Construction Needs 650K New Workers to Meet Housing Demand

The number of available homes for sale in the US is likely to remain at historically low levels in 2022 as a perfect storm of labor and materials shortages are preventing the construction sector from keeping up with the demand for new houses.

The construction industry needs to add 650,000 workers above its current pace of hiring in order to meet demand in 2022, according to a new analysis by Associated Builders and Contractors (ABC).

Home builders also are having trouble getting basic materials like lumber, which is delaying the construction of an estimated backlog of 5.3 million new homes needed to keep up with demand. According to the National Association of Home Builders, 90 percent of builders reported delays and materials shortages in 2021

ABC projects that an estimated 1.2 million construction workers will leave for other industries in 2022, but an estimated influx of 1.3 million workers this year will barely cover the turnover rate. ABC said the labor shortage in construction is being exacerbated by demographic trends that see fewer young workers joining and staying on job sites as older workers retire.

According to Redfin, the housing market began 2022 with fewer homes for sale than ever before, with active listings dropping nationally by 29 percent at the end of January compared with the same period last year. As 2022 began, active listings fell below 500,000 for the first time to an all-time low of 482,000, Redfin said.

The scarcity of basic building materials has nearly tripled the price of framing lumber used to build houses, which skyrocketed from $600 per thousand board feet in April 2020 to more than $1,000 by the end of 2021. According to the Bureau of Labor Statistics’ Producer Price Index, the average price of goods used in residential construction has risen three times faster than the rate of core inflation throughout 2021.

The surging price of building materials was exacerbated by the Biden Administration’s decision in November to hit Canadian softwood lumber producers with anti-dumping tariffs of nearly 18 percent, more than double the previous rate, costs that will be passed on to consumers as home prices increase.

The labor and materials shortages in the construction sector may have contributed to an unexpectedly stronger downturn in US housing starts in January, which declined 4.1 percent to an annual rate of 1.64 million units, predominantly due to a drop in starts for single-family houses. Analysts cautioned that this dip also was impacted by the wave of Omicron cases that swept across the US in January, which slowed construction as workers got sick.