U.S. homebuilding takes a step back amid bitterly cold weather

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. homebuilding dropped to a six-month low in February as severe cold gripped many parts of the country, in a temporary setback for a housing market that remains supported by extremely lean inventories amid strong demand for larger homes.

The report from the Commerce Department on Wednesday also showed a sharp decline in building permits last month. It followed on the heels of data this week showing that the deep freeze, which was most severe in Texas and other parts of the densely populated South region, depressed retail sales and output at factories.

Though the second straight monthly decline in homebuilding could lead economists to trim their lofty gross domestic product estimates for the first quarter, a rebound in starts is expected in the April-June period, keeping intact predictions that economic growth this year will be the strongest since 1984.

Indeed, the Federal Reserve on Wednesday projected robust growth and higher inflation this year. The U.S. central bank, however, repeated its pledge to keep its benchmark overnight interest rate near zero for years to come.

“We can read nothing into the underlying strength of the economy from these weather-distorted reports,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “March data are likely to show strong bounce backs in consumer spending, industrial production and construction activity.”

Housing starts fell 10.3% to a seasonally adjusted annual rate of 1.421 million units last month, the lowest level since last August. Economists polled by Reuters had forecast starts would decrease to a rate of 1.560 million units in February.

Starts were down 9.3% on a year-on-year basis in February.

Groundbreaking activity plunged in the Northeast, Midwest and South, but surged in the West. Permits for future home building tumbled 10.8% to a rate of 1.682 million units last month. They, however, jumped 17.0% compared to February 2020, underscoring the housing market’s strength.

U.S. stocks pared losses following the Fed statement. The dollar edged down versus a basket of currencies. Longer-dated U.S. Treasury yields were higher.

RISING CHALLENGES

The year-long COVID-19 pandemic has shifted demand towards bigger and more expensive houses as millions of Americans continue to work from home and remote schooling remains in place.

But challenges for the housing market, one of the main drivers of the economic recovery, are mounting. The 30-year fixed-rate mortgage has risen to an eight-month high of 3.05%, according to data from mortgage finance agency Freddie Mac.

Mortgage rates have jumped in tandem with Treasury yields, which have spiked as investors anticipate that stronger growth will generate significant inflation. Growth is being driven by massive fiscal stimulus, including President Joe Biden’s $1.9 trillion rescue package, which was enacted last week.

A separate report from the Mortgage Bankers Association on Wednesday showed a moderate increase in applications for loans to purchase a home last week. Though mortgage rates remain low by historical standards, they are contributing to the rising costs of homeownership, especially for first-time buyers.

Supply disruptions because of coronavirus-related restrictions are driving up commodity prices, including softwood lumber, which surged a record 79.7% in February on a year-on-year basis. According to a survey from the Associated General Contractors of America, manufacturers have hiked drywall prices by 20% effective late March or the beginning of April.

A survey on Tuesday showed confidence among single-family homebuilders dipped in March, despite strong buyer traffic, amid worries over rising material costs and delivery times, especially for softwood lumber.

With the supply of previously owned homes at record low levels, builders are likely to continue breaking more ground, though houses could become more expensive.

“Builders face some near-term challenges,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “We don’t anticipate that this will weigh too heavily on starts, the forecast is for housing starts to steadily increase throughout the course of this year.”

Single-family homebuilding, the largest share of the housing market, declined 8.5% to a rate of 1.040 million units in February, also a six-month low. Single-family building permits tumbled 10.0% to a rate of 1.143 million units.

Starts for the volatile multi-family segment plunged 15.0% to a pace of 381,000 units. Building permits for multi-family housing projects declined 12.5% to a pace of 539,000 units.

Housing completions jumped 2.9% to a rate of 1.362 million units last month. Realtors estimate that housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to close the inventory gap.

The stock of housing under construction rose 0.3% to a rate of 1.283 million units, the highest level since October 2006.

“Builders will continue to have a key role to play in addressing the inventory shortage for a market chock full of eager home shoppers,” said Matthew Speakman, an economist at Zillow. “The homebuilding sector has more room to run.”

(Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci)

Printed in days, a house: New York firm takes 3D printing to the next level

(Reuters) – Most homes are built block by block, or brick by brick. But a demo house in Calverton, New York, was constructed scan by scan – its walls made using a giant three-dimensional printer.

The demo house was built by construction firm SQ4D, to show the public and industry what was possible. Now the company is putting one up for sale – a still to-be-built house in the nearby town of Riverhead, which has been listed on property site Zillow at $299,000.

With a detached garage, the house will cover some 1,400 square feet (130 square meters). The footings, foundation and slab, along with the walls, will be entirely made with the 3D printer.

“We instruct the machine to go around and follow your floor plan each pass as we go by. We’re constantly building up,” said Kirk Andersen, the director of operations for SQ4D.

Andersen and his colleagues had to design and build their own printer to fulfill their house-sized dream.

“We took the idea of a plastic 3D desktop printer and wanted to make it much larger and spit out concrete,” said Andersen.

