While mortgage rates, inflation, and affordability concerns cloud market outlook for housing, an ongoing issue is likely to challenge the industry beyond the short-term future: the labor shortage. Improving supply chain conditions have shifted cycle times from over a year during the peak pandemic period to between six and seven months in recent times, but the continued shortage of skilled labor is a headwind that will impact the industry’s ability to combat the nation’s housing shortage.
“The bottom line is that the supply chain and the interest rates can shift pretty quickly. A slowdown in the market certainly decreases the labor need, but when you have a 400,000 gap of empty jobs, it’s not something that’s a quick fix,” says Ed Brady, CEO of the Home Builders Institute (HBI). “It’s not something that is going to happen over eight or 12 months, it’s something that is going to happen over a generation. As some of those things have adjusted to the positive—the cost of lumber, etc.—labor has not.”
According to the HBI’s Spring 2023 Construction Labor Market Report, the construction industry needs approximately 723,000 new construction workers each year to meet demand. A survey of single-family builders by the HBI indicates at least 80% are experiencing a shortage of carpenters and subcontractors in six additional trades.
Zonda’s survey of home builders indicated more than 80% were experiencing labor disruptions as recently as March 2022. While labor remains a challenge, the share of builders reporting labor disruptions to Zonda has dipped below 40% in 2023. At the same time, more than 50% of surveyed builders by Zonda indicated in July plans to increase the pace of starts compared with 2022.
“[The construction labor environment] is in a steady crisis mode, especially for those without a lot of buying power. If you’re a framing contractor, you’re going to go to somebody who’s going to give you work constantly; if you’re a big builder, you have access to that,” Brady says. “If you’re a smaller builder, you’re going to [have to] wait for that framing crew.”
The skilled labor shortage in the construction industry is compounded because many employees in the workforce are aging out. For every five people that age out or retire from the industry, the industry is bringing in approximately two new workers. Fewer workers will add to the cost of labor, but newer workers will also potentially increase the time frame to complete work, according to Brady. An apprentice-level skilled laborer may take significantly more time to complete the same task as a 30-year laborer with ample on-job experience and knowledge.
“We’re going to lose production and volume before it picks up because we’re losing so much talent and experience in the marketplace,” says Brady.
Shift in Perceptions and the Role of Builders
Brady says he feels optimistic about the future of the labor shortage because perceptions are beginning to shift around certification credentialing instead of four-year universities for high school students. The perception shift is still ongoing, though, and will require buy-in and effort from parents, counselors, legislators, and school boards to communicate to younger individuals that there are other paths to success instead of the traditional four-year college route.
“I see a lot of hopeful young people at our facilities that aspire to be their own businessperson,” Brady says. “I see hope in our young people, and the tide will turn to understand that [construction] is a good career path.”
While builders are typically not hiring skilled laborers directly, there are steps they can take to help their contractors find labor. Brady says builders can take an active role in combating the skilled labor shortage by sharing resources and recruiting initiatives with their subcontractors as well as demonstrating an interest in youth programs, trade schools, technical schools, and training programs.
“The industry has to invest. When the industry invests, it is going to see momentum, and the philanthropic world will continue to invest because we’re giving people career paths,” Brady says. “My message is always to invest in the future, invest in these training programs, and [the labor shortage] will take care of itself. It won’t take care of itself if we don’t train and invest.”
Brady shared the example of the Home Builders Care—the charitable arm of the Home Builders Association of Central Arizona—which funded a Home Building Academy in Phoenix to train students. Students in the school will participate in a nine-week rapid worker training program, resulting in industry-recognized certificates.
“The easy part is that after they are trained, those builders and subcontractors have access to those students. You don’t have access to students who don’t train,” Brady says. “I’m looking for builders to adopt schools, to bring the curriculum into high schools. There are a lot of people that are out there that want to work, that want to get into a career path that don’t have the venue to do so.”
A Unified Effort
A limiting factor to the construction industry’s ability to combat the labor shortage is the siloed nature of current approaches. Efforts from unions and non-unions in the residential, commercial, and industrial sectors often compete with each other rather than working together.
“We should be agnostic to where somebody lands in the industry, as long as we get them into the pipeline in the industry,” says Brady. “We don’t all work together on creating the perception that this is a good industry and that we’re in it together. We have to understand that we’re stronger together than we are apart. If we’re not collaborative or cooperative with each other in the industry, then it’s going to be a harder time.”