At their March 12 Quarterly Luncheon, the BASF Trustees will hear from two Members of Congress from the South Florida delegation regarding the possible FAA height limitations on downtown high-rise buildings. Congresswoman Frederica Wilson (D-24) and Congressman Carlos Curbelo (R-26) will be two of the four panelists to discuss this important development issue before the Trustees, a select group of builders and developers from Miami to Fort Lauderdale. For reservations, contact firstname.lastname@example.org or call BASF offices.
Here’s latest housing news from Capitol Hill…..FYI, TB
By a wide bipartisan 378-46 margin, the House last night approved H.R. 5771, the Tax Increase Prevention Act, which will renew scores of temporary tax provisions known as “tax extenders” that expired this year, including several of interest to the housing community. The one-year retroactive renewal is through 2014 and dates back to Jan. 1.
NAHB is disappointed that a longer term deal was not reached, but the political situation and the calendar have forced Congress into a one-year deal everyone hoped to avoid.
Just one week ago, Congress was headed to a bipartisan, bicameral deal which would have extended all of the expired provisions for two years through 2015. The agreement also would have also made a handful of extenders, such as the research and development tax credit, permanent.
Just hours after word of the agreement leaked out, the White House scuttled the deal by announcing the President would veto any bill that contained these permanent provisions.
In a letter to the House prior to the bill’s passage, NAHB urged lawmakers to support the legislation. We also expressed concern that these short-term tax bills create difficulties for our members by denying builders the certainty needed to finance complex projects and called on Congress to act quickly on a longer-term deal in early 2015
Key provisions in the tax extenders package for 2014 (retroactive to Jan. 1) include:
- Section 45L Tax Credit for Energy Efficient New Homes. Provides builders a $2,000 tax credit for exceeding energy standards by 50%. The base energy code is the 2006 International Energy Conservation Code plus supplements. Section 45L is expected to save home builders $267 million in taxes for 2014 construction activity.
- Fixed Credit Rate for 9% Low Income Housing Tax Credit projects. The bill will renew the 9% fixed rate, but only for 2014 allocations.
- Section 25C Tax Credit for Qualified Energy Efficiency Improvements. This is a credit worth up to $500 (subject to a $500 lifetime cap), with lower caps for certain products like windows, for consumers to install qualified energy efficient upgrades. Remodelers often leverage 25C tax credits when working with clients. Section 25C is expected to save home owners who remodel $832 million in taxes for 2014 improvements.
- Section 179D Energy Efficient Commercial Buildings Deduction. Provides a deduction up to $1.80 per square foot for commercial buildings, including multifamily buildings built under the commercial code, that exceed specific energy efficiency minimums.
- Section 163 Deduction for Private Mortgage Insurance. Allows taxpayers, subject to an income cap, to deduct premiums paid for private mortgage insurance. The deduction for PMI is expected to save home owners $919 million for tax year 2014.
- Bonus Depreciation. Extends the 50% bonus depreciation.
- Section 179 Expensing. Increases the maximum expensing amount to $500,000 for qualified property on up to $2 million in property placed in service.
- Short-sale mortgage debt forgiveness. The provision would extend through 2014 the exclusion from gross income of a discharge of qualified principal residence indebtedness due to a short sale.
The Senate is expected to take up and pass H.R. 5771 next week.
Tuesday’s Afternoon Update
What you need to know about Florida today
Home prices accelerated in October
U.S. home prices rose at a faster year-over-year pace in October than in September, snapping a seven-month slowdown. Still, home values are rising more slowly than they were earlier this year, when 12-month gains were averaging nearly double their current pace. More at the AP.
Included in your BASF “Three In One” Membership:
Snapshot of the Economy from the National Association of Home Builders in Washington, DC
Contact any NAHB staffer in their Economics Dept for more detailled information…TB
Favorable Decision in Liability Insurance Court Case
With insurers increasingly citing the “contractual liability exclusion” as a reason to avoid paying for damages covered by home builder liability insurance policies, a recent decision by the Fifth Circuit Court of Appeals is good news for the housing industry.
Code Change Proposals Will Now Come with Price Tags
In a big win for NAHB and the home building industry, the International Code Council (ICC) has taken a significant step forward in ensuring that code change proposals come with price tags.
NAHB Analysis of Election Results
NAHB’s Government Affairs staff has prepared an election summary that explains how the Nov. 4 results will affect the political landscape and our policy agenda for the next two years.
Early Pricing for IBS Registration Ends December 5
What are you waiting for? Time is running out to save with early pricing on IBS registration options, so register by December 5.
Electricity Use Traceable to Household Behavior
The behaviors and habits of people moving into a new home can easily have a larger influence on energy consumption than items a builder may be able to control, according to research recently published by NAHB.
Codes Victories Mean Real Savings
NAHB’s victories on proposed building code changes saved the typical builder roughly $1,477 per new home started by keeping costly provisions out of building codes. Look over this value-of-membership infographic to learn more.
Elliot Eisenberg, Ph.D.,
Over the past 60 years GDP growth has been spectacular, averaging close to 4%/year with GDP doubling every 20 years. More recently, GDP growth has been lackluster, averaging about 2%/year since 2000. As a result, GDP now doubles every 35 years. In part this slowdown is due to the recession, slowing population growth and a lack of corporate investment in plant and equipment. These are temporary problems that should not be overblown.
By contrast, those who believe in “Secular Stagnation” ascribe the recent GDP slowdown to the fact that our economy is mature, that our best days are behind us and that technology can no longer deliver like it has. While I think the notion of Secular Stagnation is bunk, our GDP growth of the last century or century and a half has been, without a doubt, artificially inflated.
This is because we have ignored the “law of unintended consequences.”
