With starts rising and a limited pool of trades, how does a builder compete?
Doug French, CEO of Texas-based Stylecraft Builders, has been creative. He had a relationship with an owner of a truss factory in College Station, Texas, where half of Stylecraft's starts occur. "Here in College Station, we couldn't get the labor, but we knew a guy who owned a truss factory and had additional capacity," he says.
French made a proposal to the owner, offering to buy his trusses if the factory produced and installed them turnkey. The factory owner agreed and French suddenly doubled his framing capacity in College Station.
If you don't have those relationships, the simplest way to secure labor is to pay more. In fact, 46% of builders and contractors who responded to Metrostudy's Builder Labor Supply report-- sponsored by Acme Brick, Johns Manville, Lubrizol, and MiTek, all Berkshire Hathaway Companies--said they're increasing pay and benefits to keep labor. But that's only a short-term solution. Long-term, the industry has to push for real change with immigration, training, and, most importantly, perception of construction as career.
But even in the short-term, builders can do more than just increase a contractor's pay. To become a "builder of choice," 25% of respondents to Metrostudy's survey said they were paying faster. Having a well-managed site can set a builder apart. Securing trades] "may mean going from a monthly payroll to every two weeks," says Kevin Wilson, vice president purchasing and national accounts for Irvine, Calif.–based TRI Pointe, about securing labor. "It might be using various online auto pay tools. And, it may mean just having our sites ready so once they walk on site, they're profitable from the minute their guys hit our jobsite."
Wilson says the quality and organization of jobsites can have a big effect on the success of its subs. "I would say that we are more focused on keeping track and monitoring how good our superintendents are doing," he adds. "If a builder has a horribly managed jobsite, I'm only going to be able to attract the worst subs or have to pay a lot of money."
The delivery of materials also plays a role in the quality of the jobsite. Yet, only 4% of respondents said they adjusted their production schedule to combat labor loss. "Purchasing and estimating is a part of the overall ability to attract and retain good subs," says Mike Schmidt, vice president of operations at Irvine, Calif.–based MBK Homes. "If they go on site and you're rolling subs and trades through, the logistics become unbearable for subs. If your superintendent schedules the guy right, they'll want to come back."
But despite all of the internal things builders can do to secure labor, it's probably the external situations that matter the most. A united building industry can solve of these problems. But others rely on a much more volatile solution—politicians in Washington, D.C.
"If our industry is going to have access to the labor we'll need to meet demand as it increases," says Fred Delibero, CEO of Summit Custom Homes in Kansas City, Mo. "We need to get serious about working with colleges and technical schools to step up their training programs for skilled construction labor, and the federal government needs to ease restrictions on temporary work visas allowing more labor to enter the market."
Brian Turmail, senior executive director of public affairs for the Associated General Contractors of America, sees the widening labor gap (between what the construction industry needs and what the workforce is supplying) as a long-term concern with a short-term fix and a longer-term fix.
"The demand for construction is growing," he says. "Even if it flattens out, the demographics of the industry are such that we'll have some severe immediate workforce needs."
The immediate problem can be assuaged with foreign-born construction workers. Right now, those workers make up 23% of the labor pool, according to the NAHB. Traditionally, they've been right at 22%. But before more foreign workers can be added, Congress needs to figure out immigration and, more specifically, construction's role in immigration. Turmail says past legislative proposals didn't address the construction industry's needs.
"We have long supported immigration reforms and giving folks in the country a path to legal status, and at the same time, changing our immigration policies so that it's easier to bring people with construction skills into the country," Turmail says.
The NAHB advocates for comprehensive immigration reform, with an emphasis on the guest worker program. "The way people get in today is family based," says Suzanne Beall, NAHB's federal legislative director. "It’s a lot easier to get in and to show you have a sister or father or son or daughter in the country than it is to say, 'I want to immigrate to America because of the skills I have.'"
But that's only part of the problem. For every 1,000 housing starts annually, the NAHB says the construction industry needs 68 workers. Right now, immigration policy doesn't provide an easier path for workers with construction skills like it does for workers in other industries.
"You can come in if you have proven skills in the technology sector or farming skills, but you can't come in if you have construction skills," Beall says. "We want to make sure that a new program will allow individuals with proven skills in construction to come in. It's not that they would be trained here, but they have to prove that they have those skills already and then they could immigrate to America."
Though it might sound overly optimistic, Beall remains hopeful that real change could happen after the 2016 election. "Frankly the system is still broken," she says. "It’s a problem that needs to be addressed. It’s a big one and its easier to take care of a big issue like that immediately after the presidential election. It's not going to go away. That’s for sure."
Training and Perception
Despite the ink spilled over immigration reform, it's really not what ultimately will solve the labor riddle for builders. Immigration reform can fix only part of the problem. "We think of immigration relief as short-term fix," Turmail says.
Long term, Turmail says the building industry needs to make construction a viable career path for students. Through its Home Building Institute, the NAHB provides training materials to high school student chapters and a variety of training institutes. But despite those efforts, vocational training is being de-emphasized in many school districts across the country.
"Most high school students are not even getting exposed to the fact that construction is a career to follow," he says.
When workers do get into construction, they're in their late 20s. That puts the onus on employers to train them—something those doing the hiring remain wary of, considering they might just be providing workers with skills to help their next employer. One solution would be for contractors to band together and create training, but companies in open shop markets can't do that. Once again, Congress could provide the solution.
"We think Congress should change anti-trust laws so that companies in a market can band together to create a common training program," Turmail says.
But ultimately, Turmail says the construction industry needs to convey that people can "make more than they would in some cube farm, work outside, and get the satisfaction of having built something. We have to make construction a first-choice not a last-choice profession," he says.
The NAHB's state chapters work with high schools and training institutes to generate interest in the construction trade. "Part of this new effort is showing that construction trades lead to the middle class," Beall says. "On average we found that carpenters made $40,000 annually. That’s the type of information that we want to get out to high school students so they know these are well-paying jobs. If you’re a general manager or supervisor, you can make upwards of five figures annually."
The industry's associations want to change the notion that the younger generation seems to prefer to sit at a computer screen than to work on a construction site. It will be difficult to change, and, even if they're successful, workers won't start streaming in next week to fill immediate needs.
"You won't change those attitudes and perceptions overnight as much as we'd like to," Turmail says.