Rebuilding the American Economic Engine

The American builder is facing one of the most challenging economic times our country has ever experienced. Traditionally, home builders and the construction industry have been vital cogs in the wheel of a successful American economy. However, the real estate bubble, the credit crisis, energy rates skyrocketing and an intense domestic recession have all forced home builders, buyers and sellers to face difficult choices and suffer severe losses. During these uncertain times, it is critical that government serve as an advocate to the 400,000 employees working in the homebuilding industry who are only looking to the government to ensure a level playing field exists where offering a quality, affordable product can still be done.

Congress has the ability to level the playing field by taking action on three critical fronts. One of those fronts is the mortgage interest deduction that has been part of the tax code for decades. There has been speculation that eliminating this deduction is “on the table.” Taking this deduction away is short sighted and unfairly punitive to the American homeowner. As the president of a financial advisory firm, I can tell you that if this change is made to the mortgage deduction, it will have a devastating effect on both housing prices and an individual’s income and will likely push the country further away from economic recovery.

Another key front to be addressed involves the ability for builders to receive the bank credit they need to be able to build. Most homebuilders are small businesses and need credit for acquisition, development and construction loans for projects. The large Wall Street Banks are currently hoarding resources and refuse to create or adjust loan programs that would fund profitable projects and stimulate the industry. These are the same banks that had no problem adjusting rules to make themselves eligible for the great taxpayer bail out of 2008. The Home Construction Lending Regulatory Improvement Act of 2011, also known as HR 1755, was introduced in May of 2011. This was the same month that homebuilder confidence dropped to its lowest level since September of 2010 and unemployment rose to above 9 percent. Our economy and this industry need help and now Congress has the opportunity to assist. Economists consistently point to the home building and construction industries as key components and the cornerstone to a true economic and job recovery. If this is true, it is incumbent for Congress to do all it can to help this industry and put our country back to work.

Finally, the American home buyer needs to have access to mortgages to keep inventory moving and also to stimulate the need for home building. We all agree that reform for Government Sponsored Enterprises (GSEs) like Freddie Mac, Fannie Mae and Federal Home Loan Banks is critical. That reform, however, should serve as a path to home ownership, not as a hurdle. Many of the proposed reforms do nothing more than make home ownership less likely for the average American. The original intent of these GSE programs was to help and that is what they should responsibly do.

While working in the North Carolina Senate to get our state’s economy back on track, I saw firsthand the importance of the housing market. Congress should do the same and work to support polices that promote home construction and homeownership.