Since the recession officially ended a lack of labor and materials has blamed in part for the sluggishness of new home construction, at least by the National Association of Home Builders (NAHB).  Now they have proof that not only are the labor shortages real but they are growing.

NAHB conducted a survey of single-family home builders in June and found that shortages of labor and subcontractors, which they said were already quite widespread in mid-2014 have become even more acute, covering virtually every trade.

The NAHB survey looked at 12 trades both in terms of workers directly employed by the home builder and as subcontractors - nine of these trades have been covered in surveys dating back to 1996 (the exceptions are HVAC, weatherization workers and building maintenance manager.) The worst gaps are in the carpentry trade. Sixty-nine percent of builders surveyed reported at least some lack of a labor force of rough carpenters, with only 2 or 3 percentage points fewer reporting shortages of framing crews or finish carpenters.  Bricklayers and Masons were also reported in short supply as were electricians. 



The survey found that builders were encountering even greater shortages of these same skills among subcontractors. A 2012 NAHB survey found that single family builders employ, on average, 25 different subs when building a home.  Over half of builders contract out at least three quarter of the work and over 95 percent always contract out some.  Among shortages of subcontractors carpentry again led the list; 74 percent reporting difficulty in hiring subs in the various sub-categories of that trade - and a slightly higher percentage saying the shortages were serious.


In the case of both labor and subcontractors the shortages were more widespread than reported last year.  NAHB charted the shortages reported throughout the survey's life averaged across the nine trades they have consistently tracked. The average fell to a low of 21 percent in 2012, rose to 46 percent in 2014 before hitting 52 percent this year.  

NAHB points out that the high level of reported shortages is especially surprising given the current rate of new home construction which has not recovered from the housing crisis.  The Census Bureau reported on Friday that housing starts were running at a seasonally adjusted rate of 1.2 million units, about half the 2004 and 2005 numbers but the nine-trade shortage is reportedly higher.  The last time NAHB found reports as high was just before 2001, "during a prolonged period of strong GDP growth with overall unemployment as low as 4.0 percent.

In general the labor and subcontractor averages have been closely aligned but in 2013 a gap opened and the shortage of subcontractors now runs 5 to 7 percentage points higher for subs than for labor.



These difference are also important because government statistics tend to focus on labor, to the extent that trends in subcontracting (where much of the work is done by the owners of small firms who are not technically counted as labor) often go largely unreported.

NAHB believes one explanation for this gap is that construction workers who lost jobs as the housing crisis grew may have started their own businesses but as employment opportunities have returned these small business owners may have returned to regular employment with home builders.  This has increased the supply of labor while making the availability of subs slightly worse.

In any case, 66 percent of survey respondents reported the lack of available labor and subs has caused them to pay higher wages or receive higher bids.  Sixty-one percent reported this has led to higher home prices and 58 percent that it has made it difficult to complete projects on time. Other effects include making some projects unprofitable, and forcing builders to turn down or delay work.

So, if costs have increased, by how much?  Starting with its March 2014 survey NAHB started asking the degree of increase in labor and subcontractor costs for the same house compared to six months earlier.  On average the increase was reported as 2.9 percent for labor costs and 3.8 percent for subcontracting, both up sharply from the first time the question was asked.  Remember this is a six month increase.  Extrapolated to 12 months labor would increase 5.7 percent and subcontracting 7.7 percent at a time when the Consumer Price Index has risen roughly 2 percent.



NAHB said that while the shortages are quite widespread, conditions vary across the country.  However they did not provide a geographic breakdown of the data.