The Biggest Barrier to Homebuilding? There’s Nobody to Build Them
By Maggie Wilson @ Real Estate Daily
May 8, 2018

A severe lack of housing inventory has been touted as one of the main reasons for high home prices. Construction is perhaps the most prominent bottleneck to sales and affordability, and homebuilders are aware of the issues at hand.

Unfortunately, builders must overcome multiple obstacles before they can start providing sufficient inventory for the current housing demand. The main problem: a lack of skilled workers.

The construction industry is desperately in need of competent workers. Many construction workers are busy remodeling homes for baby boomers or rebuilding homes devastated by recent hurricanes. Now, the industry needs to find ample workers to meet the demand for housing.

Key Takeaways

  • The residential construction industry is hamstrung by a shortage of workers and rising construction costs
  • Homebuilders will build about 900,000 single-family houses this year, whereas 1.2 million would be ideal to keep up with demand
  • The unemployment rate for the construction industry is 7.4%, almost double the national rate of 4.1%


In this blazing-hot housing market of severe home shortages and rapidly rising prices, many buyers around the country have found themselves left shivering in the cold. But while builders would love to swoop in, construct a bunch of homes, and save the day (while making bucketloads of cash), they can’t. They simply don’t have the manpower.

Construction workers have become an increasingly rare and precious commodity in today’s housing market. The national labor shortage is dramatically slowing down builders—many of whom already have their hands full with remodeling homes for baby boomers planning to age in place, and rebuilding thousands of homes ravaged by last year’s hurricanes and wildfires. Combined with overall rising construction costs, it means an influx of new homes to ease the housing shortage and tame runaway prices isn’t coming anytime soon.

Skilled workers such as home framers, electricians, plumbers, masons, carpenters, and HVAC installers are especially in demand, builders say.

“We’ve got rising housing demand at the same time that the residential construction industry lacks workers,” says Robert Dietz, chief economist of the National Association of Home Builders. He predicts about 900,000 single-family houses will be built this year—whereas 1.2 million are needed to keep up with demand from those hoping to purchase a home of their own.

How bad is the labor shortage?

To put the problem into perspective, there were 250,000 unfilled construction jobs at the beginning of the year, according to an NAHB analysis. The unemployment rate for the industry, reflecting unfilled positions, was 7.4% in March, according to a government data analysis by the Associated General Contractors of America, a trade group for commercial builders. That’s significantly higher than the national unemployment rate of just 4.1%.

The dearth of construction workers is slowing down all stages of the business, says Jason Scott, owner of North Star Premier Custom Homes in Westlake, OH, and president of the local Home Builders Association.

“It takes me twice as long now to do an estimate as it used to,” he says.

Instead of being able to find workers that day, he now waits eight to 10 weeks. Delays due to overbooked contractors slow the pace of homebuilding, amplifying existing shortages.

The shortage is also inflating costs for buyers and homeowners. Scott has had several subcontractors (siding, roofing, concrete) raise their prices by at least 10% since the new year. He’s paying double what he was 10 years ago for framing.

“I know builders who haven’t factored these [worker pay] increases in, and they’re watching $10,000 to $15,000 come off their bottom line,” Scott says.

With no relief in sight, builders may just have to rely on ingenuity, perhaps by using more prefabricated components.

“We’re going to have to build more with less with the current workforce,” NAHB’s Dietz says. “Builders have to find a way to be more efficient.”

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