Building The Trades: We Can't Afford A $10 Billion Annual Housing Loss
Construction workers are in high demand as the country faces a severe affordable housing crisis.
The United States and many other parts of the world are currently experiencing an affordable housing crisis. While there are many levers driving that crisis, one critical factor is a shortage of skilled trade workers.
New research from the Home Builders Institute and the National Association of Home Builders (NAHB) revealed that the skilled labor shortage is causing an annual economic impact of $10.8 billion in the single-family home building sector.
While home builders face higher material costs and more regulation that adds to time delays and extra costs, they also are scrambling to find skilled labor to start new home projects. The shortages mean fewer new homes are built, which means fewer homeowners are moving up, and fewer existing homes are becoming available to first time buyers as a more affordable option.
Without having skilled labor, construction times are extended by an estimated two months. That extended construction time is responsible for the annual economic impact of $10.8 billion, which can be broken down into higher carrying costs and lost production. Extended construction times add up to $2.6 billion in direct costs, plus, it's estimated that in 2024, builders weren't able to build about 19,000 single family homes, representing a loss of $8.1 billion.
Now, we need solutions. We need ways to fill that skilled labor gap that can help deliver the housing efficiently and effectively so that the costs are within reach of more Americans.
Lowe's Chairman and CEO Marvin Ellison (left) and David Gitlin, Chairman and CEO at Carrier Global ... More Corporation discuss workforce development at Business Roundtable's event.
The Business Roundtable, an association of CEOs of top U.S. companies, hosted a forum to discuss how large employers are creating new pathways for workers, including current best practices that expand opportunities in skilled trades and manufacturing roles.
One of the main hurdles for these programs to be successful is the perception of these types of jobs.
'I grew up in a rural community in Tennessee and it wasn't uncommon that there was a vocational building next to a high school,' said Marvin Ellison, who serves as chairman and CEO at Lowe's. 'Many of my former classmates turned those into jobs, but then into careers and businesses. Sometime we started looking at that as less than.'
Leadership at Lowe's saw that transition happening and decided to take responsibility for change by investing $50 million over five years to a training program to build skills and open the door to individuals wherever they choose to work.
'The construction trade has 500,000 open opportunities as we sit here,' Ellison said. 'There are 80,000 job openings for electricians per year, but they cannot find the skilled labor. AI is not going to fix a hole in your roof or stop a water heater from leaking. We'll always need skilled trades individuals so we started investing directly into vocational schools and organizations with a commitment in skilled trades.'
The cultural shift goes well beyond no longer having vocational schools next to high schools. The school systems and their respective high school counselors that have the power to and the role of guiding students into careers and lifelong decisions have metrics based around college placements and therefore rarely point a student into the trades.
'There is a knowledge gap with guidance counselors,' said Calvin Butler, the president and CEO at utility company Exelon Corporation. 'They need to prompt students to consider careers outside of the traditional college path. Think beyond it and change lives.'
This Business Roundtable session was moderated by Kevin O'Connor, skilled trades champion and the host of PBS's 'This Old House." Here he speaks with founder of Angi on the career opportunities in the trades.
'Demand in HVAC is doubling, but fewer folks are entering the field,' said David Gitlin, chairman and CEO at HVAC company Carrier Global Corporation. 'In just 10 years, we've gone from 1 of 3 going to a vocational school to 1 in 6. The amount of applicants is decreasing, and the availability of younger applicants is decreasing, and the demand is increasing.'
He is leading Carrier to commit to making it a more attractive career by partnering with unions, and creating career advancements to give more upward mobility. The company is offering training, with a focus on the importance of how technology and virtual reality can assist the role, so participants get skills training, plus training in the digital realm.
Sara Armbruster is the president and CEO at manufacturing company Steelcase and also said the ultimate need is to reframe views of careers in manufacturing that aren't always someone's first thought of what they want to do, help them see the possibilities which can be a life changing moment.
New federal policies are changing the discussion for builders as well, with tariffs adding additional cost pressure and the deportation of immigrants reducing the available skilled worker pool for home builders.
While the tariffs seem separate from the labor aspect, they are connected in several ways. A stable cost environment is needed to create a healthy supply chain, improve cost dynamics, and to maintain strong companies that can manage projects.
