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The onset of the coronavirus pandemic brought a great deal of uncertainty to multifamily construction, from local construction moratoriums to on-site safety regulations. To help the industry stay on top of the ever-changing conditions, the National Multifamily Housing Council (NMHC) began a COVID-focused construction survey in late March 2020. Over the course of the pandemic, multiple rounds of this industry survey have asked construction and development firms how the spread of COVID-19 has affected permitting, starts, completions, materials, labor, and financing. Now having completed its sixth round, trends have emerged around what multifamily companies have faced over the past year.

COVID-19 Disruptions Result in Construction Delays

Every iteration of the survey has asked about overall construction delays in jurisdictions where respondent firms are operating. Over most of the past year, slightly more than 50% of respondents had been reporting construction delays; however, in the most recent round, that figure shot up to 75%.

Respondents who reported construction delays then were asked specifically about experiencing delays in permitting and starts. The results around these specific delays have varied more over the different iterations of the survey, but the data show they have certainly been a pain point for firms. Permitting, entitlement, and professional services were the most cited (72%) cause of delays in starts for the sixth round of the survey. While economic uncertainty and feasibility were the next two highest cited reasons, they were cited less frequently than in the previous rounds. With vaccine rollout at full speed and warmer weather on the way, it’s getting much easier to see the light at the end of the tunnel.

When asked about the causes of delays in starts, issues around sourcing materials have not been included as potential answer options for respondents, but it seems that the stress on materials could be adding fuel to the fire. In the past two rounds of surveying, there was a sharp increase in respondents indicating that they were struggling with a lack of materials. Figure 1 below illustrates the more recent increases in both overall construction delays and material shortages.

These delays are scarcely holding back deliveries altogether, though. In 2020, multifamily (buildings with five-plus units) completions were higher than the levels seen in 2019, with many projects already in the pipeline when the pandemic hit. This stands in contrast to the greater slowdown in permitting and starts in 2020, which decreased 11% and 3%, respectively, over the previous year, according to the U.S. Census Bureau.

Although reports of delays for one reason or another have been virtually consistent up until this point, many respondents were optimistic about the duration of their delays. Nearly every respondent (95%) reporting delays in starts expected the duration to be shorter than a year, with 65% of responses indicating less than six months.

As Construction Activity Rebounds, Materials Become Scarce

Sourcing and paying for materials has been an issue all its own, with the share of respondents reporting stress in these areas growing significantly over the course of the survey. Beginning in the fifth round of the survey, conducted in October, concerns around materials soared. In the sixth round of the survey, 83% of respondents reported being impacted by lack of materials—a drastic shift from 24% who reported the same during the first round of the survey in spring 2020.

In the last two rounds of the survey, respondents also reported implementing strategies such as sourcing materials from alternative locations or sourcing alternative materials altogether with greater frequency. Appliances, lumber, and windows and doors were a few of the many materials the survey respondents cited experiencing shortages of, albeit these ones were cited most frequently. To a lesser extent, they reported a lack of cabinets and countertops, metal and steel components, drywall and insulation, electronic components, and AC/condenser units as well.

Now of growing coverage in the news, lumber prices have skyrocketed over the course of the pandemic for a variety of reasons—including cutoffs in supply as mills were forced to shutter last spring as well as increased demand with home repairs and single-family and multifamily projects alike.

In the most recent iteration of the NMHC Construction Survey, a record 93% of respondents indicated seeing price increases in construction materials, up from 82% of respondents in round five and 18% in round four. Lumber was mentioned specifically by 81% of respondents seeing price increases. Other structural materials such as concrete and steel, as well as drywall and insulation, copper, and PVC (polyvinyl chloride) also were cited as experiencing price increases.

Those seeing price hikes in materials also were asked more explicitly for the magnitude of those increases for the most impacted materials. The results (Figure 2) are troubling, and multifamily developers and construction firms will need to continue to innovate to stay ahead of these challenges in order to keep projects in the pipeline.