NMHC Survey Dives Into Record Construction Costs, Delays

SAN DIEGO—A record 83% of multifamily developer respondents reported construction delays in the jurisdictions where they operate, according to the seventh edition of the National Multifamily Housing Council (NMHC) COVID-19 Construction Survey. NMHC released the survey during its annual conference here in San Diego, where housing stability and rental assistance were also topics of discussion as GlobeSt.com previously reported.

Of this group, 80% reported experiencing delays in permitting, up slightly from the 77% in round six and comparable to the results seen in the earlier rounds. Survey respondents reporting construction delays also indicated a significant pause in starts, with a similar 80% still reporting delayed starts over one year into the pandemic.

The main reasons cited for delays in starts were permitting, entitlement, and professional services (70%); projects not being economically feasible at this time (56%); and economic uncertainty (27%). The percentage of responses attributing delays to projects not being economically feasible at this time increased from 30% in round six to 56% this round.

“These findings highlight the deep challenges that builders and developers are facing as the economy continues to recover from the depths of the pandemic,” said Doug Bibby, NMHC President. “While we are encouraged by the overall prospects for the industry, skyrocketing construction costs and a lack of available labor makes it increasingly difficult and expensive for apartment homes to be built – worsening the affordability challenges facing communities across the country over the long-term.”

The NMHC Construction Survey is intended to gauge the magnitude of the disruption caused by the pandemic on multifamily construction.

Additional findings include:

*86% of respondents reported being impacted by a lack of materials, the highest share recorded since the survey began.

*Fully 100% of respondents reported price increases in materials, another record for the survey and up from 93 percent of respondents in the previous round. Of those respondents who saw price increases for materials, the average firm experienced a 38% price increase of the past 12 months for its most impacted materials.

*On average, respondents experienced a 201% price increase in lumber costs over the past year.

Because of rising lumber costs, respondents have taken a variety of actions in response, including repricing projects (62%), making price-saving modifications/eliminations to other materials or fixtures (49%), and delaying the start of projects (39%).

*47% of respondents reported they are impacted by labor constraints, up 11 percentage points from round six and up 27 percentage points from round five.

*83% of respondents indicated that deals were priced up. Specifically, 69% of respondents indicated deals being priced up 5% or more, compared to just 14% of respondents reporting the same in the last round of the survey.

The survey was conducted from May 17 to June 1, 2021 and received 109 responses from leading multifamily construction firms. Results will be compared with each of the six previous surveys, the first of which was conducted March 27-April 1, 2020, and the most recent from February 10 – March 5, 2021.

Check back with GlobeSt.com for more from the NMHC annual meeting.