Labor, Material Costs Plague Developers: NMHC

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Construction delays are being experienced by 93 percent of multifamily developers. The availability of labor and the rising cost of materials are two very important reasons for the delays. These are among the findings of the eighth edition of the National Multifamily Housing Council (NMHC) Construction Survey.

Among the 93 percent of multifamily developers experiencing delays, 83 percent experienced delays in both starts and permitting, an increase from the 80 percent when the seventh survey was undertaken.

“It is notable that with the pandemic having lasted almost 18 months and the recovery well underway, the availability of labor remains so restricted, and the costs of materials are persistently high,” Caitlin Walther, NMHC vice president for research, told Multi-Housing News.

“Apartment industry executives should plan over the short and medium term for these challenges to continue, though we expect them to be increasingly alleviated over time,” she added.

Construction delay responses. Data and chart courtesy of NMHC

Gauging disruption

Measuring the magnitude of COVID-19’s disruption on multifamily construction represented one of the goals of the NMHC Construction Survey. Among respondents, 98 percent reported being affected by materials shortages. For the second consecutive edition, 100 percent of respondents reported materials price increases, with the average firm experiencing a 13 percent price increase over the three most recent months.

Lumber proved an exception to the rule of increasing materials costs. Respondents reported an average 24 percent price drop during the most recent three months. That came on the heels of precipitous price increases in the survey’s seventh round.

Some 88 percent of respondents reported they are being impacted by labor constraints. That figure is up 41 percentage points from the seventh round and 52 percent from the sixth round. This survey marked the introduction of a question about how construction labor availability compares with pre-pandemic times. Almost one-third said labor was less available at pre-pandemic wage levels, but about the same with higher pay levels. Fifty-four percent said labor was less available even at higher compensation levels.

Among respondents who reported increasing compensation to attract or retain workers, the average pay increase stood at 12 percent. Two months ago, another NMHC survey found a quartet of apartment market metrics ascending.