Weekly Update: March 9, 2017

Iowa Senate Passes Statute of Repose Reduction Yesterday

We are really excited to report that the Statute of Repose reduction (SF413) has passed the Iowa Senate last night by a vote of 32 to 16.  All of the amendments offered were party line votes, but when all was said and done it passed overwhelmingly 32 to 16.  The democrats voting in favor included Senator Allen (Jasper); Senator Bowman (Polk); Senator Kinney (Johnson); and Senator McCoy (Polk).

Commercial will be eight years and residential was saddled with an amendment earlier by the Iowa House to make it ten years, which is comparable to a majority of other states.  There was much debate from Senate Democrats on keeping it at 15 years or having public buildings remain at 15 years to protect the taxpayer and the children.  We have long argued that the public buildings are the worst violators of maintenance issues.  For instance, a school will use funds in the classroom long before they would repair a roof.  Now on to the House.

Contact Your Representatives for HF3 Statute of Repose

We are not expecting problems in the Iowa House, but it wouldn’t hurt to follow up with House members.  You can find your local representative here.  This is for HF3, Statute of Repose.  You can use the fact that it passed out of the Iowa Senate overwhelmingly with the exact same language as this bill.  It could come up for debate any minute, so please follow up as soon as possible.  Here are the talking points that we’ve been using.

HBAI Legislative Report March 3

It’s been non-stop action with lots of big issues as we made it through the first funnel and halfway through the session.  There are lots of new bill numbers as study bills evolve.  We will provide a complete list of the current versions in a future newsletter.  Here are a few of the newer topics that we discussed last Friday in our HBAI Legislative Committee:

SSB1094Quiet Title of Real Property – This bill relates to an action to quiet title of real property and the doctrine of adverse possession. The bill provides that in an action to quiet title based upon the doctrine of adverse possession a party claiming title shall prove by a preponderance of the evidence that the adverse possessor has been in hostile, actual, open, exclusive, and continuous possession of the real property under either claim of right or color of title for at least 10 years and that the adverse possessor has paid the property taxes assessed on the real property for the period of possession. For purposes of the bill, “claim of right” means the actual occupation, use, and improvement of the property by the adverse possessor in such a manner as to put the titleholder of the real property on notice as to the adverse possessor’s claim for possession of the real property. Monitor

SSB1113 & HSB161 – Contractor Registration and Licensing – Under current law, the labor services division of the department of workforce development and the department of public health are directed to develop a plan to combine the contractor registration and contractor licensing application process for contractors licensed under Code chapter 105, the Iowa plumber, mechanical professional, and contractor licensing Act, to be implemented in time for licensing renewals due July 1, 2017. As part of that process, the department of public health is required to transfer to the labor services division a portion of each contractor license fee equal to three times the current contractor registration fee. This bill strikes language regarding such fee transfers. The bill instead requires the department of public health to collect and transfer to the labor services division a portion of each contractor license fee equal to three times the contractor registration fee for each three-year license or a prorated portion thereof using a one-sixth deduction for each six-month period of the renewal cycle beginning July 1, 2017. The bill excludes from the fee transfer requirements registrations by contractors that are exempt from the registration fee pursuant to Code section 91C.1. The bill also strikes language providing that $25,000 surety bonds filed with the division of labor services as provided in Code section 91C.7 are filed for a one-year period.  Monitor

HSB145Conformity with OSHA – This bill strikes references to specific dollar amounts for certain civil penalties under Code chapter 88, pertaining to occupational safety and health, in order to comply with the requirements of the federal OSHA. Undecided

HF359County or City Approval of Gifts and Purchases of Real Property – This bill relates to gifts of real property offered to, and contracts for the purchase of real property entered into by,county and city entities. The bill requires the governing body of a county (board of supervisors) or city (city council) to approve the acceptance of gifts of real property by resolution before acceptance of such a gift by an entity of the county or city. The bill also requires such approval before a county or city entity may enter into a contact for the purchase of real property, if the contract price for the real property is less than 50 percent of the fair market value for that property. Monitor

OSHA Recordkeeping Rule Overturned

We reported in last week’s newsletter that a vote was near regarding the Volks rule at OSHA.  There were links to letters sent to Paul Ryan and Nancy Pelosi – so with that intro, in a victory for home builders and other members of the small business community, the House on March 1 approved H.J. Res. 83, legislation that would overturn the Occupational Safety and Health Administration’s (OSHA) recordkeeping rule known as the Volks rule.

The rule would subject millions of small businesses to citations for paperwork violations, while doing nothing to improve worker health and safety.  The rule attempts to extend to five years the explicit six-month statute of limitations on recordkeeping paperwork violations in the Occupational Safety and Health Act of 1970.

