircraft hangar, to experiment with different building techniques (such as a “dry” house with minimal plumbing), new house features, and “green” technologies. Spokesperson Marshall Ames, tells BUILDER that at least four different product lines emerged from those tests, although he could not comment immediately about Lennar plans' to eventually bring those products to other communities around the country.—J. Caulfield

Up-Front Education

Congress hopes to head off defaults with more home buyer counseling.

First-time and low-incomE home buyers may soon have access to more counseling services as the result of an amendment to the appropriations act for the Departments of Transportation and Housing and Urban Development. The amendment increases funding for HUD-certified housing counseling services by $6.76 million for a total budget of $48.34 million in fiscal year 2008.

Affordable housing advocates frequently cite pre-purchase counseling as a major tool in reducing the risk of default. Counseling helps buyers understand the financial obligations of homeownership and choose a home that best fits their budget.

“Purchasing a home, especially for first-time buyers, can be incredibly daunting,” says U.S. Rep. Judy Biggert (R-Ill.), one of three co-sponsors of the amendment and ranking member of the House Financial Services Housing and Community Opportunity subcommittee. “For many, it's the first legal contract they ever sign. At the same time, buyers must contend with the personal stress of making what is often the largest single investment in their life. As a former real estate attorney, I know how vital it is that buyers have reliable experts to talk to before closing on a home.”

With the additional funding, the agencies that provide the counseling will be able to hire additional counselors, pay the costs of providing services, and train counselors to address particular concerns, such as default counseling, which has experienced a significant rise in demand, Biggert says. The House of Representatives approved the appropriations bill and referred it to the Senate for consideration. - Pat Curry

Refilling the Void

Post HD Supply, can The Home Depot be a meaningful supplier to contractors and builders?

“Own the pro” is one of the Home Depot's five business priorities and shorthand for capturing more sales from a customer segment that currently accounts for only 2 percent of its stores' shoppers but 30 percent of its annual revenue. However, the Atlanta-based retailer's recent $10.3 billion sale of its pro-focused HD Supply division, to three private equity firms—which, as of press time, was up in the air—raises questions about how realistic that priority is.

Frank Blake, The Home Depot's chairman and CEO, says the company has added 700 licensed plumbers and electricians to its stores, dedicated to servicing pro customers. But company officials haven't revealed how The Home Depot is addressing other reasons why pros stay out of its stores, such as the lack of jobsite delivery services. And regardless of their lower margins, HD Supply's 12 business units generated $12.1 billion in revenue last year and were Depot's lifeline to the housing industry.

About $1 billion of those sales came from Creative Touch Interiors, whose 24 showrooms provide turnkey interior design solutions for 24 of the 25 largest builders. “The sale of HD Supply will have a positive impact on our customers, since the new enterprise will be more agile and focused,” says its president Tom Lazzaro. HD Supply's two lumber and building materials dealers—the former Cox Lumber in Florida, with 24 yards; and Williams Brothers Lumber in Georgia, with 22 locations—generated an estimated $700 million to $800 million last year.

“This is the right decision for our business, at the right time,” says Joe De Angelo, The Home Depot's COO who is staying on as CEO of HD Supply. - John Caulfield