Weekly Update: April 20, 2017

 

The Iowa City Area Development Group brought together stakeholders to discuss worker shortages in the construction industry last week.  It was an excellent dialogue and panelists included Bryan May from BirdDog HR, IC HBA President Andy Martin of Martin Construction, Micah Loveless from Master Builders of Iowa, and Joe Greathouse of Kirkwood Community College.

First-Time Homebuyer Savings Account Heads to Governor’s Desk

The Iowa Association of Realtors has worked tirelessly for several years to pass a first time homebuyer savings account (SF505 and lots of variations in between).  It passed the House Tuesday evening 87-11.  HBAI was supportive of the bill and attended subcommittee hearings on the issue.  There was a fiscal impact that potentially could have killed it again.

After it’s signed by Governor Branstad, an individual (on or after January 1, 2018) may open an interest-bearing savings account for the purpose of financing the purchase of a single-family residence in Iowa.  It’s $2,000 per year for an individual or $4,000 for married taxpayers.  There is a ten year cap, so you can only do $20k/$40k.  A great job and a big thanks to everyone who helped get this passed.

Water Quality Rule Making – We Need Your Input on GP 1, 2 and 3

Please see the overview and instructions below for the details on this water quality rule making proposal to reissue 3 NPDES general permits for certain storm water discharges for another five years.  Check out the folllowing documents:

  1. The draft General Permit #1 for storm water discharges associated w/industrial activity in tracked changes
  2. The draft General Permit #2 for storm water discharges associated w/construction activity in tracked changes
  3. The draft General Permit #3 for storm water discharges associated w/industrial activity for asphalt plants, concrete batch plants, rock crushing plants, and construction sand and gravel facilities in tracked changes
  4. A 2-page summary of the proposed changes to the permits
  5. The draft Notice of Intended Action
  6. The draft Fiscal Impact Statementdated 1/24/2017
  7. DNR Responses to comments at 9/29/2016 Stakeholder Meeting

What and why?

This rule proposal is intended to reissue 3 general permits for the storm water discharges identified above for another 5 years.  These 3 permits are set to expire in October 2017.  Under state rules in Iowa Administrative Code, reissuance of NPDES general permits must occur through the rule making process consistent with the Administrative Procedures Act (APA).   The current permits are proposed to be updated consistent with newer federal requirements and other minor clarifications identified through stakeholder outreach.

Outreach

Over the last year the DNR has reached out to individual stakeholders and held an open stakeholder meeting on September 29, 2016 on this proposal.  The key issues discussed at the meeting were documented and responses provided (See attached DNR Responses to Comments Received at 9/29/16 Stakeholder Meeting).

Please let us know if you’re comfortable with this proposal beginning the formal rulemaking process.  We know this may be a lot of information to absorb and process so we’re hoping to hear from you by April 28th.  Also, we will be happy to meet and walk through this with you, if needed.

Young Adults and the Construction Trades

NAHB conducted a national poll of young adults ages 18 to 25 to find out how this age group feels about a career in the construction trades. The majority of young adults (74%) say they know the field in which they want to have a career.  Of these, only 3% are interested in the construction trades.

Most of the young people interested in the trades say the two most important benefits of this career choice are good pay (80%) and the attainment of useful skills (74%). Less than half cite as benefits that the work is seasonal (15%) or that it does not require a college degree (37%).

The 26% of respondents who do not yet know the career path they want to take got a follow-up question about the chance they might consider a number of fields (construction trades being one of them) using a scale from 1 to 5, where 1 meant ‘no chance no matter the pay’ and 5 meant ‘very good chance if the pay is high.’ Construction trades got an average rating of 2.1, with 63% of undecided young adults rating it 1 or 2 (no or little chance regardless of pay) and 18% a 4 or 5 (good to very good chance if pay is high).

The 63% of undecided young adults who indicated there was no or little chance they would consider a career in the trades no matter the pay were prodded about the reasons for their resoluteness. The two most common reasons are wanting a less physically-demanding job (48%) and the belief that construction work is difficult (32%).  They were then asked if there was any compensation level that might entice them to reconsider a career in the trades.  For slightly more than 20%, that number is either $75,000 or $100,000, but for the plurality (43%), there is no amount of money that could make them give the trades a second thought.

A complete research paper on this topic can be found here, including an analysis of government data on actual wages for construction occupations relevant to the home building industry.

