Flashback to 2008 — a year most Americans will always remember in a not-so-positive way. The economy took a nosedive, and with it, many industries did as well. Recession set in, and showed no sign of letting up in the immediate years to follow.
Builders naturally saw a major downturn. Where new housing starts were consistently ranging from 1.5 to 2 million per year from 1996 on, 2008 slashed those numbers by more than half, making the last six years the six worst for new home builds since World War II.
Yet, as expected from our cyclical economy, the dim lights of the past six years are slowly brightening up for builders. But as new housing starts and projects see an incline, builders are facing a different issue: a growing shortage of labor.
Reported shortages in the labor supply
When 2008 barreled in, it took its toll on the labor market. With the sudden decrease in new home starts, many builders were forced to downsize. So as the market turns back up, it’s no surprise that in the latest National Association of Home Builders (NAHB) survey data, 46 percent of builders reported a shortage in the labor directly employed by their firms. This number jumped significantly from 20 percent in 2012 and 28 percent in 2013.
The shortage is felt even more in the subcontracting arena, though.
According to the NAHB data, shortages in subcontracting have historically run parallel to shortages in directly employed labor. But for the first time in history, data has bucked the trend. Today, the 46 percent shortage reported in directly employed labor is five percentage points behind the 51 percent shortage in subcontracted labor.
While a five percentage point difference may not seem like a big deal, consider the share of work in residential construction done by subs. NAHB’s 2012 survey on the matter found that single-family builders employ, on average, 25 different subcontractors when building a new home. Over half of builders reported subcontracting out at least 75 percent of the work. Certain tasks, like HVAC work, are always subcontracted out, as reported by 95 percent of builders. Because of these percentages, shortages in subcontracted labor have a far greater impact on construction costs than the related shortage in labor directly employed by builders.
Even if you aren’t a builder or subcontractor for builders, it is anticipated the labor crunch is going to hit many residential and commercial construction sectors in the renovation, insulation, electrical and specialty contractor industries.
Rising demand puts projects at risk
The bounce back in home construction can be considered a sign of economic recovery for the country, but it’s tough on everyone from builders, subs, renovators and specialty contractors to even the buyers and customers themselves.
Builders cite the following issues as the top effects of the shortage of subcontractors:
- Subcontractors are raising prices. Seeing the demand in their labor, subcontractors can and will demand higher wages and bids.
- Higher home costs. Builders naturally have to raise prices on new home builds and retrofits as their costs grow.
- Difficulty in completing projects on time. 60 percent of the surveyed builders said the shortage of labor is keeping them from completing projects according to schedule.
In the same survey, 36 percent of builders admitted projects have become unprofitable, while 18 percent said the shortage of labor has forced them to turn down projects or slow the rate of incoming work.
Which means one thing: builders and contractors need to find ways to achieve even more with the resources and staff already in their arsenal.
The importance of doing more with less
Over the past few months, JobFLEX has talked to builders and subcontractors left and right who say they are simply too busy to think about implementing systems to increase their efficiency.
Yet these same builders and subcontractors have had to stop generating estimates, failing to create new quotes for work because they’re busy getting “caught up” and finishing jobs already sold.
Does it mean business is TOO good, and the need for good, easy-to-use estimating software is gone? Hardly. The pipeline will dry up on existing work and it will take months to get it back on track once that happens. So what can be done to prevent a dried up sales pipeline?
Make estimating easier and keep the quotes coming
The best thing builders and subcontractors can do right now is optimize the work they’re already doing. Work ceases when estimates stop, so quoting is the first place builders should look to improve.
Consider the time that’s currently invested in generating a proposal. Quoting requires a sales visit, often some sort of site assessment, a trip back to the office to pull together pricing and sell sheets, and the delivery to the potential customer. When work is steadily coming in and labor is short, there’s no room for wasted time.
Equipping the sales team with easy-to-use software made to increase their efficiency in the field and help them close sales on the spot will significantly cut the upfront time required to garner new work. With built-in mobile capabilities not requiring internet, and software setup able to be implemented in a flash, improving the efficiency of builders’ and subcontractors’ quoting process is nearly a no-brainer.
Things are looking up
Let’s celebrate the uptick in the market and work together to meet the demands. Builders and subs have to do more than react to the economy; they need to be proactive so they can keep growing. Investing in systems like JobFLEX, the easiest-to-use estimating software and app on the market, is what’s going to help builders and subs combat the labor shortage and extend their resources farther.