Create a culture of accountability

Two kinds of labor risk stand in the way of continued traction for a housing recovery that has yet to fulfill a role it normally plays in economic cycles--that of an engine of growth.

One labor capacity dimension is the more obvious and talked about issue. It looks at the math and geography of skilled workers--how many there are of each type and where they are--and equates those quantities to start-to-completion schedule and cost variances in the field.

This is a serious math problem, and it's likely to grow more serious as builders nationwide put more invested capital to work to meet a surge of demand for homes and communities that range mostly in the $175,000 to $300,000 range, depending on the market.

For builders, there are only four economic resource values that matter to stay in a business that will generate profitability. Time, labor, materials, and land. If builders have to pay more for or spend more on all four of these finite resources, they don't stand much of a chance of meeting that unmet need in the market--for those $175,000 to $300,000 homes that so many buyers are ready or about to be ready to buy.

In the middle of this math problem--for the near-term at least--is the looming, highly divisive issue around immigrant labor in residential construction. Builders, soon, are going to be pushed to a new resolve around this issue, one that will not and can not please or satisfy all of them.

Fact is, builders are not a single homogeneous group, although at BUILDER, we like to think of builders as a community. There are geographies, local politics, regional economics, a wide-range of competence levels, firm sizes, varying climates and topographies, reputational distinctions, and countless number of other differences that define a builder night-and-day and 180-degrees different than his or her counterpart, both in that very submarket, and certainly, across the country. Builders, in fact, oppose one another by the nature of who they are, who their customers are, what the local rules are, and so forth.

So, when it comes to figuring out an answer on the immigrant issue all home builders can live with, what seems like the right and obvious answer to some will strike others as the wrong and stupid answer. What's more, can one expect to achieve near-term economic and housing growth, and still resolve the immigration issue as it's being proposed?

So, some facts, depending on whether you choose to believe their sources, may become useful as your voice and your opinion on the matter of immigrant labor's present and near-future role in residential construction figures into a resolution.

Here from the Urban Institute contributor Carlos Martin, is an analysis on "The Immigrant Construction Workforce," which lays out some basic data points on the role immigrant workers currently play:

About 2.2 million construction workers are foreign born, making up roughly one quarter of the US construction workforce in 2015. A larger share of foreign-born workers is in the cleaning and maintenance sector and in the agricultural sector, but their numbers are smaller. Only about 450,000 agricultural workers were immigrants in 2015.

Construction work has long played a critical role for the immigrant community as a fundamental employer, a skill-building opportunity, and a source of entrepreneurialism. Nine percent of foreign-born workers in the United States work in construction and extraction occupations. Over 15 percent of immigrant men work in construction, making it the sector with highest employment of immigrant men.

Here's an article from Wall Street Journal reporter Adam Creighton on potential effects caused by the removal of unauthorized immigrant workers from job sites. Creighton reports:

The study, by two economists at City University of New York, puts the economic contribution of the U.S.’s seven-million-plus illegal workers at 3% of private-sector GDP, or $5 trillion over a decade.

California’s private-sector economy would shrink by almost 7% if its unauthorized workers, which make up 10% of its workforce, were removed, the study found.

Some small businesses, including ones in the construction trades, believe the problem is not too many foreign-born workers, but too few of them. Here, Wall Street Journal reporters Miriam Jordan and Stantiago Perez report that small firms are struggling to find lower-skilled, less expensive workers for jobs in their companies. Jordan and Perez write:

Many business owners who rely on low-skilled labor say the real trouble is too few Mexicans heading north, not too many. “Without Mexican labor our industry is at a standstill,” says Nelson Braddy Jr., the owner of King of Texas Roofing Co, which is helping build a sprawling new Toyota North American headquarters in a Dallas suburb. He says he would hire 60 roofers right away if he could find them. “It’s the worst I have seen in my career,” he adds.

And we know, too, there are facts that support that native-born workers in housing have seen their livelihoods compromised and their wages suppressed by the insurgence of workers willing to come in and labor for less.

This is an issue that divides people in housing. Will people in housing stay divided on the issue, or approach it as a challenge they can better solve together?

Of course, the other labor capacity issue that puts many builders' plans at risk, and in some ways, jeopardizes the still-fragile recovery--the one few talk about--is among engineers, planners, and municipal officials capable of bringing new home lots online to meet a new wave of buyer prospects.

In many markets, the big problem for builders is the lack of finished lots for programs that require a pipeline of them to scale profitably over multiple quarters, absorbing front-loaded overhead costs as they go farther into the months ahead.

2017 will be a clarifying year on both fronts, and not one we expect will extend an even hand for all builders in all markets. Can, and should, home builders try to pull together on these issues of labor capacity challenge, or does it matter?