Ironic that one of builders' biggest, not-going-away soon worries right now is not demand. Demand is fine. It's healthy. It's growing. More people want homeownership, and more people intend to buy homes.
Many of them want new homes. For one, people in existing homes are staying in them longer and longer, and they're not planning to sell. Secondly, new homes are better, safer, higher performing, and give an experience an already-lived-in home can not match.
Still, several home building executives at our Housing Leadership Summit in Southern California this week spoke that demand is not the focus of their worries and challenges right now. It's their ability to supply homes at prices these well-intended, would-be buyers can afford.
Labor is a No. 1 risk area for new home construction. The men and women who run home building companies worry that, on any given day on their job sites, a competitive, deeper-pocketed organization can show up on that site and offer laborers there $1,000 dollars to drop what they're doing and come over to the competitor's job.
The men and women of home building companies worry too, especially in states like Texas, that federal, state, and local policies squeezing undocumented workers in the United States illegally, are adding to the labor crisis.
One executive whose operations are entirely Texas-based called out brand new state legislation, SB-4, signed off this past Sunday by Texas Governor Greg Abbott, banning sanctuary cities in Texas.
Not that there are sanctuary cities in Texas. The bite of this bill is that it effectively turns local law enforcement officers into a local posse deployed to flush out illegals. Fox News correspondent Brooke Singman writes:
Under the law, officers who fail to comply, or cooperate, with federal immigration agents could face jail time and fines reaching $25,000 per day.
"It's going to get harder to find workers for our jobs now. They're going to start going into hiding," the Texas home building operator told me. He said that recently compiled data shared among builders shows a shortage of 20,000 workers in the Dallas-Fort Worth market alone, and that estimates of the impact of this shortage on new home prices in the market are an eye-popping $100,000 per home.
"Multiply that cost impact on all the new home starts in the country," he says. "It's mind-boggling that they're going down this path right now."
This is a real worry for builders right now. It's not that builders have their heads in the sand about the need for improved operations and productivity tools, more technology, automation, and data-enabled process management. They're aware of the need for transformation in their home construction models, especially on scaled projects.
But to get from here to there, they have to get through the real world today, and that real world involves a force of workers on job sites that is already diminished, and is now increasingly at risk of even more dramatic dislocation.
This, at a time when ambitious new infrastructure investment is on the table.
A reckoning moment on what happens to the undocumented labor workforce in construction seems to be near. What will builders do? Will they act together as this reckoning moment draws near?
