The annual South Carolina legislative session has ended. Julian Barton, Director of Government Affairs for the Home Builders Association of South Carolina, has provided this report on the results for Home Builders of the legislative session.
Fire Sprinkler Bill – Choice Prevails: One of most contentious issues of the year was a bill to stop the mandate by the SC Building Code Council that would have required the installation of residential fire sprinklers in all new homes built effective January 1, 2011. The impetus for the change in policy was the inclusion of the sprinkler mandate in the IRC 2009, which is pending implementation in 2011. The HBA was unsuccessful in getting the Building Codes Council to accept a state modification to delete the residential sprinkler mandate from the new code.
Despite a full frontal assault on the bill by the well-financed national fire sprinkler industry and their legions of high-priced lobbyist, common sense prevailed and the General Assembly overwhelmingly passed the fire sprinkler choice bill (H. 4663). The bill received an overwhelmingly affirmative vote in the SC Senate (38-0) and the SC House voted to concur with the Senate (100-1). The bill was signed by Governor Sanford on June 16. There was no appetite in the General Assembly for the state government mandating residential sprinklers. Interestingly, over 25 other states have now removed the sprinkler mandate requirement from their state building code.
Permit Extension – Time Out Granted: Due to the crisis in the real estate/finance sector of our state and national economy, real estate developers, including residential developers and commercial developers have experienced an industry-wide decline, including reduced demand, canceled or delayed orders, declining sales and rentals, price reductions, increased inventory, layoffs, and delayed construction plans. Many permits issued during the recession are now near expiration, or they have already expired.
A bill (H. 4445) to address the permit extension problem was introduced this past session by Rep. Dwight Loftis (Greenville) and Senator Ray Cleary (Myrtle Beach). The bill passed the General Assembly and was signed by Governor Sanford on May 19, 2010. The purpose of this bill is to prevent the wholesale abandonment of already-approved projects by tolling the term of these permits for a finite period of time as the economy improves.
The bill has two major provisions: First, it resurrects development and building permits by state and local government agencies that were valid on January 1, 2008, but have since expired. It allows the resurrected permits to remain valid through December 31, 2012. For example, if a development permit expired on December 31, 2009, it is now renewed on May 19 and is valid through December 31, 2012 (3 additional years).
Second, for permits that were still valid on May 19, 2010 (the effective date of the law), the law provides a “tolling period”, which stops the clock on the permit through December 31, 2012. For example, if a DHEC permit had three months left on it on May 19, the permit now remains valid through December 31, 2012, plus three months. The permit will now expire March 31, 2013. The additional time provided by the bill insures that the permit doesn’t expire and that a new permit does not have to be purchased.
Permits included in this “pause” period include land disturbance, storm water, coastal zone consistency certificates, water/waste water permits, 401 water quality certification, OCRM critical area permits, DHEC air quality, site specific development plans, building permits, etc.
In the case of building permits that have expired for one year or more during the applicable period, the local government must extend the building permit at no additional cost. However, the construction of the new building must comply with existing rules (building codes) and regulations at the time the building permit is reissued.
Permits excluded from this “pause” period, include a number of federal permits and administrative consent orders. The law allows a government entity to revoke or modify a development approval as permitted by law, and it has no effect on Certificate of Need or Demonstration of Need certificates issued by DHEC.
The bill will give the development industry a much needed time out, and at the same time provide an incentive to get development projects restarted, and get the South Carolina economy rolling again.
Tort Reform – Down to the Wire: The opportunity for substantive tort reform (H. 3489) was alive until the dying moments of the 2010 legislative session. With time running out, the SC Civil Justice Coalition (HBA is a member) offered the SC Trial Lawyers Association a tort reform proposal. Senators McConnell and Martin urged the trial lawyers to come to the table and compromise on this issue this year.
After several hours of negotiation a compromise was reached. The compromise included the House language on punitive damages, appeal bonds, and tightening of the construction statute of repose; the Senate language on PARSA (state hiring lawyers), disclosure of insurance limits in personal auto cases; and the Senate’s threshold on the admissibility of non-use of seat belts in accident cases. However, Senator Gerald Malloy (Darlington) found out about the pending compromise and nixed it. With literally only 30 minutes left on the clock before the end of the 2010 session, there was no time to overcome his pending filibuster.
The good news is that we made considerable head way in reaching a compromise with the trial lawyers. The bad news is that we didn’t have enough time to seal the deal. As a result, tort reform will be back on the front burner in the 2011 legislative session. This issue is too important to the economic recovery of our state to let a last minute distraction stop this important and much needed reform!
Point-of-Sale Bill – No Sale: A bill (H. 3272) that would have changed the point-of-sale property tax assessment for existing real estate stalled in the General Assembly this year.
Real estate agents have complained that the immediate property tax reassessments from assessed value to point-of-sale price had caused “sticker shock” with real estate buyers. The actual sale/improvement price has often been far higher than the most recent property tax assessment on the books. This creates huge inequities and disincentives to buy new or remodeled real estate properties.
The roots of the point-of-sale controversy are found in the passage by the General Assembly of Act 388 – 2007 Property Tax Reform. Not only did the law shift property taxes from the faster appreciating to the slower appreciating real estate, it set in motion a growing inequity situation over time. The problem is that by exempting out additional property classifications, it shifts the tax burden further and makes the inequity of taxes increase.
The issue of property tax reform is an extremely complicated and politically charged issue, with no simple political solution. We would anticipate that this issue will resurface next session. The resolution of the point-of-sale issue is critical to keeping the rebound in the real estate industry on track!
