Danuel House and the Two-Way Contract
This year has not been kind to the Houston Rockets by any means. After overcoming a disastrous start, the Rockets have faced injury after injury. Three starters - Chris Paul, Eric Gordon and Clint Capela – have missed and will continue to miss extended time. If not for the herculean performances by James Harden, the Rockets would be at the bottom of the ultra-competitive Western Conference.
And now here comes Danuel House and his two-way contract. House and the Rockets are in the middle of a stand-off on his contract negotiations. Like the current government, he’s shut down from the Rockets until a deal is made.
The purpose of this article is to understand (a) what a two-way contract is and (b) how its currently affecting the Rockets.
Two-Way Contract Overview
A two-way contract is a hybrid between a standard NBA deal and a G-League deal. Under a traditional G-League deal, a player is only paid $26k a year but then may sign with any NBA team at any time. A two-way player receives a much higher salary but can only play for his NBA affiliate, for a maximum of 45 days. The two-way player receives an annual salary of $77k plus about $4.5k for each day on the NBA roster, for a total up to roughly $290k.
Its debatable if a two-way contract is better or worse for the player. The player earns more money but loses all flexibility to sign with other teams. From a team perspective, its good in that the two-way salary does not count towards its salary cap.
Current Situation with House
House has maxed out his 45 days with the Rockets, so he can no longer play under his two-way contract. House and the Rockets did not come to an agreement on a standard NBA deal, so he is returning to the G League. House’s agent said they turned down a fully guaranteed 3-year, $4 million minimum deal. That offer is better than the deal they signed Gary Clark to, which was similar but unguaranteed.
The Rockets have a unilateral option to convert House into a standard minimum NBA deal for the rest of the season. House’s agent said they even asked the Rockets to do this. However, House would then become a restricted free agent this summer and the Rockets could potentially lose him to a higher bidder. The Rockets would much rather prefer to sign him now to a long-term deal at the right price.
The Rockets far exceed the salary cap, so they can only pay House more by eating into their Mid-Level Exception. While there is about $3.9 million remaining on the exception, the Rockets need this flexibility to add a player in the buyout market, free agency, or to re-sign Austin Rivers.
One final wrinkle – the Rockets can’t trade House once they sign him to an NBA deal. Players are eligible to be traded 30 days from signing a two-way contract, so the Rockets can currently trade him. However, once he signs an NBA deal, the Rockets would have to wait 3 months before they could trade him. That would push past the trade deadline, and therefore the Rockets wouldn’t be allowed to include him in any potential trade packages.
Plan Going Forward
Hopefully, the two sides will come to an agreement soon. He’s a good fit for the Rockets’ system, adds much needed depth, and is a hometown guy to boot. In the worst-case scenario, the Rockets sign him for the rest of the season but lose him in restricted free agency. But still, at least the Rockets will have him for this season. Paul, Gordon, and Capela will eventually be back, but it would be great to have House on the roster for the next few years.