Apr 22 2020
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2020 National Green Building Standard Now Available

By Industry News

The 2020 edition of the ICC-700 National Green Building Standard® (NGBS) has been approved by the American National Standards Institute (ANSI) and is available for public use. The NGBS provides the roadmap for residential professionals to integrate green practices and features appropriate for their businesses and local housing markets. As of April 2020, more than 216,000 homes have been NGBS Green certified.

The 2020 edition is the fourth edition of the standard, which reflects significant changes based on evolving market conditions and feedback received over the past decade from those using the standard. This edition expands the application of innovative practices and offers additional options toward achieving certification. Changes include:

  • A new Chapter 12: Certified Compliance Path — for Single-Family Homes, Townhomes and Duplexes — that is intended to provide an entry point to certification for single-family builders, particularly production builders.
  • An expanded scope that now includes certification for:
    • Mixed-use buildings in their entirety as long as the residential portion of the building is greater than 50% of gross floor area; and
    • Assisted living facilities, residential board and care facilities, and group homes.
  • A new water-efficiency performance path using an index that generates a score relative to a standard baseline home and equates that to an NGBS certification level.
  • A substantially revised remodeling chapter that offers:
    • An option to utilize a phased approach for multifamily remodeling projects; and
    • A choice of prescriptive or performance compliance paths for energy and water efficiency.

The NGBS includes high-performance building practices in six areas: Lot Design and Development, Resource Efficiency, Water Efficiency, Energy Efficiency, Indoor Environmental Quality, and Building Operation & Maintenance.

The NGBS has several certification levels — Certified, Bronze, Silver, Gold and Emerald — providing residential building professionals options to integrate sustainability and high performance into their project at a level most appropriate for their business model, customer base and local housing market.

The NGBS continues to provide architects, builders and developers the flexibility needed to design and construct homes and mixed-use buildings that are sustainable, cost effective and appropriate for a home’s geographic location.

“The benefit of the NGBS is its flexibility — that I’m able to pick practices that work together rather than have a very prescriptive set of practices that I have to follow,” says John Barrows, NAHB Sustainability and Green Building Subcommittee Chair and founder of B3 Builder Group in Bridgehampton, N.Y. “I can tailor the practices from the options in the program so that I meet my clients’ budget a little bit easier.”

Download the NGBS for free at nahb.org/ngbs.

For more details about NAHB’s sustainable and green building initiatives, contact Sustainability and Green Building Program Manager Michelle Diller. To stay current on high-performance residential building, follow NAHB’s Sustainability and Green Building team on Twitter.

Apr 22 2020
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Virus Affecting Homeowners’ Willingness to Remodel

By Housing

A recent NAHB survey shows the negative effect the coronavirus pandemic is having on the decision to remodel.  Over 90 percent of remodelers in the survey reported a slowdown in both the rate at which inquiries are coming in, and in the general willingness of homeowners to remodel at this time.

This information was collected via a question added to the survey for NAHB’s first quarter 2020 Remodeling Market Index (RMI).  The RMI question listed eight possible impacts of the coronavirus and asked the professional remodelers in the panel if each has so far had a major, minor, or no adverse effect on their businesses.  As indicated above, at the top of the list 96 percent of remodelers said the virus was hurting the rate at which inquiries are coming in and 93 percent said the virus was hurting the general willingness of homeowners to remodel at this time.  A full 70 percent characterized the negative impact on inquiries as major rather than minor.

Other adverse impacts on the list have also become widespread.  Over 80 percent of remodelers said the virus was having a noticeable, adverse impact on homeowners’ concerns about interacting with remodeling crews (86 percent), supply of n95 respirator face masks (84 percent) and cancellations or delays of existing projects (also 84 percent).  Although somewhat less widespread, willingness of workers and subs to report to a remodeling site, supply of building products and materials, and amount homeowners are willing to pay for remodeling work were still cited as significant negative effects of the pandemic by over half of the remodelers.

In some respects, the impact of the coronavirus on the remodeling market mirrors what we’re seeing in the market for new homes.   In both cases, the pandemic is having a number of significant negative impacts, but the strongest ones are the negative impacts on the behavior of potential customers.

Apr 21 2020
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Existing Home Sales Tumble in March

By Housing

After reaching 13-year high last month, existing home sales, as reported by the National Association of Realtors (NAR), plummeted in March as expected due to the coronavirus outbreak.

Total existing home sales, including single-family homes, townhomes, condominiums and co-ops, dropped 8.5% to a seasonally adjusted annual rate of 5.27 million in March, largest monthly decline since November 2015. On a year-over-year basis, however, sales were still 0.8% higher than a year ago.

The first-time buyer share rose to 34% in March from 32% last month and 33% a year ago. The March inventory level rose to 1.50 million units from 1.46 million units in February but decreased from 1.67 million units a year ago.