Iowa Workforce Development to Add More Business Reps   

The Iowa Workforce Development Board will increase its number of voting members, which may help expand postsecondary education programming.  Presently, the Iowa Workforce Development Board, which facilitates grants and programs designed to help local employers, has nine seats for voting members, all of whom are appointed by the governor. The board also has 12 “ex officio,” or nonvoting, members, which include state lawmakers, higher education representatives, a labor union representative and others.

Following Gov. Terry Branstad’s approval of HF572 on Thursday, the board’s voting membership under the new structure will include 17 business members, four labor members and two representatives of community-based organizations.

If you are interested in serving, please email HBAI Executive Officer Jay Iverson or go to the state’s website where you can apply for any gubernatorial appointments.

What Does the New Statute of Repose Law Mean for Me?

On April 13, 2017, the Governor signed SF413 into law, which is a law reducing the Statute of Repose applicable to construction claims. This is great news for the Iowa construction industry.  This law will reduce Iowa’s current 15-year Statute of Repose for all claims arising out of a defective or unsafe condition of an improvement to real property to 8 years for commercial construction and 10 years for residential construction. Please note that the law has the following exceptions:

  • claims regarding nuclear power plants, interstate pipelines, and fraud/intentional misconduct claims will maintain a 15-year repose period, and
  • if the unsafe or defective condition was discovered within one year of the expiration of the new statute of repose period, then the repose period would be extended for one additional year.

When Does the New Statute of Repose Law Take Effect?

The new statute of repose law will take effect on July 1, 2017. The law does not have any retroactive effect. In addition, the law contains an express provision regarding applicability:

Sec. 2. APPLICABILITY. This Act does not apply to an improvement to real property in existence prior to the effective date of this Act or to an improvement to real property, whether construction has begun or not, that is the subject of a binding agreement as of the effective date of this Act.

This means that, if the construction project has not begun as of July 1, 2017 and if your company’s construction or design agreement has not yet been executed as of July 1, 2017, then the new, shorter statute of repose will apply to your company. Conversely, the old 15-year statute of repose applies if either the “improvement to real property” is already “in existence” as of July 1, 2017, or your company has already signed a “a binding agreement” regarding the construction project as of July 1, 2017 regardless of whether construction on the project has begun.  Please contact attorney Jodie McDougal should you have any questions regarding this law.

   Over 120 members of the Cedar Rapids Housing and Building Association and/or the Greater Iowa City HBA met together last week for a social event at the University of Iowa Community Credit Union headquarters in North Liberty.  It’s an annual event and is a great networking opportunity between the two organizations. 

Weekly Update: April 13, 2017


   It was a great day today for our membership and we’re holding our official pens from the signing ceremony.  Thanks to a few of the leaders who made it happen, from left to right:  Senator Brad Zaun (Urbandale), BUILD PAC Trustee Rich Fitch, past HBAI President Mike Far, current HBAI President Tim Ruth, LaDonna Gratias, Senator Jake Chapman (Adel), Des Moines HBA Executive Officer Dan Knoup, HBAI Executive Officer Jay Iverson, and Representative Kevin Koester (Ankeny).

Order Doug Mayo Golf Outing Apparel Now/Sponsors Still Needed

The golf portion of the 4th Annual Doug Mayo Golf Outing, which benefits students entering the building trades, is sold out.  We are still in need of sponsors though.  Official apparel needs to be ordered now to look super fashionable on our event, which is Friday June 30th, 2017. Click here for you to be a sponsor.  Click here to order super awesome clothing with our Doug Mayo Golf Outing logo.

HF586 – Mechanic’s Lien Changes – Commencement of Work

All contractors who directly work for a homeowner should read through this note from Construction Law Attorney Jodie McDougal – or you could lose your right to file a lien.  On March 30, 2017, the Iowa Senate passed House File 586. This legislation included a provision expanding the category of residential general contractors who are required to timely file a “Commencement of Work” Notice (or C.O.W. Notice) at the outset of a project to preserve their right to later file a mechanic’s lien. Specifically, for those who are required to file them, C.O.W. Notices must be filed on the online MNLR registry no later than 10 days of commencement of work on a residential project for one to preserve their mechanic’s lien rights on such project.

This legislation was introduced by the Iowa Finance Authority and had support from the banking industry, closing companies, and Iowa Title Guaranty, while most within the residential construction industry opposed the legislation.

The bill was passed by both the House and Senate, and is now on to the Governor to be reviewed and likely signed into law in the near future. The effective date of the new law will be July 1, 2017.

