Where Demand Is Sprouting, Labor Shortages Are Close Behind

Custom home builder Joe Shannon often lines up several sub-contractors for each stage of home construction these days because, more often than not, his first choice framer or plumber can’t show up on time because they are running late on another job.

“Having to get bids from three and four guys, and juggling them all is a lot of work,” says Shannon, owner of Veritas Developers in Dallas. Often the contractors he knows best can’t make it and he’s stuck hiring someone unfamiliar to work on his detailed, high-end houses.

“It really puts a lump in your throat every time,” said Shannon of the worry that comes with using untried labor. But at the same time, he can’t risk a job going late. “These are multi-million-dollar homes. A month’s interest payment is enormous.”

Home builders in areas across the country where the market is starting to improve are beginning to experience the first pangs of labor shortages.

“Where there has been a fundamental pop in sales volume it has been big enough and sustained enough to start maxing out the base” of labor supply, says Jody Kahn, a vice president at John Burns Real Estate Consulting (JBREC).

While the problem isn’t ubiquitous, it has already begun to impact the time it takes to start and finish homes. A survey of builders by JBREC shows that the average time it takes to start a home across the country is eight weeks, three weeks longer than the typical average of five, says Kahn. The time it’s taking to complete a home, from start to finish, has climbed from four months to 4.3 months.

Some of the delays are being caused by shortages in the concrete and framing trades, causing problems in even the first construction phases, said Kahn. But not all of the start delays are being caused by worker shortages. It’s also taking builders longer to get permits because local governments have cut staff. Getting first-time home buyers qualified for loans is another cause for delay.

Some builders are even deliberately holding out on releasing some product and phases because they don’t want to sell homes they can’t deliver in a timely fashion. “They are basically putting on the brakes in a number of ways,” Kahn said.

Kahn said the complaints about labor shortages began in the West and have spread across the country to some of the larger metros in Florida. She doesn’t hear as much about the problem in the Northeast or the Midwest.

Phoenix is having a particularly tough time finding workers because many former trade workers were foreign and moved back home after the market crashed. “The builders don’t believe they are coming back,” said Kahn. “It’s a messy process to really get the trades’ people to pick up their tools and come back to the job.”

Jim Bagley, president of City Homes in Florida said that labor shortages are making it difficult to keep to a consistent construction schedule and it’s giving trade workers an opportunity to ask for higher pay.

“Framing is a problem right now,” said Bagley. “There are just not enough framers for the new housing starts.” Electricians and block masons are, likewise, in short supply, he said. And then there’s the problem of finding experienced construction superintendents.

“As we approach the superintendent from days gone by, a lot of them are saying, ‘We are not prepared to come back to the industry yet. We don’t see enough consistency’” in demand, Bagley said. And others have already moved on to other industries that they perceive as offering more job security, even if the pay might not be as high.

“Their spouses are saying, ‘You can’t leave a stable job, even though it’s less money, for the ups and downs of the construction industry.’”

The fear that the pickup in home construction might not continue is another governor on labor. “People running trade companies are a lot more nervous about whether we are really seeing a lift off the bottom or a flash in the pan [in demand]. They do not want to add capacity and put capital on the line to bring people online only to have to lay them off again,” Kahn said.

Shannon agreed. “They got lean and mean in the last couple of years and had to let go of good, qualified guys because they couldn’t afford them,” he said. “Now they are gone, gone, gone, and they are having trouble responding to even the slightest uptick in work.”

Consequently, many crews show up under-staffed, causing more completion delays.

While builders are complaining about labor problems, the issue has hardly registered as a blip on NAHB’s builder survey this year, where most builders reported no problems finding labor.

“It’s not a nationwide problem. It’s not a region-wide problem,” said Rose Quint, NAHB’s assistant vice president of survey research economics and housing policy. “A few people out there are seeing some problems, but not national problems.”

Tell that to Mark Mosolino, of Mosolino Development, a custom home builder in Connecticut. His company has trouble finding competent drywall laborers, plumbers, HVAC installers, and seasoned job supervisors.

“We do not have adequate tradesmen for the impending upcoming boom, and we don’t have adequately trained, highly skilled supervision, guys who have the experience to know what to do on a day-to-day basis to keep a project running,” said Mosolino. “Our business is a lot like the military; we need boots on the ground. You can’t build a house from a computer. This conversation is only the beginning of what is going to be an enormous challenge over the next five years.”

Challenge though it may be, Kahn says it’s a good one to have compared to dealing with the dearth of demand for new housing that most builders have lived through for the past six years.

“Trying to create demand when there was none was more difficult,” said Kahn. “This is very challenging for them, but it’s a good kind of challenge.”

Teresa Burney is a senior editor for Builder magazine.

Learn more about markets featured in this article: Dallas, TX.