Agenda Summary
National Association of REALTORS®
2011 REALTORS® Conference
Anaheim Convention Center
Room 303 C
Friday, November 11, 2011
11 a.m. - 12:30 p.m.
Chair: Terry Sullivan, Spokane, WA
Vice Chair: Daniel Hatfield, Comfort, TX
Committee Liaison: Bill Brown, Los Angeles, CA
Committee Executive: Russell Riggs, Austin Perez, Washington, DC
I. Call To Order and Opening Remarks
A. Terry Sullivan, Chair
B. Dan Hatfield, Vice-Chair
II. Approval of Previous Meeting's Minutes and
Review of Conflict of Interest Statement
III. Land Use Forum Review
A. Karen O’Donnell, Chair
B. Bob Snowden, Vice-Chair
IV. Legislative and Regulatory Update
A. NFIP Reform/Property Insurance Legislation
Congress must extend authority for the National Flood Insurance Program (NFIP) to write or renew flood insurance policies, which are required in order to obtain a mortgage in the 100-year floodplain.
Without the NFIP, 5.6 million home- and business owners in 21,000 communities nationwide would not be able to obtain a mortgage or insurance to protect their properties against flooding, the most common natural disaster in the U.S. The NFIP was created because of the lack of available flood insurance in the private market, which is still true today. It also reduced the number of uninsured properties that otherwise would be rebuilt with taxpayer-funded disaster relief after major floods.
NAR supports:
1) Renewing and strengthening the long-term viability of the federal flood insurance program;
2) Maintaining funding to update and improve the accuracy of flood maps, which are used to determine which properties require flood insurance; and
3) Including comprehensive coverage for properties including non-primary residences and reforms to ensure "full risk" premiums for properties with repetitive insured losses.
For some time now, the Congress has been approving short-term extensions of NFIP authority to issue flood insurance policies while congressional debate continues over fiscal reforms to the program. Since September 2008, there have been more than ten stopgap extensions and, last year, authority was allowed to expire twice for multiple weeks at a time. During the June 2010 lapse, 47,000 home sales were delayed or cancelled according to NAR survey data. Further NAR research confirms that more than 1,300 homes sales daily would be at stake in the event of another NFIP lapse.
As a result of REALTOR® advocacy efforts, Congress has extended NFIP through November 18, 2011. With NFIP authority extended, attention has turned to proposals to reform the program. While a fiscal year extension would bring a level of certainty to the NFIP, the Congress must now take the next step and adopt a comprehensive set of reforms to place the program on more sound financial footing over the long-term.
On July 12, 2011, by a vote of 406-22, the House passed the 5-year Flood Insurance Reform Act H.R. 1309 (Biggert, R-IL; Waters, D-CA), to extend and strengthen the program through 2016. Before that, it defeated, 38-384, a NAR-opposed amendment by Rep. Candice Miller (R-MI) that would have struck the bill and terminated NFIP in six months. The House bill is now pending before the Senate, where we continue to urge quick action.
On September 8, 2011, the Senate Banking Committee marked up its version of the Flood Insurance Reform Act, sending it to the full Senate for consideration. Similar to the House's, the bill includes a 5-year extension as well as premium-rate and flood-mapping reforms that would ensure the fiscal continuation of the program for the long term. Unfortunately, additional short-term extensions were necessary so that the Senate could debate and pass a bill and then reach agreement with the House over a reconciled version, before the legislation can become law.
On October 4, 2011, Congress passed the Continuing Appropriations Act (H.R. 2608), which includes a provision extending NFIP to November 18, 2011. NAR is urging Congress to finish its work on the 5-year NFIP reform bill before this latest extension ends, to help provide certainty and avoid further disruption to real estate markets. However, according to several reports, the 5-year bill has again stalled in the Senate over unrelated amendments and yet another extension may be necessary.
B. Clean Water Act Guidance/Proposed Rulemaking
Since the Supreme Court decision in Rapanos and SWANCC, there has been ambiguity in which water bodies are deemed “waters of the U.S.” and therefore subject to regulation under the Clean Water Act.
Depending on the definition of U.S. waters, expensive federal permits could be required to develop private property with any wet area--not just properties with a navigable interstate water or adjacent wetland.
NAR supports using appropriate scientific criteria to identify regulated areas, keeping the focus on preserving high value wetlands; requiring that local officials and affected property owners be notified about the presence of wetlands; and using wetlands mitigation banking.
Last Congress, legislation which NAR opposed was introduced in both houses to replace “navigable waters” with a broader definition of U.S. waters under the Clean Water Act. However, the bill stalled in the House and would have to be reintroduced; the sponsors did not return to Congress this term.