Subsequent court rulings have affirmed applicability of the six-month statute of limitations. Nonetheless, in a clear attempt to circumvent congressional authority and in spite of the court rulings, the agency proceeded with its rulemaking, which went into effect last month.  The US Senate hopefully will pass the companion bill so that it can move to the president’s desk.

How Much Do Residential Remodelers Earn Annually?

Findings from the recently released Remodelers’ Cost of Doing Business Study: 2017 Edition show that the net profit margin for the typical residential remodeler increased to 5.3% in 2015, up from 3.0% in 2011.

Combining all sources, remodelers reported an average $1.8 million in revenue for 2015, of which $1.3 million (71.1%) went to pay for cost of sales items such as labor, material, and subs. Subtracting these costs from revenue left a gross profit of roughly half a million dollars – or 28.9% of revenue.

Remodelers also spent an average of $420,000 in operating expenses (e.g. general and administrative expenses, marketing and finance expenses), thus ending fiscal year 2015 with $95,000 in net profit – a 5.3% net profit margin.  Check out the article here, with more graphs.

The Softwood Lumber Trade Dispute

The root of the recent lumber price increases is the long-running dispute between Canada and the U.S. regarding softwood lumber imports to the United States.

Rules of Trade from 2006-2016

The two countries reached what is known as the Softwood Lumber Agreement (SLA) of 2006 over a decade ago.  That agreement:

  • Removed all duties (tariffs) placed on Canadian softwood lumber imports since May 2002
  • Placed export charges and/or volume limits on Canadian imports unless the “prevailing monthly price”-as measured by the Random Lengths Framing Lumber Composite Index-rose above $US 355
  • Imposed charges on Canadian regional exports if the volume to the U.S. in any given month exceeded a “trigger volume”
  • Exempted softwood lumber products exported by dozens of Canadian companies

The 2006 SLA officially expired On October 12th, 2015.  However, the agreement included a key provision: upon the expiration of SLA 2006, there would be a 12-month “cooling off period” during which no new trade disputes could be filed.[8]  Thus, on November 25th, 2016, litigation began in earnest as domestic lumber producers filed a petition with the International Trade Commission (ITC) requesting an investigation into softwood lumber imported from Canada.[9]

How Expiration Has Fueled Price Increases

As was widely expected, the ITC issued a preliminary determination siding with domestic softwood lumber producers on January 6th.[10]  Soon after, lumber price increases took hold as the market reacted to the initial ITC investigation. In late February, the U.S. Department of Commerce decided to postpone its preliminary determination of countervailing duties to late April.  Cash deposits from Canadian exporters would then be required in the beginning of May.  The eventual magnitude of duties placed on imports remains uncertain, but recent price increases indicate that producers are bracing for charges on the order of 20%-30%. As a result, Canadian mills have priced lumber at a premium high enough to not only make up for surcharges tied to February purchases, but also to make up capture funds to be remitted to the U.S. tied to shipments going back to December 2016.[11]

Outlook

Fortunately, lumber prices have generally remained level over the past two weeks.  Hiking prices has recently been challenging for producers as trading volume slowed.  One explanation is that the pricing increase drove many buyers to shift purchases forward to hedge against future price increases. The price of lumber futures came down modestly in the last week, but the trend since late January is unmistakable.  Futures prices of lumber­­ with May and especially July (shown below) delivery dates have risen consistently since the beginning of 2017.[12]

Identifying prospective price hikes early has allowed NAHB to actively pursue solutions to protect builders from the deleterious effects of another prolonged softwood lumber trade dispute.  For the time being, it looks like mills have largely priced future, retroactive duties into the market.  However, any news, regardless of the source, is sure to cause market changes.  Moving forward, the announcement of preliminary duties is of paramount importance.  It will not be until then that market prices truly reflect all the facts.

National Trade Exposure for Zak Fleming

Check this out – Des Moines residential remodeler Zak Fleming was featured in a NAHB designation article.  Check it out here.  Awesome Zak!Here’s a shout-out to Zak and all our other successful designation holders. Want to talk about pursuing an NAHB educational designation?  We’re here for you: Send an email to designations@nahb.org.

   Peoples Company hosted its 10th Annual Builder and Developer Luncheon last Friday.  There were 375 attendees gathered to hear Lt. Governor Kim Reynolds, Creighton University Professor Ernie Goss, and Kalen Ludwig from Peoples Company to talk about our industry.  It was really interesting and optimism continues to be the theme for the future.

Kansas City & Texas HBA’s Looking for Parade Judges

Our sister organizations in Texas and Kansas City are both looking for parade judges.  They will pay your expenses.  We’ve had our members participate in this in the past and they’ve had a great time.  Meet industry professionals and see new homes outside of your area.  Email Jay Iverson if you’re interested in either one and he’ll forward the information.

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