“We set tracks on each side of the structure where we plan to print. We set up our giant gantry, our large scale printer goes back and forth, extruding these layers one by one, stacking, building all your walls.”

Andersen said the actual printing time for the walls took about 48 hours, part of an overall eight-day process to build the entire home.

That is significantly faster and around 30% cheaper overall than a home built using standard construction methods, he said, where laborers need to tow in and stack blocks manually.

“We show up with a printer. We can replace the labor-intensiveness of those guys and extrude concrete much faster than they can lay the bricks,” he said.

Not everyone in the construction industry is thrilled at that prospect, and the process has received mixed feedback, he said, with some skepticism in particular from older tradesmen.

“I think people are just unprepared for how this is going to change construction,” said Andersen. “This is the beginning. This is just scratching the surface right here.”

(Reporting by Reuters TV, Writing by Rosalba O’Brien; Editing by Marguerita Choy)

U.S. manufacturing near two-year high; road ahead difficult

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. manufacturing activity accelerated more than expected in October, with new orders jumping to their highest level in nearly 17 years amid a shift in spending toward goods like motor vehicles and food as the COVID-19 pandemic drags on.

The survey on Monday from the Institute for Supply Management (ISM) was the last piece of major economic data before Tuesday’s bitterly contested presidential election. But the outlook for manufacturing is challenging.

While the coronavirus crisis has boosted demand for goods complementing the pandemic life, a resurgence in new cases across the country could lead to authorities re-imposing restrictions to slow the spread of the respiratory illness as winter approaches, which could crimp activity. Government money for businesses and workers hit by the pandemic, which boosted economic growth in the third quarter, has dried up.

“Manufacturing rebounded strongly with fewer restrictions on economic activity and stimulus efforts, but the path forward will be more difficult as the economy continues to cope with the pandemic,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.

The ISM said its index of national factory activity increased to a reading of 59.3 last month. That was the highest since November 2018 and followed a reading of 55.4 in September.

A reading above 50 indicates expansion in manufacturing, which accounts for 11.3% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 55.8 in October.

The jump in activity, however, likely overstates the health of the manufacturing sector. A report from the Federal Reserve last month showed output at factories dropping 0.3% in September and remaining 6.4% below its pre-pandemic level.

Manufacturers and suppliers said last month they “continue to operate in reconfigured factories” and with every month were “becoming more proficient at expanding output.”

Though sentiment among manufacturers remained upbeat, there were two positive comments for every cautious comment, a slight decrease compared to September.

The outcome of Tuesday’s vote is expected to lead to a brief period of uncertainty. President Donald Trump is trailing former Vice President and Democratic Party candidate, Joe Biden, in national opinion polls.

Stocks on Wall Street were trading higher following their steepest weekly loss. The dollar was steady against a basket of currencies. U.S. Treasury prices rose.

NEW ORDERS SURGE

Fifteen industries, including apparel, food, furniture and transportation equipment reported growth last month. Textile mills and printing reported a contraction.

Manufacturing’s continued recovery will likely keep the economy floating, with growth expected to slow sharply in the fourth quarter after a historic 33.1% annualized rate of expansion in the July-September period.

Growth last quarter, which followed a record 31.4% pace of contraction in the April-June quarter, was juiced up by more than $3 trillion in government pandemic relief. There is no deal in sight for another round of fiscal stimulus.

A separate report from the Commerce Department on Monday showed construction spending rose a moderate 0.3% in September, slowing after a 0.8% increase in August.

The coronavirus crisis has pulled spending away from services towards goods that complement the changed life-style. Spending on goods has surpassed its pre-pandemic level.

Makers of chemical products reported “business continues to be robust.” Food manufacturers said they had “increased production due to stores stocking up for the second wave of COVID-19.” Manufacturers of computer and electronic products said the coronavirus continued “to have an effect on supplier support and operations, more from a decreased labor perspective rather than unavailable material.”

The ISM’s forward-looking new orders sub-index surged to a reading of 67.9 last month, the highest reading since January 2004, from 60.2 in September. Customers’ inventories remained too low for the 49th straight month and order backlogs steadily increased, which bodes well for future production.

“On the upside, social distancing efforts, which have been a factor in consumers pivoting spending away from services and toward goods, is showing no signs of abating, especially as virus case counts are surging again,” said Sarah House, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

“This shift to goods spending should continue to underpin orders, but is unlikely to go on with the same muster as it did earlier when an initial flurry of spending on manufactured goods aimed at setting up at-home offices and remote classrooms boosted goods spending.”

With orders booming, manufacturing employment expanded for the first time since July 2019. The ISM’s manufacturing employment gauge rose to a reading of 53.2 from 49.6 in September. That likely supported overall job growth in October.

According to a Reuters survey of economists, nonfarm payrolls probably increased by 700,000 jobs last month after rising 661,000 in September. Employment growth has cooled from a record 4.781 million in June. About 11.5 million of the 22.2 million jobs lost during the pandemic have been recovered.

The government is scheduled to publish October’s employment report on Friday.

