While the latest round of the National Multifamily Housing Council (NMHC) Construction Survey saw slight improvements, costs and delays are still hampering the creation of much-needed housing, particularly at low- and middle-income price points.
Conducted between March 7 and 20, the NMHC quarterly survey found that 79% of developer respondents reported construction delays, which is better than the 84% in December, the 90% in September, and the 97% in June.
Of those experiencing delays, 76% cited permitting delays, while 88% reported delays in starts.
Nearly half of those experiencing delayed starts, 49%, cited project infeasibility as the cause, up from 32% the previous quarter. The second most common factor for delays was economic uncertainty for 42% of respondents, followed by the availability of construction financing, or lack thereof, for 40% of respondents.
The survey found that the labor market showed signs of easing this quarter, with only 7% of respondents citing staffing shortages as a cause for delayed starts, down from 18% in December and 31% in September.
In addition, permitting, entitlement, and professional services and materials sourcing and delivery were not causing the delays they had in 2022. Over a third of respondents, 37%, blamed permitting, entitlement, and professional services, down from 46% in December, 69% in September, and 85% in June. And just 21% of respondents cited delays to materials sourcing and delivery, a drop from 30% in December, 53% in September, 58% in June, and 64% a year ago.
Nearly half of respondents, 47%, said they had deals repriced up over the last three months, down from 58% in December and 92% in March of last year. However, 21% of respondents reported deals repricing down, up from 18% in December and no respondents a year ago.
Prices for essential products continued to rise, but at a smaller pace. Over the last three months, respondents reported a 9% average increase in the price of electrical components, down from a 13% increase the previous quarter; a 7% increase in appliances, down from 9%; a 4% increase in the price of exterior finishings and roofing, down from 9%; and a 3% increase in insulation, down from 9%. However, respondents reported an average drop in lumber prices for the fourth straight quarter, a 5% decrease over the last three months.
Only 10% of respondents said construction labor has been less available compared with the previous three months; this is down from 21% in September. The majority of respondents, 71%, reported labor availability to be roughly the same, while 19% reported it to be more available.
In addition, 24% of respondents said they did not see labor costs increase over the past three months compared with 5% in December. Most respondents saw labor costs increase as expected, while 12% said they increased more than they had anticipated.
“As pandemic-caused costs increases begin to alleviate, policymakers and private enterprise must remain focused on one clear goal—enacting policies that support increased housing development,” said NMHC president Sharon Wilson Géno. “Supply chain constraints, still high labor and material costs, and complex and expensive regulatory barriers continue to restrict the development of badly needed housing. With policymakers of both parties and all levels of government increasingly understanding the need for more housing, now is the time to enact policies that will increase supply, including improvements to the low-income housing tax credit, middle-income housing tax credit, improving and expanding the Section 8 Housing Choice Voucher program, and passing zoning reforms.”