On April 26, 2011, EPA and the Army Corps of Engineers released non-binding draft guidance designed to "clarify Clean Water Act responsibilities." According to these agencies, this guidance “will increase significantly” the number of water bodies subject to Clean Water Act regulation. NAR submitted comments on this draft guidance. NAR's comments opposed the Guidance and observed that only Congress can fundamentally change what waters are regulated under the Clean Water Act.
EPA has also suggested, though not confirmed, that they will be moving forward with a rulemaking later in 2011 that would codify the approach and principles of the Guidance. NAR will continue to oppose any effort that expands the reach of the Clean Water Act or otherwise infringes on property rights.
C. Residential and Commercial Building Energy Use Labeling Programs
The federal government is moving forward with voluntary energy efficiency policies and programs to spur energy efficiency in residential and commercial buildings.
Residential and commercial energy use assessment and rating programs could have adverse impacts on the value of residential and commercial property by stigmatizing older buildings that are less energy efficient than newer ones. These proposals could also lead to labeling and point-of-sale energy reduction mandates during a transaction. If energy efficiency were federally mandated, property owners’ ability to sell their home or building would be at risk without first having to conduct energy audits and improve its heating and cooling system, windows, insulation and/or lighting.
NAR supports improving energy efficiency through voluntary incentives, commercially reasonable approaches and education in lieu of individual building mandates. The policy opposes applying existing laws/regulations that are not designed for global climate change; provisions that impose undue economic burdens on property owners or managers; or triggering such requirements at the time when real property is sold.
The Department of Energy (DOE) has almost completed development of a voluntary Home Energy Performance Score as part of Vice-President Biden's "Recovery Through Retrofit"
initiative. DOE intends to continue testing and refining the energy audit software until late 2011 when the plan is to take this voluntary program nationwide
NAR has written and met with the White House and various federal agencies to reinforce our strong concerns about the stigmatizing effects of these kinds of energy labels on real estate at one of the most critical moments in the nation's economic recovery. While NAR is pleased that in establishing a pilot program, the Administration addressed several of NAR’s concerns over the reliability and accuracy of home energy rating systems, NAR continues to have concerns about the potential for misuse of such information in the property transaction.
In addition, the Department of Energy is developing an Asset Rating Program to assess energy usage and spur energy efficiency in commercial buildings.
The development of this program has just started. DOE is expected to release a proposal for this program in early 2012 and develop a series of pilot programs to test various aspects of the program in the spring of 2012. A final program could be rolled out as early as the fall of 2012.
To address this proposed Asset Rating program proposal, NAR has convened meetings with DOE staff and is working in coalition with other regulated stakeholders to ensure our concerns are heard by the agency and Members of Congress. NAR will also comment on the proposal when it is published in the Federal Register in early 2012.
D. Lead Paint RRP Proposed Rule for Commercial Buildings
To limit exposure of humans, especially children, to lead-based paint hazards, Congress in 1992 enacted the Residential Lead-Based Paint Hazard Reduction Act (Title X of Public Law 102-550). Section 1018 of Title X regulates disclosure of lead-based paint in sales and lease transactions involving pre-1978 residential properties.
The most recent EPA rule in this area regulates the creation of lead hazards during renovation, repair and painting activities in residential property. EPA is requiring contractors and renovators to comply with additional regulatory procedures before, during and after any remodeling or renovation activity to reduce the creation of lead dust. EPA is now beginning to develop proposed regulations that address RRP activities in commercial buildings.
Pursuant to Section 1018, Realtors are required to (1) obtain information from a seller regarding the known existence of lead-based paint in a home; and (2) provide information regarding the hazards of lead-based paint in the home. Failure to comply with this rule could result in warnings and monetary fines.
Similar rules for commercial buildings could impose increased regulatory burdens and costs on commercial property managers and Realtors with commercial property management responsibilities.
NAR opposes mandatory testing for lead-based paint tied to the transaction process and supports property condition disclosure and education. NAR also opposed the renovation, repair and painting rule due to its costs and administrative burdens.
The rule was promulgated on April 22, 2010, and EPA has moved forward with implementation and enforcement. Congress passed a 6-month delay in the implementation of the fines for contractors who conduct renovation activities but are not certified, which expired in December 2010. NAR has provided comprehensive information to Realtors on how to comply with this regulation and will continue to communicate with EPA on how this rule is adversely impacting Realtors and property managers.
The rulemaking process for the proposed commercial RRP rule has just begun. EPA is required by a court settlement to propose a rule regulating RRP activities on the exterior of commercial buildings by December 2011 and finalize this exterior rule by July 2013.
