NAA/NMHC Building Code Victory Saves Industry Millions.

After seven years of aggressive advocacy, NAA/NMHC have secured a change in the National Electric Code (NEC) that will save the apartment industry millions in construction costs. Until now, the National Electric Code has only allowed the use of non-metallic sheathed (NM or Romex) wiring in apartment properties with three stories or less. NAA/NMHC have submitted multiple proposals to have this unnecessary provision removed, based on hundreds of pages of statistical and technical documentation that NM wiring is safe at any elevation. Despite this evidence, however, National Fire Protection Association (NFPA) committees and the NFPA membership have repeatedly rejected these proposals based in large part on the advocacy efforts of firms who manufacture and install more expensive (non-NM) wiring.

After the NFPA membership, on May 17, once again rejected NAA/NMHC's proposal, NAA/ NMHC appealed the decision to the NFPA Standards Council. We argued that the NFPA panel with oversight for the NEC: violated NFPA procedures; failed to provide any technical justification for rejecting the proposal; and disregarded directives issued to it as a result of a prior NAA/NMHC appeal. On July 17, the NFPA Standards Council overturned the original May 17 vote and approved NAA/NMHC's code change. The 2002 edition of the National Electric Code will now allow the use of non-metallic sheathed wiring in nearly all buildings five stories or less. With this code change, NM wiring can essentially be used in 99 percent of all new apartment construction. NAA/NMHC previously estimated that builders could save between $1,000 and $2,000 per unit using NM wire instead of more costly alternatives.

Court Upholds FCC Satellite Order

The U.S. Court of Appeals for the District of Columbia last week upheld the 1998 Federal Communications Commission (FCC) rule granting apartment renters the unrestricted right to install certain types of satellite dishes within their leased space. NAA/NMHC led a coalition of real estate organizations that petitioned the court to overturn the FCC Order (98273). In written and oral arguments, we argued that the FCC lacks the authority to regulate property owners and that the FCC Order violates the U.S. Constitution's Fifth Amendment by authorizing residents to install physical facilities without permission from, or compensation for, the owner.

NAA/NMHC remain concerned that the FCC Order places apartment owners, residents and employees in danger because of the unsafe way many satellite dishes have been installed since the ruling went into effect in 1999. The coalition has previously submitted evidence of these dangerous installations to the FCC. The practical consequence of the FCC Order is that many apartment communities are now in violation of state and local safety codes. Fortunately, the court ruling does not give residents any new rights. Namely, all dishes must still be installed totally within the leased premises and not in any common areas. Apartment owner/managers can require refundable damage deposits and liability insurance where appropriate. A decision on whether to appeal the July 6 ruling is pending. NAA/NMHC will continue to vigorously pursue individual petitions where the FCC provides incorrect advice to residents concerning satellite dish installations.

Massachusetts Court Rejects Forced Access Rule

A major victory in the delivery of competitive telecommunications service to consumers was achieved when the Massachusetts Superior Court struck down "forced access" regulations promulgated by the state's Department of Telecommunication and Energy (DT&E) (Greater Boston Real Estate Board v. Massachusetts Department of Telecommunication and Energy and Smart Buildings Policy Project, No. 00-4909-A (Mass. Super. July 25, 2001). The court ruled that the regulations constituted an impermissible taking of property without compensation in violating of the U.S. and Massachusetts Constitutions. NAA/NMHC provided financial and staff support to the Greater Boston Real Estate Board in the suit.

While the ruling applies only in Massachusetts, its importance cannot be overstated. Forced access advocates have held the Massachusetts' regulations as a model for creating a right of access without violating property rights. They argued that once a property owner provided access to any service provider, the space used by that provider was rendered utility space, and an owner forfeited their right to exclude others. The judge specifically rejected this argument. The regulations, originally scheduled to take effect July 1, 2001, would have required property owners to open their buildings to all telecommunication companies licensed to do business in the state. It is unclear whether DT&E will appeal the decision. Members are urged to contact Jim Arbury at [e-mail] at the first sign of any "forced access" measure in their area.

Renting Versus Owning

The annual State of the Nation's Housing report by Harvard University's Joint Center for Housing Studies finds that the housing market remains resilient despite the slowing economy, but affordability is eroding. The report's "Rental Housing" section offers important insights into the "rent versus own" debate by analyzing the historical costs of each housing option in several markets. It notes that many households "find renting a better financial choice because they avoid the high transaction costs of buying and selling a home and the risk of losing money over short holding periods."

Whether owning or renting is the prudent financial choice depends on when in the real estate cycle a household buys, the market's volatility, the differential tax benefits and the returns available on competing investments. The analysis finds renting can be a better financial choice in many circumstances and locations. For example, in five of the 14 years between 1983 and 1998, renting in Boston would have been the more prudent financial choice for families that moved within three years. The study, which is co-sponsored by NMHC, is available at www.gsd.harvard.edu/jcenter.

