Across the country, cities are having trouble keeping up with the demand for housing. The demand is outstripping the supply in cities like Philadelphia, Seattle, Los Angeles and Columbus, Ohio, and, well, almost everywhere. The culprit blamed most often is the labor shortage. But is that true?
Industry experts argue that it is, but many maintain that there are other factors as well. It may not matter to you much — knowing why there’s a supply and demand problem won’t help you find a new home — but if you’re driving around block after block, or putting in unsuccessful bid after bid, and you’re wondering whom to blame and send a nasty letter to, these are some of the culprits.
[See: 7 Things You Can Do to Win a Bidding War.]
The labor market. As noted, your dream home may be elusive due to a shortage of subcontractors, plumbers, bricklayers and the like.
“I can safely say there is a large shortage of workers, especially those with trade skills, in the U.S. homebuilding industry,” says Dan Shube, the chief marketing officer at Labor Finders, a nationwide temporary blue collar and industrial staffing agency based in Palm Beach Gardens, Florida.
He explains that the unemployment rate, which is 4.3 percent but heading toward 4 percent, means that homebuilders are having major supply issues.
Shube says that the remaining unemployed workers either don’t have the skills or interest to get involved in homebuilding.
“It seems that many workers in our country are less inclined to pursue blue collar work,” he says. “Some have dependency issues and cannot be hired due to workplace safety concerns.”
The labor shortage has had a ripple effect, too, causing delays beyond simply not having enough workers.
“With contractors being stretched thin, we are having brand-new houses come back with more issues than existing houses on home inspection,” says Kyle Springer, a realtor and owner of SouthCentralHomes.com in Bowling Green, Kentucky.
[See: The Best Apps for House Hunting.]
City officials. Perhaps you should write that complaint letter to one of your city officials. Ernie Rafailides, a Baltimore-based licensed real estate broker and attorney who has worked in property management for almost 30 years, believes zoning policies and anti-development sentiment around the country should be blamed for the shortage of homes.
“If you follow development trends, state, city and local municipalities are favoring multifamily development and town home development, or at the other extreme, the mini-mansion or basically one house per two-plus acres. The middle class is being completely ignored. The kind of house that I grew up in, a house on a quarter-acre lot, is no longer in favor,” Rafailides says. “You can’t talk about getting people out of the city into the suburbs if the product being built goes from $450,000 per unit for a new town house to $1,300,000 for a new home.”
Politicians. Maybe you should write your congressman. For starters, as Rafailides says, “The middle class, as much as they were talked about in this last election, is being completely ignored.”
And some politicians have made it clear that illegal immigrants aren’t welcome in the U.S., and whether you approve or disapprove of that position, many industry experts say that it hasn’t helped the homebuilding market.
“Many foreign-born laborers, who made or make up a large percentage of industry workers, were forced to return to their home countries, found employment there and never returned. And the recent reforms and controls on immigration are making it even harder for undocumented workers to enter the workforce,” says Marc Carver, a principal at The Carver Property Group, a technology-based, luxury real estate company with offices in Atlanta.
[See: 7 Things First-Time Homebuyers Wish They’d Known.]
The Great Recession. OK, you can’t really write a letter to the recession, but maybe pen a missive to your local economist because you can blame the past economy for the current housing shortage. Carver echoes what a lot of homebuilders say, that the shortage of labor is because “the homebuilding industry has been basically nonexistent for the past 10 years.”
When the recession hit, and people stopped buying homes, many construction workers were laid off and went to other jobs.
Because of that, Carver adds, not enough millennials during the last decade took on jobs in the homebuilding industry.
“There have been very few opportunities for young workers to enter the industry and become skilled tradesmen. And the ones remaining from the previous housing boom are at, or nearing, retirement age,” he says.
All of this has created a recipe for too many homebuyers and not enough homes, and Carver doesn’t see things getting better any time soon.
“Because of the shortage of workers, developers are competing with each other for their share of workers, paying higher wages that impact their margins,” he says. “Builders are also facing higher material costs and this could get worse due to the new administration’s tariff on Canadian lumber. And in the end, all of these costs will be passed on to the consumer in the form of higher new home prices.”
Trade and vocational schools. Get ready to write an angry missive to your local school board. Over the years, trade and vocational schools have had their budgets hit on the federal and state levels. Granted, sometimes fewer state dollars go to schools because fewer students are enrolled.
Whatever the reasons, trade schools and vocational schools don’t seem to be churning out students the way they used to be, says Todd Whalen, owner and CEO of Eclipse Building Corp., a general contracting and construction management firm in Tampa, Florida.
He thinks if vocational and trade schools could make a comeback, it would help with the labor shortage.
“The labor shortage is a direct result of a lack of younger people getting into the construction industry while the older generation moves up the ladder and into retirement. Trade and vocational schools have diminished drastically [and] similar programs have been cut from high school curriculum and elective options,” Whalen says.
With fewer workers, those millennials in construction can command higher prices, he adds.
And not only are there fewer workers. Whalen says that ” large scale projects, like the multitude of high-rise buildings, major transportation like Tampa International Airport expansion and many others are making labor scarce for the smaller contractors.”
Because of that, you’re going to love Whalen’s prediction.
“This industry is going to hit a recession of its own real soon. I would estimate within the next five to seven years, if not sooner,” he says.
And it’s worth remembering that leading up to the last recession, while there were a lot of factors that tore the global economy apart, a big part of the reason things went downhill was due to a slowdown — in housing construction.
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If You Can’t Buy Your Dream Home, Is the Labor Shortage to Blame? originally appeared on usnews.com
