Eye On Housing
Labor and subcontractor shortages became even more widespread in July of 2018 than they were a year earlier, according to single-family builders who responded to special questions on the survey for the NAHB/Well Fargo Housing Market Index.
The July 2018 survey asked builders about shortages in 15 specific occupations that were either recommended by Home Builders Institute or other key stakeholders. Shortages of labor directly employed by builders were at least fairly widespread for each of the 15 occupations, ranging from a low of 47 percent for building maintenance managers to a high of 83 percent for rough carpenters.
However, on the typical home building project, three-fourths of the construction cost represents work performed by subcontractors. For that reason, it is particularly significant that, in the 2018 survey, the incidence of shortages was higher for subcontractors than for labor directly employed by builders in 14 of the 15 occupations.
At the bottom of the charts, the shortage incidence was the same (47 percent) for building maintenance managers, whether subcontracted or directly employed by builders. For weatherization workers, the spread was 2 percentage points (50 percent for subcontractors vs. 48 percent for labor directly employed). For the other 13 occupations, the incidence of the shortage was 4 to 9 percentage points higher for subcontractors.
At the high end, 90 percent of builders reported a shortage of subcontractors to handle rough carpentry work in 2018—the first time any labor or subcontractor shortage has reached 90 percent in the history of NAHB’s survey on the topic.
A possible explanation for the relatively severe shortage of subcontractors is that workers who were laid off and started their own trade contracting businesses during the housing downturn have returned to work for larger companies. That would add to the pool of workers available for builders to employ directly, while subtracting from the number of owners running their own trade contracting businesses. A previous post has shown that the number of one-person trade contactors has actually declined slightly, even while the number of homes under construction was increasing by 131 percent.
NAHB has been collecting information from builders about labor shortages in a consistent way since the 1990s. An average shortage percentage for the 9 occupations that have appeared on every survey over that span can be calculated and tracked over time.
The 9-occupation shortage for labor has now skyrocketed from a low of 21 percent in 2012 to 56 percent in 2016, 63 percent in 2017, and now 67 percent in 2018. This is as high as the 9-occupation average has ever been. The shortages seem especially severe relative to housing starts, which still have not fully recovered from their historically low 2009-2011 trough.
The NAHB survey results are consistent with the latest numbers from the Job Opening and Labor Turnover Survey (JOLTS) conducted by the Bureau of Labor Statistics, showing that the number of unfilled jobs in the construction industry has reached a cyclical high.
Coming soon:
Effects of the labor shortages on builders’ businesses (9/10).
Report on new JOLTS release (9/11).
Does this shortage represent a true shortage of people available for hire or a shortage of people available to hire at a price the home builders are willing to pay? It is always so surprising with the demand for labor that more people wouldn’t be entering the home construction business.
When it comes to the labor shortage: stop the greed, and you will meet the need. I have been in the home remodeling business (painting/carpentry) for many years; and believe I have an an informed insight into the issue. Home builders / general contractors need to pay reasonable rates, create reasonable working conditions, and start giving the trades the respect they deserved: only then will there be a stop to the shortages. Innovation and automation is always needed as a continuous improvement process: but theoretical constructs are not what gets homes ‘constructed’.