Real estate industry suits up for ‘weird’ legislative session

by Mary Welch

Image: J. Glover (Autiger) CC BY-SA 2.0

The Georgia General Assembly started its 40-day session and already it is “weird,” according to Jeffrey Ledford, senior director of governmental affairs for the Georgia Association of Realtors. “It’s been slow to start … A handful of little things rumbling about and a big one this year.”

That “big one” is a prohibition on local residential building design and restrictions. In recent years, many local governments have sought to impose restrictions on such building features as exterior material, color schemes, the location of garages, window spacing and facade design through the use of ordinances.

And, while some may view it as a way to preserve an aesthetic uniformity, Ledford believes that the overall result of these rules negatively affects affordable housing and building supply manufacturers. “These municipalities are using zoning not for the health and safety and structural soundness of the buildings, but really about aesthetics,” he said. One common restriction is requiring builders to such as only use brick in their facades, not any kind of vinyl siding, which increases costs dramatically. “It’s really about raising the cost of construction so that you have higher level of rents. It’s about creating luxury apartments rather than affordable housing or housing for service workers.”

Aaron Johnson, government affairs director at the Atlanta Commercial Board of Realtors, agrees that the restrictions many of the municipalities want would make it “almost impossible to make the homes affordable; it’s a way to control affordable housing.”

He said that the typical chain of events is that, after a community experiences an uptick in development, some in the area seek to restrict future buildings to be only one certain, higher-end type of development. “They don’t want vinyl siding because that might bring a certain type of people coming to the neighborhood so suddenly you have to have brick, which costs more.”

As an example, Ledford noted that one county prohibited slab construction and crawl spaces. “Adding a basement put another $30,000 on the cost of a house. If you’re building a $150,000 house and have to add $30,000, well, it becomes an affordability issue.”

Another consideration is that if a resident’s existing home is destroyed by a fire or natural disaster, the insurance may only cover the cost of rebuilding the original structure. New zoning restrictions put in place after the destroyed home was built mean that the homeowner potentially would be responsible for any additional costs to make it comply to the new regulations.

State House Rep. Vance Smith, (R-102), president of Smith Construction Co. in Pine Mountain, is expected to introduce a bill that would preclude this type of zoning. “There’s ample room for zoning at the local level but there have to be reasons” for it, Ledford said. “There’s a lot of bills that may sound like a great idea… but our job is to point out who will be impacted and the consequences.”

And it’s not just affordable housing and the construction industry taking hits from these local laws. Among others affected are the vinyl siding industry as well as other companies that manufacture some of the offending materials. “There are a lot of jobs being impacted by this,” Ledford said.

Although Smith hasn’t submitted his bill, Ledford believes it has a very good chance of passage.

Also on the legislative horizon: short-term rentals

After months of hearings conducted by the House Short-Term Rental Study Committee, it is anticipated that a bill will soon be introduced that will impose legislative restrictions on Airbnb and similar companies. Some items that could be on that list include a limit on the number of rentals in an area, noise restrictions, safety inspections and the need to pay a hotel-motel tax.

Johnson was skeptical of the need for legislation in this area. “People say it’s a safety issue and that if there’s a problem you don’t know how to find the owner,” said Johnson. “Five minutes on a computer and you can find the owner. Most of the owners are local anyway. To me, it seems like a way to generate revenue for the municipalities.”

While acknowledging that there may be an occasional “loud Thursday party,” Johnson noted that short-term rentals have other important uses. “We have cancer centers in our area but a lot of towns in Georgia don’t. People use short-term rentals while their loved one is getting treatments. The movie industry also uses them to rent out for their stars and production people. Military families also use short-term rentals.”

Johnson said that the committee’s report is complete and he’s anticipating legislation to pop up at some point in the session.

Possible movement on HOA closing letters

Last year the General Assembly passed legislation concerning homeowners’ association closing letters, but it was vetoed by Gov. Nathan Deal. The sponsor of that bill, Rep. Alan Powell (R – 32), recently noted that because of Georgia Realtors bringing awareness to the HOA closing issue, the state’s attorney general sent out letters of investigative demand to HOA management companies and there is talk of a possible class action suit on the horizon.

A seller must obtain a letter from a management company saying that their HOA fees are up-to-date. New legislation on this topic would likely aim at getting some sort of uniformity on HOA letters sent to those selling a home and ensuring that the homeowner pays a nominal fee for that letter. Since management companies currently have no stated deadline, they can delay the letter and then offer to expedite it for an extra fee.

“You can go from $10 to $250 to as much as $1,500, all because [homeowners] need that letter and the management companies don’t have to deliver that letter within a certain timeframe. It’s just a revenue stream for these companies,” Johnson said.

While there’s certainly a great deal of real estate-related topics on the docket this year, that may not be as uncommon as you think. When told of Ledford’s comment that this session seems “weird,” Johnson laughed and replied, “Every Georgia legislative session is weird.”