State of the Union – Residential Construction
By Jerry Whitaker, Senior Partner, Acrisure
Come join us in Denver for the CFMA’s 2023 Annual Conference & Exhibition on Monday, July 17 at 8 AM for our session on the State of the Union for Residential Construction.
The fear of recession and an increase in interest rates have put a damper on the residential market. During this challenging time, residential contractors should review their indirect costs and new laws/tools that can assist in saving money and becoming more efficient. This session will enable you to:
- Define tax incentives residential contractors may be able to utilize
- Identify new technology/technical tools that benefit residential contractors
- Determine key differences between residential contractor and commercial contractor insurance policies and the current state of the residential insurance market
The Inflation Reduction Act of 2022 became law in August 2022. It contains initiatives tied to clean building initiatives. There are tax credits for improving overall energy efficiency, appliance upgrades, adding insulation, making ventilation improvements, or installation of new doors and windows.
There are many new technical tools available for residential contractors. The right software will drastically improve your efficiency. A reliable system, centered around a customer relationship management (CRM) tool, offers many helpful features to stop your business from wasting time and losing money.
There are some key differences between residential and commercial contractor insurance policies. The key differences tend to be centered around differences in risk, additional insureds, and indemnity language.
Finally, the current state of the residential insurance market is challenging to say the least. Property insurance is facing the hardest market in a generation. These challenges have been made more difficult by increases in flood, hurricane, and other weather-related events. Most notably, 2022 was the eighth consecutive year the U.S. experienced at least $1 billion in losses. The National Oceanic and Atmospheric Administration (NOAA) found that 2022 recorded 18 separate billion-dollar weather and climate disasters in the country, representing the third highest number of such disasters in a calendar year and totaling $165 billion in overall damages.
You will learn what insurers believe are keys to easing the cost pressure by utilizing disaster-resistant building materials and making sure -up-to-date building codes are used for new construction. These losses are not limited to one geographic location, they are across the United States. The losses are also not limited to just flood and hurricane events, they are from drought, hail, tornadoes, wildfires, and winter storms.
Many experts believe these types of weather events are the new norm. If this is truly the case, it will be important to understand and influence regulations around climate change. It is also important to have a voice on Environmental, Social, and Governance (ESG) through the eyes of insurers. Many insurers are looking to begin ESG underwriting practices that will impact not only pricing, but also impact residential construction risk acceptance. I would point you to the excellent article in CFMA Building Profits magazine “ESG in Construction” that goes into detail on the ESG issue.
For tax purposes, a Home Construction Contract differs from a Residential Construction Contract. They each have a specific definition. Those who otherwise consider themselves commercial contractors might have a residential construction contract. Beyond the name distinction on the contract type, the tax treatment itself is different.
When reviewing your job schedules, the scope and nature of the work matters for tax. This session will help you develop a preliminary understanding of the differences for your tax planning.
I encourage you to join us and learn about how taxes, technology, and insurance impact residential construction.