(Reporting By Lucia Mutikani,; Editing by Chizu Nomiyama and Andrea Ricci)

Exclusive: Israel builds new Jerusalem road that will link settlements as government weighs West Bank annexation

By Stephen Farrell, Maayan Lubell and Rami Ayyub

JERUSALEM (Reuters) – Construction is underway on a major new ring road for Jerusalem that Israeli officials say will benefit all of its residents, but critics of the project say is another obstacle to Palestinian hopes to make East Jerusalem the capital of a future state.

The bypass, called The American Road, will connect Jewish settlements in the occupied West Bank that are north and south of Jerusalem. The central and southern sections of the road are already being built, and tenders for the northernmost stretch – at a projected cost of $187 million – will be issued toward the end of the year, a Jerusalem municipality official told Reuters on condition of anonymity.

In total, the project, which will run along or near the outer rim of East Jerusalem, is forecast to cost more than a quarter of a billion dollars. Israel annexed East Jerusalem, in a move that has not won international recognition, after capturing the area, along with the West Bank and Gaza Strip, in a 1967 war.

The construction comes as the Israeli government is set to begin cabinet-level discussions from July 1 about implementing Prime Minister Benjamin Netanyahu’s election promise to annex Jewish settlements in the West Bank – a planned step that is sparking growing international criticism. Peace negotiations between Israel and the Palestinians broke down in 2014.

Israeli officials say the road, which will include a 1.6 kilometre (one mile) tunnel east of the Mount of Olives, will ease traffic congestion for both Israelis and Palestinians living in the area.

“It doesn’t unite the settlements. It’s not about uniting borders or municipal lines,” said Arieh King, a Deputy Mayor of Jerusalem and a leading figure in the city’s settler movement. “But it does connect them more on the daily level – whether it’s studies, tourism or commerce. And then in practice you create a huge Jerusalem metropolis.”

Palestinians say the new road will primarily benefit settlers, and will further undermine the feasibility of East Jerusalem as the capital of the state they seek in the West Bank and Gaza.

“This project cuts off Palestinian neighborhoods within the city from one another,” Fadi Al-Hidmi, the Palestinian Minister of Jerusalem Affairs, said via email. Responding to questions from Reuters, Al-Hidmi said The American Road was part of Israel’s “illegal” ring road project, which “surrounds occupied East Jerusalem to further connect Israeli settlements and sever the occupied Palestinian capital from the rest of the West Bank.”

Israel’s West Bank settlements were built by successive governments on land captured in the 1967 war. More than 400,000 Israelis now live there, with another 200,000 in East Jerusalem. Palestinians say the settlements make a future state unviable, and most of the world views them as illegal under international law. Israel disputes this, citing its security needs and biblical and historical ties to the land on which they are built.

King said the highway would be a “significant corridor” from the Gush Etzion settlement bloc in the southern West Bank and settlements such as Har Homa south of the city center to settlements to the north and east of Jerusalem, including Maale Adumim, which is home to more than 40,000 people.

Arab residents in East Jerusalem neighborhoods such as Umm Tuba and Sur Baher would also benefit, he said, because it would reduce their travel times.

Israel’s transport ministry directed questions to the Jerusalem municipality.

Daniel Seidemann, an Israeli attorney who represented some Palestinian families affected by the construction, told Reuters the bypass fitted into a long-time strategy by Israel of using infrastructure projects to secure “de facto annexation” of territory.

“What we are seeing here is, again, the seamless integration of the northern West Bank, East Jerusalem under sole Israeli control, and the southern West Bank for the purposes of the settlers,” said Seidemann, who specializes in the geopolitics of Jerusalem. “That is the motivation, and the fact that it will benefit a Palestinian East Jerusalemite somewhat is a collateral spinoff, but not more than that.”

Planning documents reviewed by Reuters and visits to the area to plot the route show the road will run for more than eight kilometers (five miles). Dozens of Palestinians living along the route of The American Road pointed to such factors as the scope of the construction and the proximity of the highway’s northern and southern ends to major settlements as evidence that the bypass was designed primarily for settlers.

The scale of The American Road project, named after a decades-old narrow road that winds through southeast Jerusalem, is evident some four kilometers from the city center, where a huge bridge is rising in a remote valley. The grey edifice, which can’t be seen from outside the valley, towers over the rural landscape. At the site, cement-mixers rumble through the hill-hugging Palestinian neighborhoods of Sur Baher and Jabal al-Mukabar toward the 230-metre-long structure.

Billboards advertise an August 2021 completion date for a section of The American Road nearest Har Homa, the settlement built by Netanyahu in the 1990s that overlooks the Palestinian town of Bethlehem.

“We lived in a paradise, and now we will live under a highway,” said Khader Attoun, whose house looks directly over the bridge. “Israel wants to squeeze us out of our land and confine us to our tiny homes, to let settlers drive on highways through the valley of our ancestors.”