Every time we invent something new, more often than not, something unexpected goes wrong. Burning coal, which brought about the industrial revolution, badly fouled the air leading to the premature deaths of millions. The automobile helped usher in acid rain, gaining access to cheap sugar created tooth decay, working at computers all day is making us fat, asbestos causes lung cancer, antibiotics create super bugs, aerosol almost destroyed the ozone layer, leaded gasoline lead to lead-poisoning, chemical dumping and the burning of fossil fuels releases mercury into the air and from there, rainfall washes it into the ocean and into fish. And now we face the enormously expensive issue of global warming. (And don’t even ask about Dodd-Frank).
My point is not that technological progress is bad. Quite the contrary, it’s great, but it’s not quite as great as we think because the negative consequences arising from it are never accounted for. The premature death of a coral reef, the rise in skin cancer rates and the eutrophication of coastal waters – to give just a few examples- are ignored when calculating GDP. And these costs, along with the costs of remedying these damages are both large and unknown. Moreover, monies spent cleaning up the messes caused by technological progress actually make GDP bigger. Now that we are more aware of “unintended consequences” we may be less optimistic about the future. And GDP growth going forward may be slower than in the past, but this is not due to Secular Stagnation. It’s simply a sign of economic maturation along with a better awareness of our impact on the planet.
Moreover, this realization should not cause us to give up on technological innovation. As a matter of fact, the only way to fix the problems mentioned above is with more technology. Genetically modified food is the only way we are going to feed the fast growing population of the planet and the impact of global warming and rising sea levels will only be mitigated with new building technologies and improved energy sources, even though they will undoubtedly cause unintended consequences.
Compared to 10, 20 or 30 years ago, GDP growth appears to be slowing. Some of the reason is cyclical, but some is because our estimates of earlier GDP growth were excessive because we did not take into account the unintended consequences of new technologies. What is for sure is that if we stop designing and applying new technologies to solve problems, GDP growth will slow further.
Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net. His daily 70 word economics and policy blog can be seen at www.econ70.com.
Miami-Dade and Broward County Endorsed Candidates List
from the political action committee of the Builders Association of South Florida Chapter, BASF
Primary Election Day: Tuesday, August 26, 2014
Miami-Dade County Commission
County Commission District 2: Commissioner Jean Monestime
County Commission District 8 : Commissioner Lynda Bell
County Commission District 10: Senator Javier Souto
County Commission District 12: Commissioner Jose “Pepe” Diaz
Florida House of Representatives
District 100 – Mr. Joseph Geller (D) (Miami Beach, Aventura, Hollywood)
District 111 – Mr. Bryan Avila (R) (Hialeah, Miami Springs)
BASF Chapter is all about helping our members get their projects moving forward….and that means supporting elected leaders that understand your business. Tomorrow is Primary Day: Get Out To Vote! And, vote for the candidates that support your industry! Check out our PAC-Endosements on the Government Affairs tab……
Elliot Eisenberg, Ph.D.,
Since the start of the Great Recession of 2008 and the Fed’s decision to inject trillions of dollars into the banking system, there has been constant talk of the US dollar losing its position as the world’s reserve currency, the position it has held since the end of WWII. After all, our debt is huge and growing, DC is thoroughly dysfunctional, our share of the world economy is shrinking and China is increasingly pushing for a post dollarcentric financial system. Despite all the concerns above, the dollar’s position as the reserve currency of the world is safe for a long while.
First, which currency can realistically unseat it? The British pound is simply too small to do the job as the British economy is about 1/7th the size of the US economy. As for the euro, while it is large enough, there are too many structural problems including weak growth, over taxation, an inflexible central bank and the outside possibility of the collapse of the monetary union to entice many central banks to significantly increase their euro holdings.
As for the Yen, Swiss Franc or Chinese renminbi, you have got to be kidding! With a debt to GDP ratio greater than that of Greece, Japan makes the US look downright fiscally responsible. Moreover, Japan and Switzerland are both pushing down the value of their respective currencies making them that much less appealing to hold. Lastly, the renminbi does not freely float and there are significant foreign exchange controls in place. As a result, it will take at least a decade before China has the necessary legal framework and deep and open financial markets that are a necessary prerequisite before the renminbi can become a credible reserve currency competitor.
Second, because of increased capital flows between nations due to increases in trade and investment, central banks have been repeatedly told by their respective governments to hold larger quantities of safe and easy-to-sell assets which can be easily liquidated in time of crisis. As a result, total foreign reserves have nearly quadrupled in the past decade and this has dramatically increased the demand for dollars. For example, when foreign capital suddenly flees a developing nation, it puts downward pressure on the local currency. By selling some of its dollar holdings to purchase its own currency, a country can stabilize its currency and avoid large currency swings. Moreover, simply holding a large supply of highly liquid foreign assets, like dollars, discourages speculation and demonstrates that a nation has the necessary reserves to pay foreign creditors for things like oil and wheat.
Lastly, with large holdings of dollars the last thing foreign nations want to do is harm the dollar as that would reduce the value of their holdings and that, in and of itself, reinforces the dominance of the dollar and thus improves its stability. That is at least partly why for the past 15 years 60% of world foreign exchange reserves have consistently been in dollars. Were that percentage to slowly fall to 50% over the next few decades, it would matter relatively little.
To sum up, despite lots of talk, there exists no strong competitor to the US dollar and one is unlikely to appear anytime soon.
Looking for something more? Become a BASF Trustee or Join the Chairman’s Circle. Here’s why…
The Trustee Level, Chairman’s Circle and Platinum Level memberships have been specifically tailored for those members who want more personalized events, as well as additional exposure and services in addition to their standard BASF Membership.
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