This story is part three in a BUILDER special report on the challenges facing small and medium-sized home builders. Read part one here and part two here.
Once a small- or medium-sized building firm secures financing and acquires land, it still has to build a physical home or two to stay in business. And much like finding financing and land, hiring available labor at this point in the cycle is no easy feat.
“We have a labor shortage,” says Robert Dietz, chief economist for the NAHB. “I think there are still some people out there who doubt it. I’m not sure why given that I think it’s plain to the eye to see.”
According to a recent Bureau of Labor Statistics Job Openings and Labor Turnover Survey and NAHB analysis, the number of open construction sector jobs (on a seasonally adjusted basis) increased to 227,000 in October. The metric peaked this cycle at 238,000 in July 2016.
In 2011, 13% of builders said the cost and availability of labor was a significant issue, according to the NAHB/Wells Fargo Housing Market Index. In 2016, that number jumped to 78%.
Labor, Dietz says, “has been the top business challenge for the last three years and will likely continue to be so.”
The typical age for a construction worker is north of 40, he adds, and the industry lost about 1.5 million jobs during the recession. “Since the low point of industry employment we’ve only gained about 750,000 of those jobs back,” he says.
The labor shortage “makes delivering homes on time much more challenging, and it is driving the cost of labor to unsustainable heights,” says Vince Barbato, principal of Palm Desert, Calif.–based Family Development Homes.
What Rick Hauser, president of Gallery Homes in Canyon Lake, Calif., calls a “severe shortage of labor” is a problem he knows well.
“As a result, many subs cannot staff our jobsites, so we have less competitive bids,” he says. He notes that his company now looks to do multiple projects in one area and gives all available work to a vendor who’s willing to stay local and take fewer projects in other regions.
Meanwhile, Family Development Homes aims to pays its labor force quicker than its competitors. “As always, money talks,” Barbato says, adding that cultivating local relationships also is important. “We do not treat our subcontractors as a ‘necessary evil,’” he says. “We treat our people with respect and this often pays off with them choosing our jobs over others.”
Most builders aspire to be the “builder of choice” in their markets. It’s something that Classica Homes has achieved in Charlotte, N.C. The company, which spun off from Simonini Homes in 2010, has maintained its relationships with trade partners since its start and in some cases since the Simonini days in the 1990s.
“We can’t be successful without them being successful so the way we treat our teammates on the Classica team is the way we treat our trade partners,” says Brian Hall, vice president of construction at Classica. “We believe they’re a part of our team.”
To that end, Hall says he and his team work with trade partners to create a construction schedule that suits all parties. “If it’s simple for them to come work for you they can make money,” he says. “If they’re making money they’re going to come back and work for you. If you’re completely out of control they’re not going to work for you even if they can make a buck because it’s too painful.”
Classica, Hall adds, has honed its systems and processes over the years to make retaining labor as painless as possible, like its reliable scheduling system that sends out weekly updates and its quarterly meetings to discuss future projects to which trade partners are invited. But even if builders—of any size, but especially the smaller ones—pay their subcontractors quickly and treat them well, quality labor is still tough to come by in dozens of markets. Many builders say what’s needed is an influx of young, well-trained workers.
Training Needs
To help answer that call for skilled tradesmen and women, the Home Builders Institute (HBI), a nonprofit based in Washington, D.C., trains underserved and at-risk populations in building construction trades and then places them in jobs within the industry.
John Courson, HBI’s president and CEO, says the nonprofit works with many different types of students, such as those who have dropped out or have been thrown out of school, high school graduates who elect not to continue their education, and those in correctional facilities in Florida and Illinois. HBI also offers classes on military bases to train personnel who will be separating from the service. In the past three years, its program also has been adapted to high schools.
Participants go through Pre-Apprenticeship Certificate Training (PACT) and learn about several trades, including carpentry, electric, masonry, painting, and HVAC. The program features classroom work where students get their OSHA 10 and safety ratings and learn about construction math, tools, and materials. Students also practice these trades under the tutelage of an instructor. Roughly half the course, Courson says, is working on real jobsites in a community, like a Habitat for Humanity build or church construction.
“We want the last day of training with us to be like the first day on the job that we place them in,” Courson says. “We’re finding that builders really want someone that can come on the job and be effective and productive on day one.”
Currently, HBI places about 85% of students who obtain a PACT certificate in industry jobs, Courson says. HBI operates in 42 states and sets up programs where a trainee population is already in place, like a military base, youth correctional facility, or high school. It does not accept students on an individual basis.
The service HBI provides, both to its trainees—of which there are about 8,000 at any one time—and to the home building industry is vital, Courson says. “We need to have a flow of younger qualified workers coming into the industry to show them that there’s a good career path, show them there’s an upward mobility capability. That’s a longer-term project, but I think it’s the key to building a strong foundation,” he says