Graphic – The American Road:

(Reporting by Stephen Farrell, Maayan Lubell and Rami Ayyub; Additional reporting by Dan Williams and Nuha Sharaf in Jerusalem; edited by Peter Hirschberg, Janet McBride)

U.S. job openings, hiring fall in May

FILE PHOTO: Job seekers line up at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida

WASHINGTON (Reuters) – U.S. job openings fell in May, pulled down by declines in the construction and transportation industries, potentially flagging a slowdown in employment growth in the months ahead.

Job openings, a measure of labor demand, slipped by 49,000 to a seasonally adjusted 7.3 million in May, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS on Tuesday. The job openings rate dipped to 4.6% from 4.7% in April.

Hiring dropped by 266,000 to 5.7 million in May, with the biggest decrease in the professional and business services industry. The hiring rate fell to 3.8% from 4.0% in April.

Nonfarm payrolls surged by 224,000 jobs in June after increasing only by 72,000 in May, the government reported last Friday. The unemployment rate rose one-tenth of a percentage point to 3.7% as more people entered the labor market, a sign of confidence in their employment prospects.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)

‘AI’ to hit hardest in U.S. heartland and among less-skilled: study

WASHINGTON (Reuters) – The Midwestern states hit hardest by job automation in recent decades, places that were pivotal to U.S. President Donald Trump’s election, will be under the most pressure again as advances in artificial intelligence reshape the workplace, according to a new study by Brookings Institution researchers.

The spread of computer-driven technology into middle-wage jobs like trucking, construction, and office work, and some lower-skilled occupations like food preparation and service, will also further divide the fast-growing cities where skilled workers are moving and other areas, and separate the high- skilled workers whose jobs are less prone to automation from everyone else regardless of location, the study found.

But the pain may be most intense in a familiar group of manufacturing-heavy states like Wisconsin, Ohio and Iowa, whose support swung the U.S. electoral college for Trump, a Republican, and which have among the largest share of jobs, around 27 percent, at “high risk” of further automation in coming years.

At the other end, solidly Democratic coastal states like New York and Maryland had only about a fifth of jobs in the high-risk category.

The findings suggest the economic tensions that framed Trump’s election may well persist, and may even be immune to his efforts to shift global trade policy in favor of U.S. manufacturers.

“The first era of digital automation was one of traumatic change…with employment and wage gains coming only at the high and low ends,” authors including Brookings Metro Policy Program director Mark Muro wrote of the spread of computer technology and robotics that began in the 1980s. “That our forward-looking analysis projects more of the same…will not, therefore, be comforting.”

The study used prior research from the McKinsey Global Institute that looked at tasks performed in 800 occupations, and the proportion that could be automated by 2030 using current technology.

While some already-automated industries like manufacturing will continue needing less labor for a given level of output – the “automation potential” of production jobs remains nearly 80 percent – the spread of advanced techniques means more jobs will come under pressure as autonomous vehicles supplant drivers, and smart technology changes how waiters, carpenters and others do their jobs.

That would raise productivity – a net plus for the economy overall that could keep goods cheaper, raise demand, and thus help create more jobs even if the nature of those jobs changes.

But it may pose a challenge for lower-skilled workers in particular as automation spreads in food service and construction, industries that have been a fallback for many.

“This implies a shift in the composition of the low-wage workforce” toward jobs like personal care, with an automation potential of 34 percent, or building maintenance, with an automation potential of just 20 percent, the authors wrote.

(Reporting by Howard Schneider; Editing by Andrea Ricci)

U.S. housing starts approach 11-year high, permits weak

FILE PHOTO: A "For Sale" sign is seen outside a home in Cardiff, California, U.S. on February 22, 2016. REUTERS/Mike Blake/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. home building surged to near an 11-year high in May amid an acceleration in both single-family and multi-family housing construction, but a second straight monthly drop in permits suggested housing market activity would remain moderate.

Higher lumber prices as well as labor and land shortages have left builders unable to meet strong housing demand, which has depleted the number of properties available for sale. Housing demand is being fueled by the lowest unemployment rate in 18 years.

“There is some early evidence that lumber prices may now have peaked, but the shortage of labor will not be solved so quickly, and that means housing market conditions will remain tight for the remainder of the year,” said Matthew Pointon, property economist at Capital Economics in New York.

The Trump administration in April 2017 imposed anti-subsidy duties on imports of Canadian softwood lumber.

Housing starts vaulted 5.0 percent to a seasonally adjusted annual rate of 1.350 million units last month, the Commerce Department said on Tuesday. That was the highest level since July 2007. Starts in the Midwest jumped 62.2 percent to their highest level since September 2006, offsetting declines in the Northeast, South and Midwest regions.

Building permits fell 4.6 percent to a rate of 1.301 million units, the lowest level since September 2017.

Economists polled by Reuters had forecast housing starts rising to a pace of 1.310 million units last month and permits declining to a rate of 1.350 million units.

Single-family homebuilding, which accounts for the largest share of the housing market, increased 3.9 percent to a rate of 936,000 units last month. It has lost momentum since hitting a pace of 948,000 units last November, which was the strongest level in more than 10 years.

Permits to build single-family homes fell 2.2 percent in May to a pace of 844,000 units, an eight-month low. With permits lagging starts, single-family homebuilding could slow in the months ahead.

