THIS YEAR, CALIFORNIA'S HOUSING INDUSTRY SHOULD surpass the 200,000-unit new construction threshold for the first time since 1986. That volume, though, has been both a blessing and curse for Riverside-based RCR Co., one of Southern California's largest plumbing contractors with 1,500 employees working on 5,600 jobs. RCR simply couldn't find enough help to keep up with all the business it was getting. “You couldn't have found an extra plumber if you begged, borrowed, or stole,” said Bob Ritchie, RCR's president.

Ritchie, a 34-year industry veteran, is not alone. The largest electrical contractor in Jacksonville, Fla., All-State Electrical, which handled 4,000 new single-family homes in 2003, was turning down eight out of every 10 jobs that builders offered earlier this year because “we could not hire enough people,” says its owner Carmel Morris, who employs 170 people.

We could use three times the number of workers we have right now,” Morris says. And that was before Florida and Alabama were blasted by a series of hurricanes, creating a massive backlog of work.

This manpower shortage, say building industry executives, is intensifying in many markets across the country as a tightening labor pool clashes with builders' ever-expanding production goals. Were it not for the waves of immigrants that continue to enter the United States, the situation would be even worse.

“If it weren't for immigrants, we would not be able to build what we are producing today,” asserts Michael Carliner, staff vice president for the NAHB's Economics Group. In a paper he wrote last fall, Carliner cited Bureau of Labor Statistics data that show that Hispanic workers alone accounted for 33.3 percent of construction laborers in 2002 compared to 27.7 percent just two years earlier. About half of the workers in the bureau's “construction” category are classified as working on residential jobs. In California, immigrants—men and women hailing from Mexico, South America, and Eastern Europe—now account for anywhere from 60 percent to 90 percent of the state's residential construction labor force.

While immigrant labor has for years seemed like a bottomless cornucopia of workers, builders and contractors are beginning to sense that the industry's labor supply is much more fragile than many suspected. At best, some believe immigrant workers can provide only a short-term answer to the industry's manpower needs. In some markets, this tenuous equilibrium has already gone off kilter. A more widespread imbalance—especially if new constraints are placed on immigration policies, in the name of national security—could jeopardize the industry's long-range ability to meet buyer demand.

Builders Get Creative These concerns are no longer academic for Marlton, N.J.-based Lipinski Landscape Irrigation, one of the country's 25 largest landscape contractors. Every year since 1996, Lipinski has hired between 150 and 175 immigrant workers—mostly from Monterrey, Mexico—through the Department of Labor's H2B program, which allows workers from other countries to enter the U.S. for 10 months if employers can demonstrate a need.

Peter Haran, Lipinski's vice president, says that 80 percent of the immigrant workers his company hires (including a small contingent of Poles) are the same people from past years, “so our retraining is immediately reduced.” That pipeline, though, could be drying up. The program hit its 66,000-person cap for the first time last March. The Department of Homeland Security now administers H2B and is expected to enforce that cap rigidly. Unless the program's limits are adjusted, Haran says he's worried that other American-based employers rushing to apply earlier for H2B workers for 2005 could crowd out his company.

Labor shortages have prompted a growing number of contractors to undertake more creative ways to bolster and stabilize their workforce, spending not-inconsiderable sums on image marketing, recruitment, and training. Those costs are seen as increasingly necessary, however, when weighed against the value of quality craftsmanship, faster closings, and the risks associated with construction defects and lost sales.

Some builders have also started running their own crews to gain control over the process. Pre-fabrication and the widespread use of structural components have also mitigated builders' labor requirements. Other companies are developing apprenticeship programs to ensure they have access to a captive stream of skilled labor. At the very least, says Mike Dwight, vice president of sales and marketing for the Forecast Homes division of Hovnanian Enterprises, big builders must establish long-term, genuinely two-way relationships with large, reputable contractors because, “if you're a builder on the periphery or have a lot of jobs going on, you're sometimes forced to work with ‘Bob's Framing.' ”