What was the Prior/Current Law on this Issue?

Prior law (including both statutory and case law) only required general contractors with subcontractors to file a C.O.W. Notice on the MNLR no later than 10 days from the start of every residential construction project in order to preserve their lien rights. This interpretation of the law was affirmed by the Iowa Court of Appeals in 2016 in the mechanic’s lien case of Standard Water v. Jones in which Jodie McDougal represented a residential contractor.

It should be noted that Iowa statute defines general contractors as contractors who have direct contracts with homeowners. Also, per Iowa statute, the general contractor’s C.O.W. Notice, as well as the related notice sent by the MNLR administrator to homeowners, generally inform homeowners that subcontractors not directly hired by them have the right to file liens against their property if not properly paid for their work by the general contractor and otherwise advises homeowners of the lien law.

Thus, under the prior law, it was only residential general contractors with subcontractors who were required to file a C.O.W. Notice, which therefore excluded (1) contractors and remodelers who self perform all work without any “subcontractors” (as defined under Iowa statute), and (2) suppliers who supply directly to homeowners. These two categories of companies did not previously have any pre-lien requirements. Unfortunately for those residential contractors and suppliers, this bill extinguishes those exclusions.

What Does the New Law Mean for My Construction Company?

By extinguishing those exclusions, as of July 1, 2017, the law will require all general contractors (that is, all contractors who directly work for a homeowner) to timely file a C.O.W. Notice at the start of every residential construction project to preserve their lien rights, regardless of whether or not a general contractor uses subcontractors on the project. Thus, even contractors who self perform all work without any “subcontractors,” as well as suppliers who supply directly to homeowners, will now have to timely file this C.O.W. Notice.

Will There Be Any Other Practice Changes?

As noted, the bill was introduced by the Iowa Finance Authority and had support from the lending and closing industries, as the bill will positively affect those industries and streamline their loan closing practices.

After the bill becomes effective (and after 90 days following the effective date), lenders and closing agents will likely no longer ask for all lien waivers. Instead, they will check the MNLR registry and only be concerned with general contractors and subcontractors who have properly preserved their lien rights through their timely filing of their pre-lien notices.

Is There Anything Else I Should Know About Pre-Lien Notices?

The bill does not affect the requirements that all subcontractors must file a Preliminary Notice at the outset of every residential construction project in order to preserve their right to later file a mechanic’s lien if not paid.

The bill also does not change the definitions under the law. Among other things, contractors who work for an “owner-builder,” as opposed to a true owner, are considered to be subcontractors for pre-lien notice purposes. The typical “owner-builder” is a spec homebuilder who builds a spec house on a builder-owned lot.

What is the Bottom Line for Residential Iowa Contractors?

All general contractors, subcontractors, and suppliers who want to preserve their mechanic’s lien rights on residential projects must timely file their C.O.W. Notice (for general contractors) and Preliminary Notice (for subcontractors) on all residential projects. Otherwise, all lien rights are lost.

How the Silica Rule Impacts Your Bottom Line

Nothing underscores the value of your membership quite like cash savings. NAHB economists recently tallied it up and confirmed just how much our members are saving this year.  The combined effect of our legislative victories and program initiatives from the past year amount to an average savings of nearly $6,000 per builder for each housing start in 2017.

One prime example of a victory that’s positively impacting builders’ bottom lines is the delay of OSHA’s proposed rule regarding the release of silica on job sites.  Our experts determined the delay amounts to an estimated savings of $1,500 per builder, per start. And that was before OSHA recently announced the rule’s enforcement would be delayed an additional 90 days (currently set to begin Sept. 23, 2017), meaning builders are likely to save even more.

Go to nahb.org/savings for more about the financial impact of the delayed silica rule. Additional examples of the value of NAHB membership will also be highlighted throughout the coming months.

Regulatory Reform Quarterly Update

Comprehensive Regulatory Reform

There have been numerous bills introduced in the 115th Congress to reform the regulatory process.  Here is an updated list for this first quarter of 2017:

H.R. 21, the Midnight Rules Relief Act of 2017

Would allow Congress to review under the Congressional Review Act multiple regulations rushed out by an outgoing administration.  Passed the House on 1/4/17

H.R. 26, Regulations from the Executive in Need of Scrutiny Act

Would restore strong congressional oversight to the federal rulemaking process, ensure that all federal regulations are carefully designed to achieve their intended benefits.  Passed the House on 1/5/17

H.R. 5, the Regulatory Accountability Act of 2017

Modernizes the 71 year old Administrative Procedure Act and would make the regulatory process more transparent, agencies more accountable and regulations more cost effective.  Passed the House 1/11/27

WOTUS – WIN

On February 28, 2017 President Trump signed an Executive Order directing EPA and U.S. Army Corps of Engineers to begin the process of rescinding or revising WOTUS.  The agencies must now review the flawed rule.