U.S. stocks fell sharply as President Donald Trump’s latest threat to impose duties on more Chinese goods fanned fears that tit-for-tat tariffs could spiral into a trade war.

The PHLX housing index  declined in tandem with the weaker stock market. Prices for U.S. Treasuries rose and the dollar  strengthened against a basket of currencies.

HOUSING SHORTAGE

A survey on Monday showed confidence among single-family homebuilders dipped in June, with builders “increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability.” According to the survey, more expensive lumber had “added nearly $9,000 to the price of a new single-family home since January 2017.”

Residential investment contracted in the first quarter. The housing market continues to lag overall economic growth, which appears to be accelerating in the second quarter after hitting a speed bump at the start of the year.

Growth estimates for the second quarter are as high as a 4.7 percent annualized rate. The economy grew at a 2.2 percent pace in the January-March period.

In May, starts for the volatile multi-family housing segment rebounded 7.5 percent to a rate of 414,000 units. Permits for the construction of multi-family homes fell 8.8 percent to a pace of 457,000 units.

The housing shortage could ease slightly, with more houses under construction and being completed. Housing completions increased 1.9 percent to a rate of 1.291 million units, the highest level since January 2008. The number of single-family houses completed last month was the most since March 2008.

Realtors estimate that housing start and completion rates need to be in a range of 1.5 million to 1.6 million units per month to plug the inventory gap.

The stock of housing under construction edged up 0.2 percent to 1.127 million units, the highest level since July 2007. Single-family homes under construction last month increased 0.2 percent to 515,000 units, the highest level since May 2008.

“While the rise is good news, it’s still not enough for a hot real estate market that is starving for inventory during the peak summer sales season,” said Sam Khater, chief economist at mortgage finance agency Freddie Mac.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Israel fast-tracks wall, escape route for new U.S. embassy in Jerusalem

FILE PHOTO: View of the U.S. consulate in Jerusalem February 24, 2018. REUTERS/Ammar Awad/File Photo

JERUSALEM (Reuters) – Israel has expedited construction permits to enable temporary quarters for the U.S. Embassy to open in Jerusalem as planned in May, the Finance Ministry said on Tuesday.

U.S. President Donald Trump in December broke with other world powers by recognising Jerusalem as Israel’s capital and announcing the U.S. Embassy would be moved there from Tel Aviv.

Trump’s reversal of decades of U.S. and broad international policy was welcomed by Israeli Prime Minister Benjamin Netanyahu as a “historic decision”. But it drew criticism from around the world and outraged Palestinians, who want a capital for their own future state in eastern parts of the city.

FILE PHOTO: Israeli Prime Minister Benjamin Netanyahu (R) and Israeli Finance Minister Moshe Kahlon attend the weekly cabinet meeting at the Prime Minister's office in Jerusalem December 24, 2017. REUTERS/Amir Cohen/File Photo

FILE PHOTO: Israeli Prime Minister Benjamin Netanyahu (R) and Israeli Finance Minister Moshe Kahlon attend the weekly cabinet meeting at the Prime Minister’s office in Jerusalem December 24, 2017. REUTERS/Amir Cohen/File Photo

Israel has said the Embassy will be opened on May 14, the 70th anniversary of its founding. A U.S. official said it would be located at a provisional site in Jerusalem that now houses a U.S. consular section.

Building a permanent embassy could take several years.

Finance Minister Moshe Kahlon said in a statement that he would empower the Jerusalem municipality to waive the permits that would have been required for a wall and an escape route at the interim site.

“We will not allow needless bureaucracy to hold up the transfer of the American embassy to Jerusalem, Israel’s eternal capital,” Kahlon said.

“This is a strategic diplomatic move for the State of Israel and the planning agencies under me will do whatever is necessary to accommodate the schedule being demanded.”

Jerusalem Mayor Nir Barkat had voiced concern about the timeline, telling Israel Radio on March 9: “I hope their (Americans’) schedule will be kept.”

The Israeli planning permit waiver for the Embassy will be good for three years, the Finance Ministry statement said.

“Initially, the interim Embassy in (the Jerusalem neighbourhood of) Arnona will contain office space for the Ambassador and a small staff,” said a U.S. Embassy official in Tel Aviv.

“By the end of next year, we intend to open a new Embassy Jerusalem annex on the Arnona compound that will provide the Ambassador and his team with expanded interim office space,” he said, adding that a search for site for the construction of a permanent embassy had begun.

Most countries do not recognise either side’s sovereignty in Jerusalem and have embassies to Israel in the Tel Aviv area.

Netanyahu has described Jerusalem as “the capital of the Jewish people for 3,000 years”, and Trump said the embassy move was “a long overdue step to advance the peace process”.

Palestinian leaders said Washington’s decision meant it was no longer an honest broker in efforts to revive peace talks, which collapsed in 2014.

(Writing by Dan Williams; Editing by Jeffrey Heller and Raissa Kasolowsky)

More than 200 companies have Israeli settlement ties: U.N

A construction site is seen in the Israeli settlement of Givat Zeev, in the occupied West Bank December 22, 2016.

