When the concept of the housing recovery is discussed, most participants think about home prices or home sales volume. More nuanced conversations include new home construction levels, but rarely do you hear about the marginalized recovery of construction workers.
The National Association of Home Builders (NAHB) describes the construction shortage as a serious problem, nationwide. The association reports on the percentage of builders who reported a worker shortage in 2017, including:
- 77% of framers;
- 76% of rough carpenters;
- 74% of finished carpenters;
- 63% of bricklayers;
- 63% of concrete workers;
- 61% of drywall installers;
- 58% of roofers;
- 57% of plumbers;
- 56% of painters; and
- 53% of heating, ventilation and air conditioning (HVAC) workers.
These are just some of the construction industries reporting worker shortages. It doesn’t include subcontractor shortages, which are even higher.
An aging (and retiring) construction workforce is partly to blame for the shrinking labor supply. Also to blame is the relocation of many undocumented residents who returned to their home countries following the housing bust. Other residents (immigrants and California natives alike) dropped out of the construction industry when jobs dried up following the housing crash.
Job openings for construction workers have continued to grow each year since 2012, according to the NAHB. The 2017 shortage is the worst since 2000, and for some categories of construction worker, the dearth is at historic levels.
The construction recovery that wasn’t
Residential construction has struggled to recover following the 2007 housing crash and Great Recession. Ten years later and single family residential (SFR) construction starts are at one-third of the level seen during the Millennium Boom.
Multi-family and SFR construction are at a fraction of what is needed to fulfill demand from California’s ever-growing population.
For evidence, look no further than California’s record low vacancy rates. In 2016, the vacancy rate was:
- 1.1% for owner-occupied homes; and
- 3.6% for rental units.
For comparison, a healthy owner vacancy rate is 1.2% and a healthy rental vacancy rate is around 5.5%.
The result of today’s lack of new construction is a home inventory shortage, which continues to propel home prices beyond sustainable levels. Renters regularly pay half or more of their income on rent, stifling their ability to save for a down payment.
All of this is made worse by the shrinking pool of construction workers.
Is there a solution to the lack of construction labor?
The federal and state government can grant special worker permits for foreign-born construction workers who want to live in the U.S. After all, much of the labor force that fueled the construction industry during the early 2000s was made up of immigrants, who left following the bust. However, given the current political climate around immigrants, this seems unlikely.
Other solutions likely lie with builders. For instance, higher pay and better benefits will attract more workers. But, unless the money comes from government tax incentives, the builder will ultimately pass these additional costs along to homebuyers.