'Once the tax bill is passed, it will give people more opportunity to forecast costs,' said Peter Davoren, the chairman and CEO at Turner Construction Company. 'The U.S. has gone through modern day industrial revolution, and 90% of all materials for construction can come from the U.S. Eight years ago, one-third came from overseas, that's now at 10%. I think it will go up to 100% of all construction materials in the U.S. I believe we will be self-sufficient building with materials within the U.S.'
He says that can happen by making the industry more welcoming.
'We need to provide all encompassing loyalty to employees and shareholders,' he said. 'There are so many workforce development programs providing the models for people to enter the industry, but not attracting them because of the perception of the industry."
Finding workers in the short term might rely on immigration program reforms. Part of that could include a clear, efficient path for citizenship for people who seek work in the industry. Currently, immigrants account for 31% of all workers in construction trades, according to data from the U.S. Census Bureau.
When I recently attended NAHB's spring leadership event, a lot of discussion was about how to approach this issue. There is passion around it, considering many builders are small business owners who are reliant on illegal immigrants to sustain their business. While they don't want to do something illegal, they also don't want their business to fail.
Armbruster and the other CEOs at the Business Roundtable event hope for more certainty and stability from the government so they can guide their companies in better, more strategic decision making.
Recently I was speaking with the editor at Rural Builder magazine who is writing about AI for his audience of 30,000 small builders in small U.S. markets. He spoke about a couple of his readers who have fairly manual processes and was frustrated by their reluctance to adopt technology that will help their business.
Understandably, these are small business owners and any and all change is a risk, however, he recognizes that what these builders are doing with spreadsheets and hand drawings can be more accurate and much more efficient by using technology.
The supply chain can certainly boost pro usage of technology. If the builder is buying lumber from a dealer that is using digital processes, the builder will need to also get up to speed. But, dealers are equally reluctant to adopt technology because of the large transformation and commitment it takes to do it.
When companies do it though, there is a substantial pay off, said Blake Moret, the chairman and CEO at Rockwell Automation. His company has proven that technology offers the ability to be more efficient, and earn more profit. He also has been able to use that profit to expand into new lines of business.
Dealers serving home builders could do the same, adding value in pivotal ways with efficiencies that will reduce costs and open the door to more affordable housing.
As the nearly $11 billion in annual losses shows, we need solutions now.
'The need for speed cannot be underestimated or overstated,' said Julie Sweet, the chair and CEO at staffing company Accenture.
She shared that the speed of transformation is possible. In November 2022, Accenture had only 30 people working on generative AI. Today, just two and a half years later, the company has more than 500,000 who have received AI fundamentals training, and more than 250,000 who have received advanced training, plus more than 70,000 are now deep data and AI specialists.
She believes this is something that can be done, and it can be at speed, but it has to be done by thinking collectively. Small- and medium-sized enterprises have to buy in, which in the case of the Rural Builder audience can be a struggle, but it also is where the majority of economic activity happens.
Keith Sonderling serves as the Deputy Secretary at the U.S. Department of Labor and is working on an executive order to set up one million apprenticeships every year.
He emphasized the importance of technology in this process, in particular the adoption of AI.
'We have to train workers on how to use AI to make their lives better personally and at work and not worry about displacement,' he said. 'We have another executive order about AI literacy to understand how the next generation of workers can use AI. We need to start developing that AI curriculum to get it into classrooms as soon as possible. It really comes down to trust, adoption of AI is hard because there isn't trust.'
The objectives are big and critical. The country needs 2.2 million new skilled construction workers over the next 3 years to start to meet what NAHB estimates at 1.5 million housing shortfall.
Yet, optimism reigns. Manufacturers and service providers are investing in ways to lower costs for builders by using AI for its time saving advantages.
And, we're all in this together. Even the folks in office jobs serving the home building industry have to take a role in building up the image of trade work, and it won't be easy.
'I truly believe the best is yet to come,' Davoren said. 'We have to get through the distractions. Go out and care for everyone you come into contact with and the strangers you don't come in contact with until you meet them for the first time. It's hard work. You might impact someone's life and they will model that behavior and impact someone else's life.'
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