By Stephanie Nebehay

GENEVA (Reuters) – The United Nations human rights office said on Wednesday it had identified 206 companies so far doing business linked to illegal Israeli settlements in the West Bank and it urged them to avoid any complicity in “pervasive” violations against Palestinians.

Israel fears that companies in the U.N. “blacklist” could be targeted for boycotts or divestment aimed at stepping up pressure over its settlements, which most countries and the world body view as illegal.

“Businesses play a central role in furthering the establishment, maintenance and expansion of Israeli settlements,” the U.N. report said.

The settlements alter the demographic composition of the occupied Palestinian territory, seized by Israel in 1967, and threaten the Palestinians’ right to determination, it said.

The majority of the companies, or 143, are domiciled in Israel or the settlements, followed by 22 in the United States, it said. The remainder are based in 19 other countries, including Germany, the Netherlands, France and Britain.

The report, which did not name the companies but said that 64 of them had been contacted to date, said that the work in producing the U.N. database “does not purport to constitute a judicial process of any kind”.

But businesses operating in the occupied area have a responsibility to carry out due diligence and consider “whether it is possible to engage in such an environment in a manner that respects human rights”, it said.

The office’s mandate was to identify businesses involved in the construction of settlements, surveillance, services including transport, and banking and financial operations such as loans for housing that may raise human rights concerns.

Human rights violations associated with the settlements are “pervasive and devastating, reaching every facet of Palestinian life,” the report said. It cited restrictions on freedom of religion, movement and education and lack of access to land, water and jobs.

Israel assailed the Human Rights Council in March 2016 for launching the initiative at the request of countries led by Pakistan, calling the database a “blacklist” and accusing the 47-member state forum of behaving “obsessively” against it.

Israel’s mission in Geneva said on Wednesday that it was preparing a statement responding to the U.N. report. There was no immediate reaction by its main ally, the Untied States.

“We hope that our work in consolidating and communicating the information in the database will assist States and businesses in complying with their obligations and responsibilities under international law,” said U.N. High Commissioner for Human Rights Zeid Ra’ad al-Hussein.

Zeid’s office deferred the report last February saying it needed more time to establish the database. It is to be debated at the U.N. Human Rights Council session of Feb 26 – March 23.

(Reporting by Stephanie Nebehay; Editing by Richard Balmforth)

Special Report: Unfettered construction raises U.S. hurricane costs

Special Report: Unfettered construction raises U.S. hurricane costs

By Benjamin Lesser and Ryan McNeill

PATTON VILLAGE, Texas (Reuters) – When Hurricane Harvey sent two feet of water rolling into this small community about 35 miles north of Houston, Alfredo Becerra had to flee his modest 1,500-square-foot house.

Muddy floodwater submerged the furniture and ruined carpet inside the construction worker’s longtime home. He has been living in temporary housing since the storm struck in August. He said the Federal Emergency Management Agency gave him $15,000 in aid.

One month later, across the Gulf of Mexico in Big Pine Key, Florida, moving company driver Byron Keeble lost about $10,000 worth of belongings, including a new sofa and his television, when Hurricane Irma sent a surge of seawater through his rented ground-floor apartment. Keeble said FEMA paid for him to stay in a hotel for a few weeks while he tried to figure out where he would go next.

Floodwaters aren’t the only common thread in the two men’s stories. Also linking them is this: Neither should have been living in harm’s way.

Becerra’s and Keeble’s homes were built or rented out in violation of National Flood Insurance Program rules. Like thousands of others in the hurricane-ravaged Florida Keys and on the Texas Gulf Coast, such houses are undermining efforts to limit flood damage, lower the cost of disaster assistance and reduce claims on the taxpayer-backed federal flood insurance program, a Reuters investigation found.

Similar rule-busting construction has happened in scores of communities across the United States, where local, state and federal officials have failed to enforce regulations intended to restrict building in areas at high risk of flooding.

Across the country, newer construction in flood-prone areas generated more than $9 billion in claims for structural damage on the cash-strapped flood insurance program between 2000 and 2015. Flood-management authorities say that some of those claims probably never would have been filed had proper building controls and accurate flood maps been in place.

“You look at the media images and you see new subdivisions, new strip malls and new buildings with water up to the rooftop. Those are red flags in my mind. Those shouldn’t be happening,” said Paul Osman, floodplain program manager for the Illinois Office of Water Resources.

Controlling construction inside flood-prone areas is critical to keeping flood insurance affordable and reducing post-disaster costs, federal officials say. The primary tool used to ensure communities are doing so effectively is a system of audits of how localities adhere to their own floodplain-management rules. But that system is crippled by a lack of funding and political will, Reuters found in a review of thousands of federal and state documents and dozens of interviews with flood-management authorities.

Many communities go years without these audits, which are conducted by FEMA or state officials and known as community assistance visits. And when serious problems are uncovered, Reuters found, FEMA has been ineffective in forcing communities to fix them.