At the current sales rate, the March unsold inventory represents a 3.4-month supply, up from 3.0-month in February but down from a 3.8-month a year ago.

Homes stayed on the market for an average of 29 days in March, down from 36 days both last month and a year ago. In March, 52% of homes sold were on the market for less than a month.

The March all-cash sales shared 19% of transactions, down from 20% last month and 21% a year ago.

Despite the steep monthly decline in sales, home prices remained solidly strong. The March median sales price of all existing homes was $280,600, up 8.0% from a year ago, representing the 97th consecutive month of year-over-year increases. The median existing condominium/co-op price of $263,400 in March was up 7.9% from a year ago.

Regionally, all regions saw a decline in existing home sales in March compared to previous month, ranging from 3.1% in the Midwest to 13.6% in the West. On a year-over-year basis, sales grew 4.2% and 0.9% in the Midwest and the South, while sales fell 3.0% and 0.9% in the Northeast and the West.

As March sales reflect contracts signed in January and February, before the virus paralyzed the economy, we might see a deeper decline in sales in the coming months. Meanwhile, reflecting the growing effects of the COVID-19 pandemic, builder confidence plunged 42 points to 30 in April, the largest monthly drop in the 35-year history of the index.

Apr 02 2020
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Home Building Generates Jobs To Lead Recovery

By Housing

As the U.S. economy struggles under the burden of the coronavirus pandemic, economists are discussing how a recovery might unfold once social distancing and other measures begin to succeed.  A recent NAHB article illustrates the role home building can play in a recovery by generating jobs.

The article published updated estimates of the national economic impact of home building.  The new estimates show that building an average single-family home generates 2.90 jobs, measured in full-time equivalents (enough work to keep one worker employed for a year).

Wages and profits are subject to a variety of taxes and fees. The national impacts of building an average single-family home include $86,759 in federal taxes and $42,888 in state and local fees and taxes, for a total of $129,647 in revenue for governments at all levels.

Similarly, the article shows that building an average rental apartment generates 1.25 (full-time equivalent) jobs; as well as $37,363 in federal taxes and $18,546 in state and local fees and taxes, for a total of $55,909 in revenue for governments at all levels. For more details and assumptions used to produce the above estimates, consult the full article.

As the tables above show, the national economic impacts of home building include a substantial number of jobs for construction workers, but also jobs in firms that manufacture building products, transport and sell products, and provide professional services to home builders and buyers (e.g., architects and real estate agents).

The tables also show that, in industries like construction and real estate, substantial revenue is generated to support for business proprietors. Included in this category are many construction subcontractors and real estate brokers with relatively modest incomes, who are organized as independent contractors and therefore not technically counted among the jobs in government accounting systems.   In summary, home building generates jobs in industries like construction and manufacturing, jobs for highly educated professionals like engineers and financiers, and revenue to support owners of small businesses like construction trade contractors.  This is an attractive mix of entities to support in a healthy national economy, especially during a period of recovery.

Apr 02 2020
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March Mortgage Rates Fall Back

By Housing

Information compiled by Freddie Mac shows that mortgage rates decreased on a monthly basis. As of end of March, the 30-year FRM – Commitment rate, declined by two basis points to 3.45 percent from 3.47 percent in February. The cycle peak was 4.87 percent in 2018 November.

Given the market volatility due to the rapidly spreading Coronavirus COVID-19, the Federal Reserve cut the benchmark interest rate by 100 basis points on March 15th to a range of 0.00-0.25 percent.

At the end of December, the 10-year Treasury rate, was at 1.92 percent. Currently, it stands at 0.63 percent.  The recent decline in the 10-year Treasury rate has contributed to lower mortgage interest rates in the last few weeks. The average 30-Year Fixed market rate, according to Freddie Mac, is was at 3.50 percent at the end of March. At NAHB, we expect the mortgage rates to decline further to near 3 percent as bond market rates decline due to the coronavirus fears. At the beginning of 2019, the average 30-Year Fixed market rate was 4.51 percent.

Apr 02 2020
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Does Business Interruption Insurance Cover COVID-19 Closures

By Industry News

The following article was provided by Kenney & Sams, P.C., a law firm based in Boston with a construction and real estate representation practice.

Our clients are asking us: Do commercial property and, specifically, business interruption insurance policies provide coverage for COVID-19-related losses?

As discussed below, it is critical that you promptly review your company’s policies, exclusions and relevant endorsements to evaluate whether your business has coverage in the wake of COVID-19. If appropriate, you should make a claim with your insurance carrier.

Business Interruption Insurance Overview

Business interruption insurance. Commercial property policies often include business interruption or business income coverage that is designed to protect prospective earnings of a business. That is, the coverage indemnifies a policyholder for losses arising from the business’s inability to operate normally, provide its services and fully function.