The agency is required to propose a rule that addresses RRP activities for the interior of commercial buildings, but the timing of that proposed interior rule is contingent upon additional research and the collection of scientific information. The EPA may propose a rule for reducing lead hazards inside commercial buildings by December, 2013, with a finalized rule at some point in 2015.
To address these proposed rulemakings, NAR has convened meetings with EPA staff, hired legal counsel to provide strategic advice on how to best have EPA address our concerns, and is working in coalition with other regulated stakeholders to ensure our concerns are heard by EPA and Members of Congress. NAR will also comment on the proposed commercial building RRP exterior rule when it is published in the Federal Register.
E. CO2 Regulations and Related Research Activity
If energy efficiency were federally mandated, property owners’ ability to sell their home or building would be at risk without first having to conduct energy audits and improve its heating and cooling system, windows, insulation and/or lighting.
NAR supports improving energy efficiency through voluntary incentives, commercially reasonable approaches and education in lieu of individual building mandates. The policy opposes applying existing laws/regulations that are not designed for global climate change; provisions that impose undue economic burdens on property owners or managers; or triggering such requirements at the time when real property is sold.
The Environmental Protection Agency (EPA) has begun to phase-in regulations of CO2 from large emitters, such as power plants and manufacturing facilities, although legislation and lawsuits to stop them are now pending. Phase 2 of these regulations, when finalized in 5 to 7 years, could begin to regulate relatively smaller emitters, including commercial and apartment buildings depending on where EPA sets a revised regulatory threshold. Under the Clean Air Act, a building owner would be required to obtain federal construction and operating permits including the installation of “Best Available Control Technologies.”
NAR filed multiple comment letters against the EPA regulating CO2 from commercial or residential buildings. While Phase II of these regulations could be delayed, due to pending litigation, EPA nevertheless will continue to move forward with Phase I and will begin to collect and analyze data on revising the CO2 thresholds at some point in the future.
In order to further explore the impacts of CO2 regulation on buildings, NAR has commissioned a report to explore how this kind of regulation would impact the real estate sector. This report will provide an analysis of the regulation, focusing on its relationship to real estate and will provide a case study and analysis of how a building, if required to obtain a permit to release CO2, might do this and related expenses and administrative costs. This report should be completed by December, 2012.
V. Old Business
A. Legislative/Regulatory Database Demo
B. Referral from the Realtors Land Institute: Policy on Conservation Easements
Conservation easements are incentive tools for land use management that allow property owners to prohibit development on a portion of land sold while maintaining private property rights. For some members of the Realtors Land Institute (RLI), conservation easements (CE) have spurred sales in some markets during the most recent economic downturn.
The current incentives that make CEs attractive as an investment and tax mitigation tool for some landowners, which apply to a landowner’s federal income tax, include:
• CE donations are tax deductible, but deductions are limited to 30% of the donor's adjusted gross income (AGI).
• A donor can take deductions for 6 years.
• C-corporations deductions are limited to 10% of their AGI.
RLI Position
RLI supports the current form of the CE tax deduction. It must be noted, however, that abuses of CEs have occurred. To address these concerns, RLI believes that Congress should establish more effective oversight of transactions that use conservation easements.
In addition, RLI supports:
(1) A 99- year maximum cap on CEs;
(2) Allowing owners to elect the number of years the CE will be in effect (with a minimum CE period of ten years) and with a corresponding ceiling on the tax deduction to account for the diminution of the value of the property. If cancellation of the CE occurs prior to the ten-year minimum, the owner should pay a penalty equal to the amount of net tax credit issued to the owner at the time of the easement, plus interest and penalties, similar to interest and penalties charged to the property owner in the cancellation of other USDA programs such as the Conservation Reserve Program (CRP) and the Wetlands Reserve Program (WRP); and,
(3) Encouraging the development of a “recapture of appreciation or gain” component to CEs, that in the event title to the subject property is sold or transferred outside of the owner’s immediate family, within ten years of the date of the easement, any monetary gain from the sale of the subject property realized by the owner, greater than the appraised value after the implementation of the easement, shall be taxed at the same rate as the net tax credit issued to the owner at the time of implementation of the easement.
VI. New Business
A. Discussion of 2012 Legislative and Regulatory Priorities
VII. Committee Member Information Exchange/Discussion
VIII. Links for Your Information
A. Five Point Housing Solutions (Full Five-Point Plan)
NAR worked with two well-respected policy think tanks – the Progressive Policy Institute (PPI) and the Economic Policies for the 21st Century (e21) – that organized and conducted a policy meeting on October 4. New Solutions for America’s Housing Crisis brought together policy leaders, industry representatives, Members of Congress, thought leaders and the media to present ideas and make actionable recommendations intended to stimulate the growth necessary for a sustained recovery in housing and extend an ensuing positive effect on job creation and the broader economy.
