HOUSTON — Unaccustomed as they are to optimism, the more than 50,000 builders attending the 41st annual convention of the National Assn. of Home Builders here last week managed to isolate at least one dark cloud over the housing recovery landscape.
Last year it was deficits, deficits and still more deficits, especially the federal budget deficit but also including the balance of trade deficit. The deficit problem is still present, with record levels in both categories, but the attention at this year's convention was focused on the threat of tax reform.
The convention ended with the board failing to take a strong stand against any of three major tax reform proposals making the rounds in Washington. All three--the proposal by Treasury Secretary Donald T. Regan, the Kemp-Kasten plan and the Bradley-Gephardt plan--would damage the housing recovery, now in its third year. At least that was the concensus of most of the sessions dealing with economic matters and it was emphasized in a 31-page study analyzing the three proposals.
Rents, Costs to Go Up
John J. Koelemij, the new president of the builder group, and Kent W. Colton, executive vice president, said the study showed that all the tax reform plans would raise home ownership costs for first-time buyers, a group already on the endangered species list because of high mortgage interest rates and housing costs.
Koelemij said that the current $675 net monthly costs of paying for an $83,500 house with a 10% down payment would increase to $730 a month under Kemp-Kasten, $815 a month under Regan's treasury plan and $834 under Bradley-Gephardt. The figures assume an adjusted gross yearly income of $40,000 for the hypothetical family.
Damage would also be done to the rental housing delivery system, which depends on investor confidence in tax benefits already in place, they said. The tax reform proposals of Regan, Bradley-Gephardt and Kemp-Kasten would result in rents that are respectively, 42%, 28% and 22% higher for conventionally-financed apartments, according to the study.
Housing and Urban Development Secretary Samuel R. Pierce Jr. agreed, in response to a question at a press conference, that the Treasury tax reform proposal would result in higher rents.
Speaking to the 1,500 members of the association's board of directors on the next to the last day of the convention, Pierce told the builders that his department will continue its efforts to ensure the availability of sufficient capital to finance home mortgages.
The housing department will also focus on rehabilitation programs to return "neglected and damaged" existing housing to productive housing stock, a message that should appeal to the nearly 40,000 remodeler members of the association. In recent years, the builder group has gathered remodeling contractors and producers of factory-built housing, among others, under its association umbrella.
Pierce, the only black member of the Reagan cabinet, said that growth in housing benefits the entire nation, adding that the goal of his department is to see as many renters who want to become homeowners do so.
He returned repeatedly to the issue of federal deficits, saying bluntly that "if we don't get our deficits down, the economy will go straight to hell."
One of two momemts of levity involving the Reagan Administration occurred at the Pierce press conference. Doris L. Muir of Log Home Guide startled the housing secretary with a question about his department's alleged discrimination in energy standards for log houses. When Pierce asked what she was talking about, Muir told him to look at his speaker's rostrum. She had placed a copy of her publication on the rostrum. As reporters in the audience chuckled, Pierce promised to look into the matter when he returned to Washington. Afterward, Muir told a reporter that builders of the 30,000 or so log houses constructed each year in the nation face discimination because the housing department's Minimum Property Standards don't address the issues of log-built construction; the standards are written largely with stick-built housing in mind, she said.
The other moment occurred during a board of directors meeting on the final day of the convention, when President Reagan, on a telephone hookup from Washington, mispronounced the name of the new president of the builder group. He accented the second syllable, pronouncing Koelemij "Kool-AM-I." The audience, many of whom are still trying to figure out how to spell and pronounce their new president's name, laughed. The proper pronunciation accents the first syllable.