With demand growing nationwide for new housing, including multifamily, the building industry continues to be challenged by labor constraints across multiple trades in multiple regions.
The last time builders reported labor shortages that were as widespread as they are now was just before 2001, during a prolonged period of strong GDP growth with overall unemployment as low as 4%, explains economist Paul Emrath of the National Association of Home Builders (NAHB). The NAHB further points out that eight years after the Great Recession drove an estimated 30% of construction workers into new fields, builders across the country still struggle to find qualified labor.
Labor shortages notwithstanding, multifamily development continues to remain strong. In fact, the NAHB reports that due to the ongoing strength of multifamily construction, total new-housing starts for the month of September rose 6.5%, to an eight-year high of 1.206 million units on a seasonally adjusted annual basis. The multifamily sector, which rose 18.3%, to an annual rate of 466,000 units, accounted for all of the September increase.
Labor Shortages Persist
With increasing construction comes a growing shortage of labor that is impacting all residential product types. The NAHB reports that the total open-position rate for the construction sector—that is, job openings as a percentage of total employment—has been trending upward since 2012.
As of July 2016, there were 214,000 open construction-sector jobs, which marks the second-highest monthly total of open, unfilled positions. “A persistent headwind for the entire residential construction sector has been labor shortages,” states the NAHB. “Recent government data indicate that a lack of available workers may now be affecting employment growth for the industry.”
With the constant demand for new multifamily housing nationwide, we expect to see ongoing labor-shortage issues that we know, from on-the-ground experience, are especially challenging in areas such as the Sun Belt states, where demand for housing, and especially apartments, continues to outpace supply.
Lacking top-grade craftspeople, builders resort to “B” and “C” quality trades, requiring more tedious oversight and “babysitting” by field superintendents and construction managers. Absent an available, qualified, well-trained labor force, builders and contractors must also deal with increasing quality-assurance burdens in the field, leaving themselves—and their insurance carriers—potentially exposed to a higher risk of construction-defect litigation.
Common causes of construction issues include deficiencies in field workmanship, misinterpretation of plan details, and deviations from manufacturers’ recommendations. Furthermore, these deficiencies can become manifest in concrete foundations; framing assemblies; weatherproofing elements; mechanical, electrical, and plumbing systems; as well as fire-rated and acoustical assemblies. In multifamily construction, one deficiency can open the door for more deficiencies, repeated over and over again.
Impact on Supply
In some market areas, construction worries are affecting the supply of attached product, such as condominiums.
Colorado, for instance, has a deficit of attached residential housing because of the state’s lack of effective right-to-repair laws. In 2015, two measures were proposed, SB-177 and SB-91, to implement construction-defect reform in the state, but neither passed the Colorado state legislature. Consequently, very few condo projects, if any, are being built in Colorado now, preventing more-affordably priced for-sale and rental housing from entering the market.
By contrast, Texas adopted a law, HB 1455, which became effective Sept. 1, 2015, that requires a majority of condo owners to attend meetings and vote in person, not by proxy, either for or against initiating a construction-defect claim. The law’s purpose is to protect condo owners from unknown and unauthorized legal disputes that can lead to lower market values and complications in selling or refinancing their units.
As with many laws, right-to-repair regulations aren’t always clearly understood or interpreted. For example, two lawsuits stemming from California’s long-standing right-to-repair law, SB 800, were recently settled in conflict with one another regarding the scope and applicability of the law.
The conflicting decisions in the two cases, McMillin Albany, LLC v. Superior Court and Liberty Mutual v. Brookfield, resulted in an appellate court rebuke of the latter. As a consequence, the California Supreme Court agreed to review a petition for resolution of the matter.
Digital Technology: an Effective Solution to Construction Problems
All is not lost, however, when it comes to overcoming the labor shortage and concomitant construction concerns. Advances in mobile app technology are changing the way builders and construction managers survey, assess, and respond to potential problem areas and have proven effective in minimizing problems resulting from labor shortages. For example, the features and benefits of high-tech quality-assurance (QA) methodologies can help locate, communicate, and resolve construction issues in real time before they become bigger problems. This can save a builder or general contractor potentially millions of dollars in post-closing legal and remediation costs.
The smart-phone QA apps available today can connect the field to the office with same-day reporting, thus helping provide statistical feedback on trade work; educating the trades on quality issues; and protecting project pro formas with on-time, on-budget performance. The app is an important addition to the builder’s toolbox, helping to forge stronger GC–trade contractor relationships, deliver worry-free projects, and protect the bottom line.
Additionally, new, cloud-based digital technology can reduce build-cycle time, lower indirect project costs, and more accurately store and analyze information from current jobsite tasks and activities. This can be helpful to the next project bid by identifying where cycle-time bottlenecks and deficiencies occurred on the previous project of similar design and building configuration, a common characteristic of multifamily construction.
Real-Time Reporting
Armed with digital methodology, a QA construction expert can identify and report in real time plan-detail project deficiencies, scheduling hiccups, and good and bad workmanship via project photos and narratives that can be sent and received the same day of the site visit. With this time-critical data, the construction manager, together with the trade contractor, can track time-sensitive, outstanding items until close-out and prioritize critical-path deficiencies that might otherwise slow a project down.
Today’s quality-assurance methodologies can also help determine whether a builder’s own site management is contributing to project issues or delays. Like the conductor of an orchestra, a site manager must effectively schedule, direct, and manage the trade contractors in a collaboration of construction and workmanship. Digital QA gives the site manager and/or management team the tools to be successful.
Finally, advanced QA technology can clearly identify construction and vendor problems that could exist across several projects in different locales, allowing the builder to act quickly to rectify problems before they’re repeated and could lead to costly construction-defect litigation. Catching these types of problems using an ongoing, methodical quality-assurance process before they become hidden defects can save builders and contractors millions of dollars in repairs or lawsuits, not to mention damage to their all-important product and company reputation.
