May 25, 2018

Builders Say Labor Shortages Grow More Widespread

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Builders Say Labor Shortages Grow More Widespread

The real estate industry has called for homebuilders to ramp up construction to meet inventory shortages. But homebuilders increasingly are facing significant labor shortages that is making it more difficult to complete projects, a new study shows.

A June 2014 survey from the National Association of Home Builders shows that the industry is facing shortages of labor and subcontractors that have become “substantially more widespread since 2013.” Shortages are particularly notable for basic skills like carpentry and framing, the NAHB notes.

The Homebuilding Shortage Continues

Forty-six percent of builders reported a shortage of labor in 2014, the highest shortage reported since 2000 and slightly higher than at the peak of the housing boom in 2004 and 2005, when the United States was averaging about 2 million housing starts a year, the NAHB notes in its report.

Today, annual housing starts remain mostly under 1 million. New-home construction has only partially recovered from its 2008 downturn and labor shortages are persisting despite relative slowdown in activity compared to previous years, the NAHB notes.

Builders say a shortage of subcontractors is raising their costs. On average, builders said their direct labor costs on the same house rose by 2.9 percent, while subcontractor costs grew by 3.8 percent.

Three out of five builders say the labor shortages have caused them to pay higher wages or subcontractor bids (65%); raise home prices (62%); and created difficulty in completing projects on time (60%). Thirty-six percent of builders said the labor shortages were making some projects unprofitable, and 18 percent of builders reported having to even turn down some projects.

Source: “Builders See Shortages of Labor And – Especially – Subcontractors,” National Association of Home Builders Eye on Housing Blog (July 8, 2014)