November's mid-term elections brought significant change to the makeup of Congress. Democrats won control of the Senate thanks to tight victories in races in Montana and Virginia, and also seized control of the House of Representatives for the first time in 12 years by picking up 29 seats.
With the White House in Republican hands for at least another two years, however, there was a sentiment in the days after the election that there will be few major policy changes during the upcoming Congress, despite both sides saying all the right things about bipartisanship.
Personal politics aside, that is probably a good thing, according to many remodelers. “The balance of power creates kind of a gridlock,” says Joan Stephens, president of Stronghold Remodeling, in Boise, Idaho, and president of the National Remodeling Foundation. “Keeping the status quo is positive” for remodeling, she says, given the healthy condition of the current market.
“Conventional wisdom has it that the stock market likes this division of power,” says San Francisco remodeler Paul Winans, “because it's likely nothing will get done.” Without the fear of change — and with a strong economy — consumers will be more open to spending money. “Homeowners will start doing the things they want — like a nice kitchen — as opposed to things they need,” Winans says.
That's not to say that legislators will sit idly until the 2008 election. There are a number of issues that have an impact on the housing and building industries that are likely to come up in the 110th Congress. Certain of those items were debated in the last legislative session, and according to some analysts, now have a higher probability of being acted upon.
Immigration. A hot issue during the 2006 session, immigration reform stalled when the House of Representatives refused to acquiesce to President George W. Bush's demands for a guest worker program, and the White House was equally unyielding. It culminated in the signing of the Secure Fence Act, a border security measure that has met with mixed reviews. Supporters say it's the first step toward immigration reform, while detractors remain skeptical of its practicality.
Either way, immigration is an issue that is almost certain to be revisited in the 110th Congress, as President Bush has not backed down from his strong stance on the guest worker program. Although such a program is not a strictly partisan issue, the turnover of several House seats formerly occupied by Republicans who were in favor of stricter regulations suggests that the new makeup of Congress is a more positive climate for making progress with immigration reform. “There is greater alignment between Congress and the president,” says Everett Collier, a San Francisco remodeler who is the current president of the National Association of the Remodeling Industry (NARI).
That's positive news for the building industry, which already relies heavily on immigrant labor and still faces labor shortages. Proponents say that a guest worker program would acknowledge that dependency while making it easier to identify which workers are in the country legally. A bill passed by the House in 2006 — met with strong opposition by business advocates, including the National Association of Home Builders — would have increased the liability of business owners found to be employing illegal immigrants. That provision played a large role in the 109th Congress' failure to pass comprehensive immigration reform legislation.
Flemington, N.J., remodeler Roy Bryhn adds that immigrant labor benefits homeowners, too. “It lowers the cost of getting work done,” he says. He notes, however, that that's only t rue if the workers are here legally, paying taxes, and contributing to the system.
Affordable housing. As of press time, standing committee assignments for the upcoming Congress had not been made. It was widely believed, however, that Rep. Barney Frank (D-Mass.) would chair the House Financial Services Committee. Frank has said that the creation of affordable housing is a priority. Another key chair could be Rep. Charles Rangel (D-N.Y.), who was expected to head the House Ways & Means Committee. Rangel authored the Low Income Housing Tax Credit. A newsletter published by the American Homeowners Grassroots Alliance and the American Homeowners Foundation credits that program with financing 90% of the nation's affordable housing.
The emphasis on affordable housing would be positive for the remodeling industry. For starters, homeowners tend to spend a lot more money on home improvements than landlords do. Making homes “affordable” generally means lowering down payment requirements, but it also extends beyond the sale price of the home to smaller mortgage payments. That means more discretionary income for homeowners — money that is often spent on remodeling projects.
While the short-term benefits of increased affordable housing are obvious, the long run may prove to be even brighter. “Homeownership breeds homeownership,” Collier says. So even if people living in affordable housing are not yet in a financial position to undertake a major remodeling project, chances are that they soon will be. “Once they get to know the system, they'll improve their income level and get into other housing stock,” Collier says. Research has shown a tendency to renovate within the first year of ownership, so that kind of turnover is good for the remodeling industry.
Energy. Rep. John Dingell (D-Mich.), the likely chair of the House Energy & Commerce Committee, has said that one of his missions would be to cut down on oil dependency in the U.S. A focus on energy efficiency, alternative power sources, and bio fuels should at the very least spark more awareness of these issues on the part of American homeowners, another boon for remodeling. “It would help propel the green building and green remodeling wave,” Collier says, as there would be a greater need for contractors to complete a variety of projects from simple insulation jobs or window replacements to more complex projects such as solar power installations.
The estate tax. Commonly referred to as the “death tax,” this controversial assessment — undergoing a gradual repeal through 2010 — will come back in full force in 2011 unless further legislation is passed. Opposed by the NAHB, opponents of the estate tax say it limits disposable income, while its supporters counter that its repeal will result in an increased tax burden for the American people as a whole. A repeal of the estate tax is unlikely with the new balance of power in Congress.
Call To Arms
Ultimately, the biggest impact of these mid-term elections may not play out on the national stage. Most of the legislative issues facing builders and remodelers are at a local level, and Winans, for one, is hopeful that the new balance in Washington will encourage his colleagues to get involved. “As there is less polarization, [politics] becomes a more attractive venue to become engaged in,” he says. “If there is no potential to be completely vilified, people might get more active on the local political scene.”