Hurricanes Irma, which devastated Florida, and Harvey, which inundated vast sections of Texas, have already generated almost $7 billion in flood insurance claims paid. Houston, where $1.3 billion of those claims originated, has not had an audit in at least eight years.

FEMA has leverage: It oversees the National Flood Insurance Program, and can use it to punish a community that fails for years to address problems. The first sanction is probation, which imposes on all policyholders in the community a $50-a-year surcharge on flood insurance premiums until violations are resolved. If the issues aren’t fixed, FEMA can impose a tougher measure: The entire community can be suspended altogether, and all property owners lose access to flood insurance.

Residents and floodplain-management officials told Reuters they think FEMA is reluctant to use these sanctions, however. Of the 22,000 communities participating in the flood insurance program, four are now suspended for failing to enforce floodplain-management rules. Thirty have been suspended for that reason since 1978.

FEMA’s desire is to keep a community in the program “as long as there is any hope of compliance” to avoid stopping regulation altogether, said Rachel Sears, director of FEMA’s floodplain-management division. “We want to keep that relationship intact,” she said. “We only move toward probation or suspension when there is no further hope.”

UNCHECKED RISKS

When Irma made landfall in the Florida Keys, the region was filled with thousands of homes that federal or state officials suspected of having illegal ground-floor enclosures. Those code-breaking homes were unaddressed despite decades of prodding from FEMA.

It is difficult to quantify the costs to taxpayers from the failure to control development in high-risk areas. FEMA doesn’t ask insurance agents and adjusters to identify illegal structures when reviewing claims. And homeowners are allowed to claim losses for a prescribed list of items, including washers and dryers, even if they had been kept in an illegal basement or low-lying enclosure.

All of this stresses an insurance program that the Government Accountability Office, a congressional watchdog, considers to be at high risk of fraud, waste and mismanagement. Until recently, the National Flood Insurance Program owed $25 billion to U.S. taxpayers because it borrowed to cover past disaster losses. In August, President Donald Trump signed a disaster relief bill that forgave $16 billion of that debt. Congress is still considering a long-term fix to the program.

Eric Letvin, a deputy assistant administrator for the National Flood Insurance Program, said he thinks FEMA is largely successful at ensuring communities control risky development. But he acknowledged the agency could do better.

“It’s one of the areas I want to focus on for improvement, especially in the post-disaster environment,” he said.

Only 23 percent of the more than 22,000 communities that participate in the flood insurance program had an audit by federal or state floodplain-management authorities in the eight years ending in 2016, FEMA documents show.

Some communities may not need an audit: They have little new development or a low risk of flooding. But the list of areas without a recent visit includes fast-growing major cities like Miami and Houston, each of which has seen severe flooding recently.

In interviews with Reuters, state and local officials in Texas could not recall the last time federal or state auditors visited Houston, but it has been at least eight years.

“I don’t know,” said Jamila Johnson, who took the helm of the city’s floodplain office in 2009. “That was before I became the city’s floodplain manager.”

FEMA recommends to each state that an auditor visit all high-risk communities every five years. In its 2010 risk ratings, it listed Houston as the top priority in Texas for auditing.

Texas is not alone. In 13 of 50 states, no federal or state auditor visited the highest-risk community between 2009 and 2016, a Reuters review of FEMA documents found.

FEMA isn’t keeping up, either. Despite its own guidance requiring it to produce community risk ratings annually, it hasn’t done so since 2010.

Meanwhile, building continues in many flood-prone areas. There is no comprehensive way to quantify flood damage to properties built illegally. But if newer structures are built in adherence with the rules, flood specialists said, such buildings should rarely flood. Communities with many illegal buildings or inaccurate maps, on the other hand, are likely to have a high percentage of flood insurance claims from new structures in risky areas.

A Reuters analysis of all flood insurance claims filed between 2000 and 2015 found that, nationwide, 27 percent of claims in high-risk areas came from owners of newer structures. States with a high percentage of such claims included Alabama (59 percent), Mississippi (50 percent), and North Carolina (44 percent).

About 41 percent of claims in Florida and 31 percent in Texas came from newer structures.

The total cost of insurance claims for structural damage to new buildings in risky areas, in adjusted 2017 dollars: $9.5 billion.

On top of that, as in the cases of Becerra and Keeble, FEMA sometimes doles out disaster aid. Data are not available to ascertain how much of that aid goes to people living in illegal structures.

Such losses suggest something is awry, floodplain managers and researchers said. Either the community is failing to enforce its floodplain-management rules, or maps do not accurately detail the community’s flood risk.

FEMA delegates the job of conducting most audits to state officials. Those officials, in turn, say they lack resources to visit more communities. For each of the past five budget years, FEMA has allotted a total of $10.4 million to the states and territories, which must match 25 percent of the money. But the dollars must also be spent on other initiatives, such as public outreach.

The number and frequency of visits varies widely by state. In Florida, FEMA and state officials have visited 64 percent of the communities participating in the flood insurance program. In Texas, the number is 12 percent.

Alfredo Becerra’s flooded home is but one example Reuters found of the results of decades of lax oversight in the Houston area.

