How the labor shortage affects multi-family development
According to a new report from the Home Builders Institute (HBI), housing stock and affordability will continue to be weakened by the shortage of skilled construction workers.
The estimates in the HBI Fall 2021 Construction Labor Market Report are based on new analysis of Bureau of Labor Statistics data by the National Association of Home Builders (NAHB). The number of new workers needed each year to meet demand is estimated at 740,000 each over the next three years.
Although exacerbated by the pandemic, the shortage of construction workers dates back to the Great Recession of 2008-09.
âThe industry lost a million and a half jobs during this time,â said Robert Dietz, chief economist for the Washington, DC-based NAHB. âIt added workers during what has been a long upturn in house building.
âBut we just haven’t added as many workers as needed and the workforce has aged. Recruiting, training and retaining workers is a major challenge for the residential and non-residential construction industry.
The implications are as striking for the multi-family as they are for any other sector. About 400,000 to 500,000 apartments need to be built each year to keep pace with the growth of household formation.
âIt requires a workforce of around half a million,â Dietz said. âWe need to recruit, train and retain workers in the multi-family space to achieve this goal. “
The HBI report offers a number of other key findings. The number of jobs open in the construction sector is on average between 300,000 and 400,000 per month. Residential construction accounts for about 3.1 million of the total construction employment of 7.42 million. Self-employment in the construction sector represents 22% of the current labor force, down from 26% in 2010. Women represent a modest growth share of construction employment, from 10.3% in 2019 to 10.9% in 2020.
When asked if some projects would be delayed because there were not enough transactions in certain markets, Dietz replied that this has indeed happened in recent years.
âIn fact, the lack of manpower is a key constraint in explaining why housing has been under-built in recent years, especially in high growth markets,â he said.
Smaller markets with high population growth and comparatively lower initial population levels, such as high-growth markets in mountain states, have been particularly affected, he said.
“However, significant labor shortages are also found in large markets which nonetheless have high levels of home construction,” he added. âFor example, Texas has three of the top five residential construction markets – Dallas, Houston and Austin – and all of them suffer from a lack of skilled labor.
Among the various strategies to address the labor shortage, the most important is to recruit younger workers who have recently graduated from high school and community colleges, Dietz said, adding: âIt s ‘also acts to train people in the industry, because it is a qualified labor shortage. Through training, we can increase labor productivity, resulting in more construction output per worker. And with greater productivity, you get higher wage growth and a virtuous cycle, in turn attracting more people to the field. “
In recent years, renewed attention has been paid to motivating high school and community college students to train for âintermediate skillâ jobs. This is important given that the United States faces what Dietz calls a âmiddle skills crisisâ. The crisis is the result of too little importance given to vocational training on which the country once depended.
âI think the combination of higher student debt, low graduation rates from four-year universities, and declining workforce participation rates, that is, workers on the sidelines, indicates that there is potential for real economic and social outcomes by advancing the intermediate skills sector. â said Dietz.
âThis is the area of ââthe economy from which small businesses are formed. We have seen more business flows to large companies during the pandemic, which has been particularly difficult for small businesses, âhe added. âWhen you get people into the trades, those people after a few years of income can continue to start their own businesses. Getting more people trained as electricians and carpenters, as well as nurses and other skilled positions, is good for our economy. “
Late last month, a report said labor shortages and inflation have increased operating expenses for senior housing communities nationwide.