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Big Builders Erect New Trade Association

After a bitter fight with the National Association of Home Builders, a breakaway group of 16 of the industry’s largest builders has decided to form its own trade association. The new entity, called Leading Builders of America, is still in the early stages of formation.

The CEOs of the biggest builders found themselves at odds with the NAHB over a tax-code provision, which reignited a long-standing rift between them and the NAHB’s leadership.

Ken Gear, executive director for the new association, said the big builders decided to form an association because they wanted to have more direct communication with policymakers.

“The points of emphasis might be different,— Gear said, comparing his group to the NAHB. “But having a direct line to [Congress] was the broader objective.—

Leading Builders is still looking for office space in Washington, D.C., and is reviewing what its policy initiatives will be and whether it will start a political action committee. The group is also looking to broaden its membership beyond just large builders. In addition to adding other homebuilders, the association wants to lure suppliers and other vendors into its ranks, according to Gear.

Leading Builders will also focus on creating a better dialogue with other industry groups and companies that regularly interact with the builders.

“We really want to reach out and build relationships not only to policymakers but also to industry groups and to our vendors and our suppliers,— Gear said. “There’s a lot of synergy that can happen within that.—

While the largest builders say they will remain members of the NAHB, the two associations could face off on issues when there are disagreements between small and large builders, as they did earlier this year over the net operating loss tax provision.

Gear said there is an “ongoing dialogue— between the large builders and the NAHB.

NAHB President Jerry Howard was unavailable to comment for this article.

NAHB Chairman Joe Robson, a homebuilder from Tulsa, Okla., said in a statement that the large builders are valuable to his trade group.

“Our large builders remain an important part of our federation, and we continue to work closely with them on issues of mutual interest,— Robson said.

Further, Robson noted that the NAHB is made up of more than 200,000 members across the housing industry and will collectively construct about 80 percent of the new housing units projected to be built in 2009.

It’s unclear how the new association will affect the NAHB’s bottom line. Organized as a federation, a significant portion of the association’s dues come from state builder associations.

Still, the NAHB has not been immune to the ongoing economic turmoil. The trade group, whose membership has been struggling with the decline of the housing market, imposed a weeklong furlough on its employees this summer, according to lobbyists familiar with the association.

The NAHB has spent nearly $2.9 million on lobbying so far this year, according to Senate lobbying disclosure reports. That’s down about $1 million compared with the same period last year when the NAHB reported spending $3.8 million on lobbying for the first nine months of 2008.

The NAHB’s powerful BUILD PAC could also take a hit if Leading Builders decides to form its own PAC. The NAHB reported raising nearly $1.2 million through the end of October, according to Federal Election Commission filings.

The decision to form Leading Builders comes after a public fight erupted in February between the big builders and the NAHB president. The dispute was triggered by a letter that Howard wrote to Speaker Nancy Pelosi (D-Calif.) questioning the NOL provision. Howard argued, at the time, that the tax measure could allow bigger builders to offload excess inventory for a tax benefit.

The measure, which passed in November, expands to five years the time that companies can use to offset revenue losses against profits. Companies can normally only carry back tax losses for two years under current law.

The measure will allow big builders, many of which are facing huge losses, to write off billions of dollars.

Some small builders have been opposed to the tax change, saying it could further depress the housing market if the big builders exploited the loophole to sell property for artificially low prices to generate a loss for tax purposes.

Still, Howard’s letter caused an angry response by big and small builders alike because members of the trade association were not consulted before it was sent.

After the NAHB was unsuccessful in getting the measure added to the economic stimulus bill this spring, the builders decided in May to take matters into their own hands and form a coalition, Homes for America Alliance.

Headed by Gear, the group quickly added lobbying muscle, hiring the C2 Group, Hecht Spencer & Associates, Patton Boggs, Polsinelli Shughart and Van Heuvelen Strategies to push the measure. Since June, the alliance has spent $410,000 on the lobbying campaign.

Industry lobbyists said they weren’t surprised by the large builders defection given the unworkable relationship that they have with Howard.

“They absolutely can’t work this out with Howard,— one industry lobbyist said. “They are where they are at because of one personality.—

Still, the lobbyist says the biggest homebuilders may need the NAHB more than they realize.

“Politically, as far as making an argument to Members of Congress, they want to hear from local homebuilders rather than corporate mega builders,— the lobbyist said. “It’s the small guys that get the Members’ attention.—

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