Becerra’s property is in a floodway – an area that carries the bulk of any floodwaters downstream and where the most destructive damage is likely. Under FEMA regulations, when Becerra built his home in 1985, Patton Village officials should have required that the house be certified as standing at an elevation above expected flood levels. City officials were also obliged under FEMA rules to require an engineering study to prove the structure wouldn’t cause floodwaters to rise even higher, damaging other properties.

Patton Village officials had no records indicating any of those steps were taken. Becerra said he did not know his property was in a floodway.

He received temporary housing assistance that paid for his stay in a hotel for at least two weeks. He says he also received $15,000 in federal disaster aid to repair the damage to his home. He did not have flood insurance.

Leah Tarrant, the mayor of Patton Village since 2013, acknowledges the village hasn’t done its part to control development.

“Honestly, we have never really dealt with floodplain management,” she said. “I’m just being honest with you.”

In surrounding Montgomery County, dozens of properties in multiple communities were built after official flood maps detailed the floodway and floodplain boundaries, according to a March 2017 FEMA audit of the county and a Reuters analysis of appraisal records and flood maps. Many of the houses had no evidence of the required hydrologic studies or proof that the building’s lowest floor exceeded the expected heights of floodwaters. Some flooded during Harvey.

Most of the properties identified by Reuters are in unincorporated areas, which fall under the jurisdiction of county government.

When questioned about the floodway structures, Mark Mooney, the county’s floodplain manager, said the county banned development in the floodway until 2014. He said he couldn’t explain how, if such a ban was in place, so many homes had been built inside the floodway over the last three decades.

“Some of the listed properties could have been constructed without the county being contacted for necessary permits,” Mooney said. “Unfortunately, we do not have a staff that can police daily, when and where everything gets built in our large county. We will definitely follow up.”

RESISTANCE AND POLITICS

Reuters obtained documents from FEMA summarizing the results of 6,253 audits of floodplain-management enforcement conducted between 2009 and 2016 in all 50 states. Auditors identified serious issues in 13 percent of those visits.

It often takes years, or even decades, to bring a community into compliance after an audit failure. As of Jan. 1, 2017, serious violations remained unresolved for three years or longer in 119 communities across the country. That list includes places at high risk of flooding such as Boca Raton, Florida, and St. Bernard Parish, Louisiana.

Monroe County, Florida, where FEMA spent decades trying to eliminate illegal construction, shows why so many known problems persist: Community resistance and politics often impede enforcement efforts.

Years before Hurricane Irma struck the county, authorities identified thousands of suspected illegal enclosures. By the time the storm hit, they had not yet inspected half of those properties to see if they complied with floodplain codes. As of the end of November, the county’s property owners had been paid $62 million in insurance claims for flood damage from Irma.

FEMA first noticed problems in Monroe County during two visits in the 1980s. But the county’s leadership was uncooperative and remained so for years, said Brad Loar, who retired in 2014 as director of the FEMA Region IV mitigation division.

“They pretty much resisted anything that we wanted to talk to them about,” said Loar, who was involved in the first FEMA visit in 1982. “We didn’t see a whole lot of understanding or corrective action for most of the whole thing.”

What auditors found in Monroe County is typical of the Florida Keys. Living space in high-risk areas is supposed to be elevated above expected 100-year floodwater heights. Here, though, property owners often furnish ground-floor enclosures, either to expand their living space or to rent out the extra rooms. The low-rent enclosures are popular with the waiters, cooks, maids and other service industry workers essential to the area’s tourism industry.

When FEMA officials returned to audit Monroe County a third time in 1995, they found the illegal living spaces had become so widespread that sanctions were warranted.

Had FEMA placed Monroe County on probation after the 1995 visit, the agency would have put one of the most hurricane-prone areas in the country on the road to losing flood insurance. Instead, FEMA pressured the county to agree in 2002 to a pilot project that called for inspections of about 5,700 properties.

Property owners with insurance were told they needed to request an inspection from the county before renewing their policies. Also, owners of the 5,700 properties who sought a building permit for any reason had to agree to an inspection.

The inspection program caused a row in county politics that lasted 11 years. Although county government had begun cooperating with FEMA, contractors complained that the inspections deterred residents from upgrading their homes. Residents complained they couldn’t sell their places. Local, state and federal officials faced calls from residents and contractors to end the inspections.

In 2011, homeowners and contractors lobbied the Florida legislature to ban local authorities from conducting the building-permit inspections. FEMA officials argued against the legislation until, local activists said, U.S. Senator Bill Nelson, a Florida Democrat, stepped in and pressured the agency to back off.

“It was huge,” lobbyist John November said of Nelson’s involvement. “Without his participation … that pilot program might still be going on.”

By the time the pilot program ended in 2013, only half of the 5,700 properties FEMA suspected of having illegal enclosures had been inspected.

Despite the lingering problems, Monroe County is a FEMA poster child. The agency describes the community as “one of the best examples” of compliance in the country.

(Additional reporting by Gary McWilliams. Edited by Janet Roberts.)