Labor Shortages Intensifying for More Builders
Persistent Labor Shortages Raising Rates and Challenging Construction Schedules
The building industry is facing serious trade labor challenges and it is having a detrimental effect on the progress of residential and commercial construction throughout the country. The trades-shortage is now substantially higher than it was at the peak of the 2004-2005 housing boom that produced 2 million starts, compared to a current rate of about 1 million units. In a recent NAHB survey, 69% of the builders reported widespread shortages of labor, especially framing crews. Likewise, an Associated General Contractors of America survey indicated 83% of its members, which include firms that build everything except single-family housing projects, report having a hard time finding enough qualified workers. And while these labor shortages are not being felt equally across the country, if you are in an area where shortages exist, they have become problematic for completing projects on time and on budget.
Source: NAHB Eye on Housing
Between April 2006 and January 2011, the construction industry slashed more than 40% of its work force, eliminating nearly 2.3 million jobs. Construction workers migrated to other industries like oil, manufacturing, and trucking during the downturn and the construction sector has not seen those workers who left the building trade profession return through the initial stages of the recovery. Residential builders are extremely worried about the loss of subcontractor crews since 75% of the construction work required to build a new single-family home is typically done by subs. Many builders report that build-days have increased due to difficulties in getting work accomplished in a timely manner and all builders say they are paying higher wages and sub labor contracts. Sixty-one percent of builders surveyed say increased labor rates have forced them to raise home prices.
We have likely only seen the beginning of construction labor shortage obstacles as building activity is projected to strengthen over the next few years. Attracting those who left the industry during the downturn to return to construction with the promise of higher financial earnings may help but I think more organized and calculated efforts to cultivate and attract skilled talent is imperative. The industry cannot rely on market forces to solve our problem. We need grassroots efforts to start rebuilding the career and technical education programs that were staples to our industry in past decades. We need to be creative and imaginative to entice young people to choose homebuilding – America’s Base Industry – as a career.