DHEC Reorganization – Not This Year: The Senate Medical Affairs Committee took up a bill (S. 384) introduced to make DHEC a cabinet agency reportable to the Governor and to divide the DHEC board into two boards – a Board of Health and a Board of Environmental Control. However, several Senators raised concern over the magnitude of the change and the short amount of the time spent on exploring the ramifications of the bill. As a result, the bill died in committee.
DHEC is the fifth largest state agency in South Carolina, which is run by a full-time commissioner with an appointed (by the Governor) part-time board like most other state agencies. Given the magnitude of its mission, the limited resources it is given, and the regulations it is given by the General Assembly and the EPA, DHEC has done an admirable job. It never has and never will please everyone – it is a regulatory agency!
Home builders and the business community have had their share of issues with DHEC over the years. The debate has been about the interpretation of various regulations many of which came down from the federal level. However, the regulated community has never dealt with a DHEC regulatory agency that is on a mission with its own private agenda!
Fortunately, this bill died in the Senate Committee. Passage of this bill would have set back the economic development of our state for years. Promoting economic development in SC would no longer have been part of the DHEC agenda.
Private Transfer Fees – Prohibition Dies: Rep. Alan Clemmons’ bill (H. 4808) that would prohibit private third party transfer fees failed to pass this session. The bill contains an exemption for any transfer fees self-imposed by homeowner associations. The prohibition was only for “third party” transfer fees. Nine other states have already passed similar legislation banning third party transfer fees.
In recent months, developers around the county have been offered a creative financing program using transfer fees. Under this option, the developer takes third party money to help finance the development in return for paying the “loan” back through the use of transfer fees. A common option is to require a 1% transfer fee at closing every time a house in the subdivision is sold for up to 99 years. The transfer fee is then given to the third party/agent to pay back the up-front money. The more times the house is sold and the more the house appreciates, the larger the return for the third party. Some Wall Street investment brokers have started bundling these “transfer fee” properties and selling them to other investors.
Opponents of third party transfer fees are concerned about a proliferation of transfer fees, the undermining of the argument against government transfer fees, and the obstacle to real estate sales that is created. Proponents argue that these transfer fees can lower the initial cost of the home, make them competitive with non-transfer fee developments, provide another option for raising capital in a tight credit market, and help jumpstart new and delayed developments.
Water Withdrawal Bill – Finally Approved: After nearly four years of haggling over several bills to require water withdrawal permits from South Carolina’s streams and rivers, the General Assembly finally passed a water permit bill (S. 452). The bill requires new or expanding industries and utilities to get state permits for withdrawing water from South Carolina’s rivers.
New industrial and utility users would need state permits before they could take water from state rivers. A good example of a new user could be the proposed Duke Energy nuclear plant in Gaffney that would withdraw and return to the river more than 30 million gallons a day from the Broad River. The term of permit for a new user is 20 to 40 years and the term of permit for existing users is 30 to 40 years. Existing industries would be grandfathered in.
Bill supporters say a state permitting law is important in negotiations with other states over water rights to rivers that run through multiple states. South Carolina is one of only a few eastern states that do not permit water withdrawals. It was just a matter of time before a state water permitting program was initiated – now is a good time for it!
Home Builder Licensing Bill Dies: A bill (H. 3492) was introduced last year by Rep. Ken Kennedy to raise the costs of home repair/construction projects that an individual can do without being a licensed home builder. Currently projects below $5,000 are exempt. Under the bill this limit would have been increased to $15,000. The bill would have allowed more unlicensed builders to operate in the state, as if we didn’t already have enough problems with unlicensed, unregulated, and too often, untrained, “handyman” builders.
After a long and tumultuous journey through the legislative process, the bill died in the final days of the legislative session. The tenacity of Rep. Kennedy in trying to pass the bill has to be acknowledged. He was on a one-man mission to pass this bill. However, Rep. Kennedy has since announced his retirement from the SC House of Representatives.
Economic Development Bill – Step Forward: The General Assembly approved and the Governor signed into law (H. 4478), the “South Carolina Economic Development Competitiveness Act of 2010”. The legislation implements numerous private sector recommendations for fostering an economic development climate in the state to attract global business and industry investment. It provides a variety of tax credit, fee-in-lieu options, and flexibility in funding for certain state agencies to encourage economic development in South Carolina and to keep our state competitive with other states in the southeast.
Affordable Housing Tax Credit Passes: A bill was passed this session (S. 728) that would expand the ability to use affordable housing tax credits in retrofitting old textile mills with residential units. The bill was signed by the Governor on May 28th. The bill will provide another option for communities to expand their affordable housing inventory.
Septic Tank Permit Bill Fails: A bill (H. 4500) was introduced this session that would require that before a parcel of land that had an onsite wastewater treatment system (septic tank) located on it could be sold that it would have to have a certified inspector inspect the septic system. The idea was to get a septic tank letter, like you get a termite letter before you close on a home. Unfortunately, the two inspections are like apples and oranges. A septic tank system is harder to evaluate, requires land disturbance, and there are already real estate laws that require disclosure by the seller, if they have inoperable waste disposal systems. The bill failed to make it out of the House Committee.
HBA Members – Special Thanks: To have a successful legislative year like the HBA had in 2010 it takes a real team effort. A very special thanks goes out to the individual HBA members who participated in the legislative process by contacting their legislators, attending statehouse rallies, and responding to the HBA “Call to Action” requests. Without your willingness to get involved, we could not have attained the level of success we did at the statehouse. You made a difference!
Thanks to your efforts we are now in the process of getting the residential home building industry back on the road to prosperity.