Coverage is generally triggered by total or partial suspension of business operations due to the impairment, damage, destruction, or loss of the use of a building, machinery, equipment, or other business property. Picture the sprinklers going off and drenching files, flooding computers, and forcing a business to shut down or reduce profits while they make repairs.

This coverage generally lasts for the “period of restoration,“ meaning the time it takes to repair or rebuild the damaged property.  In other words, your policy would optimally pay repair costs and reimburse you for lost operating revenue while your business remains closed.

Notably, to establish a business interruption claim, you must prove (a) a direct physical loss or damage to property at the insured’s premises; (b) that necessitates suspension of operations; and which (c) directly causes the business income loss.

Key Exclusions/Endorsements to Consider

Many policies include an endorsement that specifically excludes damages caused by viruses or bacteria called formally the “Exclusion of Loss Due to Virus or Bacteria Endorsement.” The key to understanding coverage, therefore, is first to determine whether your policy includes this endorsement. If it does, you may not be covered. For policies that include the standard Exclusion of Loss Due to Virus or Bacteria Endorsement, coverage will likely be precluded.

Where a policy includes the Exclusion of Loss Due to Virus or Bacteria Endorsement, courts must first consider whether the claim satisfies the insuring agreement, i.e., whether coronavirus contamination constitutes a “direct physical loss or damage to covered property.”

Is a Coronavirus Infection a “Direct Physical Loss or Damage to Covered Property” to Trigger Coverage?

As set forth above, to trigger business interruption coverage, there must be a direct physical loss or damage to the premises. How courts interpret this language in the context of COVID-19, however, will impact businesses throughout the world and have staggering societal, economic and legal implications. What if, for example, an employee, visitor or tenant tests positive for the coronavirus, forcing owners to close? What if testing reveals coronavirus on the surface of a countertop in a company’s kitchen or on a piece of equipment at a jobsite? Would that be evidence of “direct physical loss or damage?”

The answer to that question may come down to whether an insured party can convince their carriers and the courts that the existence of the deadly virus at the premises constitutes physical loss or damage to property.

Already, insureds are racing to the courthouse for a judicial determination of coverage. A restaurant in New Orleans recently filed suit asking the court to determine whether state and local restrictions on public gatherings and restaurant operations trigger coverage. The complaint states that “the deadly virus physically infects and stays on the surface of objects or materials, ‘fomites,’ for up to 28 days, particularly in humid areas below 84 degrees.” “Fomites” are inanimate objects that can become contaminated with infections agents and, in turn, cause the virus to transfer from object to human. Expect courts to hear that word often in the coming months and years.

Additionally, the complaint alleges that it is “clear that contamination of the insured premises by the coronavirus would be a direct physical loss needing remediation to clean the surfaces of the establishment.”

Does the presence of a virus on the physical property, causing shut down, trigger coverage? Must an infected person first contaminate the physical property, with a test determining the virus was on the actual building or its interior — or is a positive test by a single occupant of the building enough? What if COVID-19 is found on a piece of equipment at a jobsite, but no one is infected, and the company voluntarily shuts down? Will businesses be able to successfully argue that coronavirus at a premises, causing fomites to exist and businesses to close, constitutes a physical loss to the property?

Is coverage available when a construction project is shut down by the government, or work is voluntarily stopped before COVID-19 is detected at the job site?  

At a minimum, companies seeking to claim a business interruption will likely have to show their policy did not include a “Virus Exclusion.” Next, policyholders would need to convince a court that the presence of the coronavirus is a physical loss to the premises, just like noxious fumes or other contamination at a premises, and that this physical loss and damage to the property caused the business operations to suspend, resulting in loss of business income to the policyholder.

Third-Party Claims and Commercial General Liability (CGL) Coverage 

Companies may also be faced with third-party liability claims arising out of the COVID-19 pandemic. A CGL policy covers damages for “bodily injury” and “property damage” resulting from an “occurrence.” CGL policies often contain a Fungi or Bacteria exclusion, sometimes referred to as the “Mold exclusion,” which may limit coverage. If there is such an exclusion, the policy language will need to be examined to determine whether it is defined to include a virus or communicable disease.

There are countless questions that will need to be answered by insurance carriers, lawyers and, ultimately, courts over the coming months. With the stakes so high, litigants will push these arguments, relying on creative application of state and federal caselaw, the language of the policies and endorsements, and the facts of each specific instance of business interruption and loss.

NOTE: Massachusetts and possibly other states are considering rules allowing for retroactive coverage to include COVID-19 claims. Learn more.

Nathan Cole is a director at Kenney & Sams, P.C., and has been representing small businesses, construction contractors, subcontractors and home owners in Massachusetts for more than a decade.