Tarkka Homes, Inc
Serving southern and central New Hampshire 


The Jobs Priority

December 2010

            Before the “Great Housing Meltdown,” New Hampshire’s housing market was strong, creating numerous jobs in the building trades. During the 10 years prior to the collapse (1997-2006), Hillsborough County issued an average of 1,532 building permits per year for one- and two-family dwellings. In 2009, the last year for which U.S. Census data is available, Hillsborough County issued a mere 329 permits--a 79% plummet from the norm. In fact, the state as a whole averaged 6,112 dwelling unit permits during that same 10-year period, but could only muster 1,708 permits for one- and two-family homes in 2009. One would think that such a dramatic drop would galvanize state policymakers to do anything possible to nurture growth in the housing industry, and that new regulations adding costs, delays, or administrative burdens would be avoided. You would think...
            Instead, the state has, in recent years, added regulations aimed to “fix what needs fixing.” In his third inaugural address in January 2009,  Governor John Lynch read a 2,375-word speech that made not a single reference to the housing industry. There was plenty of enthusiasm for a new Green Jobs Initiative that was supposed to have stimulus money pouring into the state, but not one word about housing and the related jobs crisis in that industry. One premise of the Green Jobs initiative was that if builders weren’t putting up homes, they could retool and get work providing energy retrofits. This may be true for companies experienced in bidding for government-subsidized work but most traditional builders are incapable of switching overnight from erecting homes to installing weatherization and conducting energy audits. In his speech, the closest the Governor came to acknowledging the dire housing situation was the statement that “Some families have seen their dream of home ownership in jeopardy.”  They certainly have.
            Even in the wake of the recent “Republican Wave,” there are still numerous proposals on tap for the coming legislative session that will have negative impacts on construction. It will be interesting to see how the new majority party looks upon such legislation. One can only hope that the impact on jobs--which was the only issue that mattered in this last election--will be the litmus test for all such legislation. If successful, several of these proposed bills are sure to wound the industry further.
            For example, consider the proposal for protective buffer areas of up to 100 feet to surround wetlands that score high on a numeric rating system. A 50-foot buffer would apply to wetlands that score more moderately. Land owners wishing to develop their property will have to pay a qualified expert to prove that mid- to high-value wetlands are not present. If a land owner has a high-scoring wetland measuring one acre, an additional 2.5 acres will become undevelopable due to the required 100-foot wide buffer areas. How high is too high on this numeric rating system? We don’t know because the method of calculation is not fully developed. The core of the new system lies in an as yet unpublished document. Nevertheless, the HB1579 Land Use Commission recommended moving forward with it anyway.
            On another front, the Department of Labor has taken the position that it does not possess enough tools to deal with the widespread problem of employee misclassification;meaning that someone who is paid as an independent contractor is actually an employee. The Department is expected to support a bill granting them the authority to issue stop-work orders against egregious offenders of workers compensation laws. The Home Builders and the Associated General Contractors pointed out that stop-work orders can seriously impact everyone on a job site, not just the offenders. For example, if a drywall contractor is suddenly shut down, the painters, carpenters, and every worker coming behind them are effectively shut down as well. Accepting the fact that misclassification is a problem, the question remains; should we really be worried about those lucky enough to have work when creating jobs is our biggest problem? No employee should be misclassified as an independent contractor, but are we really helping workers (and the job situation overall) by sending them home through a stop-work order?
            There is also cause for concern if Republicans get “repeal happy’ thanks to their super majority. One new law in the crosshairs is HB1554, which created Clean Energy Districts. I have maintained in this column that green building standards should not become a requirement across jurisdictions, but the fact remains that this is a vibrant niche for those skilled builders and environmentally conscious home buyers who support them. HB1554 enables towns to offer financing, payable through special assessments, for home energy improvements. The finance mechanism may need a tweak in order to work efficiently, and the program remains entirely optional for communities, yet this small encouragement for green building is one of the few new laws that might actually create local jobs. Even so, it may be under attack. Incentive-based laws such as HB1554 usually work out, but in this case, depending on how things go, we may never find out.
            Another Republican recently mentioned to me that he would like to see the statewide building code repealed. This would not be helpful. Builders will always be required to operate under one code or another and it is far more efficient to have one code throughout the state than many codes in different towns. Yes, the Home Builders have complained that certain codes are overreaching and unable to withstand a cost/benefit analysis, but that does not mean that all codes should be eliminated. Nor does it mean that the state should take radical steps in the name of some libertarian effort to shrink the influence of government. Such a move would only lead us back to the haphazard chaos of each jurisdiction writing its own rule book. This would lead to a very subjective ruling on code issues, which could lead to increased costs. This is not the kind of scenario we need in these times.
            The International Code Council has just wrapped up their actions for the 2012 code cycle. In particular, the International Energy Conservation Code (IECC) will have dramatic changes that will increase costs and push more first-time home buyers out of the marketplace. Figures for the cost increases are not yet available, but the code is reported to be 30% more restrictive than IECC 2006. Once again, the popular energy efficiency lobby wins at the expense of more residential job losses. While increased efficiencies are a good thing, they are of no value to someone who cannot afford to buy a home. It is reasonable to assume that energy codes will continue to require greater performance values, as they should, but the changes are occurring at a faster pace than markets can absorb. The ICC and the Federal Department of Energy need to understand this.
            The National Association of Home Builders (NAHB) has determined that construction of each single family home creates 3.24 jobs. Based on that, the 2009 housing permit figures quoted at the beginning of this article represent a loss of 14,269 good paying jobs in New Hampshire. At the time of this writing, forecasts for 2011 were only slightly better, and the latest foreclosure debacle will likely prolong the miasma for several more years. In past downturns, home builders moved into other areas of construction, such as remodeling or commercial work. But remodeling numbers are off as well, and heavy competition in commercial work does not afford many opportunities for home builders to change business models. Therefore, the job losses for residential builders are even greater, perhaps as high as 20,000 or more. In the coming legislative session, nothing will be more important than safeguarding what remaining construction jobs we have and preventing legislation that will jeopardize the growth we so desperately need.


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