Meanwhile, a new report by the Research Institute for Housing America (RIHA) lends further support to NAA/NMHC's position that homeownership is not a panacea for all that ails America. The Economic Benefits of Homeownership finds that many lower-income households do not benefit economically from homeownership. In addition to not receiving any tax benefits because they do not pay enough in mortgage interest and property taxes to justify itemizing their tax deductions, these households also typically own older homes which have higher maintenance costs that they are likely to have difficulty paying. The authors find evidence that lower-income families tend to overinvest in housing, have highly leveraged mortgages and live in neighborhoods that have more volatile house prices. They also note that owning a home reduces the labor mobility of these households, making it difficult for them to move to areas with better job opportunities. They conclude, as NAA/NMHC have pointed out for years, that unsustainable homeownership is in no one's interest, and that many of the recent gains in homeownership among lower-income and minority households "hinge on highly leveraged mortgage products." For more information, contact RIHA at 703/351-1089.

Mold Regulations Considered By States

Two mold-related bills are currently pending in the California legislature. The first (S.B. 732) originally sought to add the presence of mold on any interior wall, floor or ceiling to the list of conditions that constitute a substandard building and would have required the California Department of Health Services (CDHS) to establish permissible exposure limits to molds in indoor environments. Thanks to outreach by the California Apartment Association, NAA/NMHC and others, the bill was substantially amended in the Judiciary Committee. The provision adding mold to the state health and safety code's list of substandard conditions has been removed and the CDHS is now charged with convening a task force to consider the feasibility of adopting permissible exposure limits. The amended bill imposes written mold disclosure requirements on property owners, but only: (a) when the owner knows or has reasonable cause to believe mold is present; and (b) if the mold exceeds permissible exposure limits. Owners who remediate the mold, according to the as yet undeveloped CDHS mold remediation standards, would be exempt from disclosure requirements. The bill is advancing through the legislature. A second bill (A.B. 284) would require CDHS to establish a mold training and education program, including seminars for local government officials and an Internet site for the public. The Department would also convene a panel to evaluate fungal contamination in buildings and the health effects associated with molds. This bill has passed the Assembly and is pending in the Senate.

At the city level, the San Francisco Board of Supervisors has added mold growth to its Health Code list of prohibited nuisances. Effective July 15, "any visible or otherwise demonstrable growth of mold or mildew in the interiors of any buildings or facilities" would require abatement and removal of the nuisance by the property owner. The addition of mold to the nuisance provision makes any mold growth in a property negligence per se, meaning that plaintiffs would not need to prove the requirements otherwise necessary for recovery under the negligence standard.

Meanwhile, the Texas Board of Health has announced that it is developing voluntary indoor air quality guidelines for publicly owned or leased buildings pursuant to a recently adopted bill (TX Health and Safety Code, Title 5, Ch. 385) In establishing the guidelines, effective September 1, the Board will consider: the potential chronic effects of air contaminants and insufficient ventilation; the potential long-and short-term health effects that may result from indoor air contaminants, and the potential costs of compliance with a proposed guideline. In Maryland, the state enacted legislation in April (MD Code, Chapter 591) that addresses occupational exposure to mold in office buildings. The law establishes a task force that will make recommendations on regulations to protect workers from HVAC-related illnesses. The task force is to submit a final report of its findings and recommendations by July 1, 2002.

Congress Considers FHA Multifamily Insurance Program

On July 11, U.S. Senators Jon Corzine (D-NJ) and Thomas Carper (D-DE) introduced legislation to raise the Federal Housing Administration (FHA) multifamily loan limits by 25 percent. The measure (S. 1163) is the companion to a bill (H.R. 1629) introduced in the U.S. House of Representatives in May by Representatives Marge Roukema (R-NJ) and Barney Frank (DMA). In a press statement, NAA/ NMHC and other members of the Coalition for Affordable Rental Housing applauded the legislation as a critical part of addressing our shortage of affordable rental housing. NAA/ NMHC Senior Vice President, Clarine Nardi Riddle, noted that "the time has come to craft a smarter, more balanced housing policy ... (that) ensures safe, decent and affordable housing for all of our citizens -- regardless of whether they own or rent."

Meanwhile, on July 20, a House-Senate conference committee removed $40 million in credit subsidy funding for the Federal Housing Administration's (FHA) multifamily program from a supplemental appropriations bill (PL. 107-20) signed into law in late July. FHA closed its multifamily insurance program in April when it ran out of credit subsidy funds for FY 2001. The elimination surprised housing advocates since the Bush Administration supported the funding, and both the original Senate and House included the full $40 million. This action effectively ends any hope of funding for new or pending FHA multifamily loans until the new fiscal year begins on October 1, 2001. NAA/NMHC will continue to work with legislators and HUD to secure adequate FHA funding for FY2002; an increase in FHA multifamily loan limits; and the elimination of HUD's recent premium increase for the program. Relatedly, the House rejected an amendment to the HUD Appropriations Bill (H.R. 2620), by a 212-212 tie vote, that would have limited FHA Section 221(d)(4) multifamily mortgage insurance premiums to the cost of the program. HUD says it is analyzing the formula used to calculate the credit subsidy and will lower the premium if it determines 80 basis points is too high.

Information compiled by NAA/ NMHC Joint Legislative Staff: Senior Vice President Clarine Nardi Riddle; Vice President of Tax Jim Arbury; Vice President of Finance and Technology David Cardwell; Vice President of Communications Kim Duty; Vice President of Property Management Jay Harris; Vice President of Environment Eileen Lee; Vice President of Building Codes Ron Nickson; and Mark Obrinsky, Chief Economist and Vice President of Research.