US Home Buyers Get Hit With `Tree Tax'
A reason for higher lumber prices is reduction in timber harvests to protect owl
NEW YORK — CINDY THEISS once saw a northern spotted owl as part of a traveling earth-resources exhibit. ``It was a magnificent creature,'' recalls Ms. Theiss, a home-economics teacher.
But little did she know, at the time, that part of the price of protecting the bird's habitat could be $10,000 to her and her husband, Michael.
The money is the difference between the cost of lumber last summer when the Theisses had hoped to begin building a new house in West Islip, N.Y, and the price this winter when they got their building permit. A significant reason for the higher lumber prices is the reduction in federal timber harvests to protect the owl's habitat.
The Theisses are not alone. According to the National Association of Home Builders, Americans building new homes this spring will pay a $3 billion to $4 billion ``tree tax'' as a result of the higher prices. NAHB estimates that the average 2,000-square-foot house will cost an extra $5,000.
This rising cost of housing is starting to take its toll. Allynn Howe, director of government relations for the National Lumber and Building Materials Association, says real estate development projects are being left incomplete or are being cancelled altogether because developers can't find people who financially qualify to buy the homes. He estimates that the rising cost of lumber has added 5 percent to 7 percent to the price of a house, ``probably knocking 80,000 people out of the market.''
Lumberyards report that the rising lumber costs are also shocking those planning to remodel this spring. ``The do-it-yourselfer is getting an owl shock,'' says Mike Beaudette, assistant store manager at Somerville Lumber, Building and Supply in West Bridgewater, Mass. The cost of a two-by-four is now up to $3 from 99 cents. ``It becomes embarrassing to sell it,'' Mr. Beaudette says.
The skyrocketing prices and uncertain future supply is leading one of the nation's largest buyers of lumber, Home Depot, to consider overseas supplies. ``There is no question, in my opinion, that we are looking at, and experimenting with, some global resourcing, so that, maybe in the year 2000, when things are tighter, we are not a new player in the global community,'' says Michael Modansky, the Atlanta-based chain's wood buyer. Mr. Modansky, who just returned from a trip to Chile, has visited lumber operations in South America, Russia, and Scandinavia.
Although lumber has always had cyclical ups and downs, the industry says the main reason for the price rise is the reduction in the federal timber harvest. The federal timber supply used to represent about 30 percent of the soft wood used in sawmills to make framing lumber for housing. This is now down to 20 percent. ``People don't realize how much less we are harvesting than two to three years ago,'' says Alberto Goetzl, a consulting economist with the American Forest & Paper Association.
The largest share of federal timber is harvested in the Pacific Northwest. The main reason for the reduction in the Northwest's harvest is the attempt to protect the habitat of the northern spotted owl. Environmentalist groups had brought lawsuits, which tied up the Northwest timber industry for two years.
Last July, President Clinton held a highly publicized meeting in Portland, Ore., with environmental groups, the logging industry, and local residents. The president announced a program generally applauded by most of the groups. On April 13, Mr. Clinton submitted the final draft of the plan to a federal judge. Environmental groups say they will bring further legal action to oppose the Clinton plan but will not ask for an injunction.
The Clinton plan will drastically reduce the amount of old-growth forest available for harvesting in the Northwest. The Clinton administration now estimates a harvest of 250 million board feet the first year of the plan, rising to 850 million board feet by 1997. This is a reduction from the 4 billion to 5 billion board feet the industry had been cutting each year.
As availability has shrunk, prices have risen. Lumber now costs about $450 per thousand board feet, compared with $200 per thousand board feet in the 1980s. In February, lumber prices peaked at the record price of $510 per thousand board feet.
Jim Middaugh, a spokesman for the Oregon Natural Resources Council, agrees that the reduction in federal harvesting in the Northwest ``has played some role'' in the price hikes. However, he believes ``the actual impact on logging levels is not as significant as the price increases.'' Instead, he blames speculators. ``A lot of people in timber are reaping huge profits,'' he states.
In February, Ross Gorte, an analyst with the Congressional Research Service wrote an analysis of the price hikes, noting: ``Protecting spotted owls has reduced federal timber sales in the Pacific Northwest.'' However, he added, the price rise coincided with the economic recovery, which has boosted housing starts, and concerns over United States duties on Canadian imports. In addition, he blames ``fear and concern about supply.''
Those fears and concerns reached their peak this past winter as the Theisses were finishing up plans to build their home. Mr. Theiss, a structural engineer, investigated the possibility of using steel. However, this would have required hiring local iron workers, whose wages would have greatly boosted the price. He also looked into ``engineered wood,'' which is 70 percent real wood and 30 percent glue. But since the house would be in a hurricane zone, he wanted the additional strength of Douglas fir. He found imported mahogany, a hardwood, selling for less than clear pine.
``But, you don't really know how that lumber has been treated,'' he reasoned. So, instead the Theisses stuck with expensive Douglas fir.