What will likely happen next is the EPA and the Crops will issue a proposed rule to rescind/revise WOTUS.  It will appear in the Federal Register and be available for comment.  After taking the comments into account, the agencies will issue their final rule.  If the final rule says WOTUS should be revised, expect a flurry of lawsuits from interest groups afraid any new rule will not adequately protect the nation’s waterways.  After that, the agencies will propose a new rule.

OSHA’s Volks Recordkeeping Rule – WIN

The Occupational Safety and Health (OSH) Act of 1970 established that all employers must keep accurate records of employee injuries and illnesses for five years and OSHA has six months to cite an employer for a violation.  Subsequent court rulings upheld the six-month statute of limitations.  OSHA’s Volks Recordkeeping Rule extended the explicit six-month statute of limitations on recordkeeping violations to five years.  This rulemaking went into effect on January 18, 2017.

NAHB key voted H.J. Res. 83, Disapproving the rule submitted by the Department of Labor relating to “Clarification of Employer’s Continuing Obligation to Make and Maintain an Accurate Record of Each Recordable Injury and Illness which disapproved the Volks Rule.  H.J. Res. 83 passed House – 3/1/17; Senate – 3/22/17

Silica

Originally scheduled to begin June 23, enforcement is now set to begin Sept. 23, 2017 of OSHA’s crystalline silica standard.

OSHA stated in a press release that the delayed implementation is “due to the unique nature of the requirements in the construction standard” and that it would be conducting “additional outreach and provide educational materials and guidance for employers.”

However, the rule will continue to be challenged by NAHB and its fellow members of the Construction Industry Safety Coalition (CISC). Soon after learning of the additional delay, the CISC released this statement:

Association Health Plans – WIN

Association Health plans ensure a level playing field for smaller employers by allowing them to pool together to purchase health insurance plans for their employees.  AHPs will grant small businesses access to better and more affordable health care plans, the ability to negotiate lower costs for coverage and the purchasing power of larger companies and organized labor groups.

H.R. 1101, the Small Business Health Care Fairness Act of 2017, AHP legislation was supported and key voted by NAHB.  H.R. 1101 passed House – 3/22/17

FHA Mortgage Insurance Premium Cuts

A mortgagee letter was issued on January 9, 2017 that would have reduced the annual mortgage insurance premium (MIP) by 25 basis points to 60 basis points for FHA-insured mortgages with less than a 5% down payment and to 55 basis points for mortgages with a down payment of 5% or more.  The changes would have been effective for FHA-endorsed mortgages with a closing date on or after Jan. 27.

The Trump administration indefinitely suspended the MIP cuts.

NAHB strongly supported the reductions issued by the Obama administration, noting that lower premiums would make home loans more affordable, help ease tight credit conditions and represent sound policy given recent actuarial reports showing FHA continues to strengthen its financial reserves.

March 9, 2017 – NAHB sent a letter to HUD Secretary Ben Carson urging him to reinstate the reductions.

HUD Budget

President Trump’s fiscal 2018 budget plan put HUD’s funding at $40.7 billion, down $6.2 billion or 13.2% from the $46.9 billion in 2017.  The budget eliminates the Community Development Block Grant (CDBG) program, which provides communities with resources to address a wide range of urban renewal projects.  This program received $3 billion in funding for 2017.  The budget also eliminates the HOME Investment Partnership and Choice Neighborhoods programs.  HOME received $950 million in funding for 2017 and is the largest federal block grant to state and local governments designed exclusively to create affordable housing for low-income households.  Many multifamily builders often use the HOME program to fund developments in conjunction with the Low Income Housing Tax Credit.  There were not specific figures for Project Based Section 8 housing.  There was $130 million, an increase of $20 million, provided for the mitigation of lead-based paint and other hazards.

It is important to note this is the first step in the budget process and the president’s budget is meant to serve as a marker, but it is up to Congress to write and submit a federal budget.