Worker shortages, material prices impacting residential construction

The construction industry faces a shortfall of 200,000 workers, according to a new report from the Home Builders Institute (HBI).

HBI is a provider of training for skilled workers for the residential construction industry.

HBI’s first Construction Labor Market Report notes that shortages of skilled trade workers directly employed by homebuilders and subcontractors remain widespread throughout all regions. Builders nationwide cite the difficulty in filling positions as among their top concerns, ranking third behind high lumber prices and regulatory burdens.

“The homebuilding industry faces a major shortage of skilled workers,” says Ed Brady, HBI’s president and CEO. “This persistent challenge endangers the affordability and availability of housing and hinders a robust economic recovery.”

The HBI report, based on research of the Economics Group of the National Association of Home Builders, will be issued semi-annually. The first one is compiled using year-end 2020 data. Citing more recent numbers, Brady says the total shortage of construction workers rose even higher to 309,000 in January 2021.

According to HBI, the share of builders reporting a worker shortage was 60 percent. The percentage is especially high relative to the acceleration for total housing starts, which increased from a seasonally adjusted annual rate of under 1 million single-family and multifamily units in April 2020 to a rate of roughly 1.5 million at the end of 2020, HBI says.

The numbers reported pertain to labor directly employed by builders, though builders employ additional workers through subcontractors.

“We estimate that builders subcontract more than 80 percent of the construction in the typical home they build,” Brady says. “And worker shortages for subcontractors continue to be even more severe.”

Brady stresses that labor represents 30 to 40 percent of the cost of a typical new home.

“That share of the costs is rising, due to the shortage of available labor,” he says. “When you consider that scarcity of labor causes construction delays, which then creates further costs, you can see how both housing supply and affordability are negatively affected.”

HBI is a nonprofit organization that trains about 10,000 students each year through an industry-recognized curriculum at 220 sites around the U.S., including in high schools, military bases, community colleges, prisons, training facilities and Job Corps centers.

“As a nation, we need to build the next generation of skilled tradespeople,” Brady says. “That means recruiting more women. It means training and placing minority, lower-income and at-risk youth for job opportunities as an important way to fight against social inequity. It means providing trade skills education to veterans and transitioning military. And it means reaching out to high school students and those who influence their decisions, to change their perception of careers in the trades.”