Construction hiring must drastically increase to ease housing shortage

The housing inventory shortage has been exacerbated by a lack of skilled construction workers needed to build enough residences to keep up with household formations, a report from the Home Builders Institute declared.

More than 12 million new households have been formed since the beginning of 2012, while approximately only 10 million new homes (for ownership and rent) were built during the same time, the group said.

In order to keep up with the growing demand for homes, 740,000 new workers need to be hired per year through 2024, the HBI calculated by using a National Association of Home Builders analysis of Bureau of Labor Statistics data. The HBI, a nonprofit provider of trade skills training in residential construction, is an affiliate of the NAHB.

The construction labor shortage has been a concern for some time. Back in 2018, the NAHB and the HBI promised to train 50,000 people in the trade over a five-year period.

"The construction industry needs more than 61,000 new hires every month, if we are to keep up with both industry growth and the loss of workers either through retirement or simply leaving the sector for good," HBI president and CEO Ed Brady said in a press release. "From 2022 through 2024, this total represents a need for an additional 2.2 million new hires for construction. That’s a staggering number."

Fannie Mae's October forecast expects 1.61 million total housing starts on a seasonally adjusted annualized rate this year, an increase of 16.8% over 2020. However, for 2020, it predicts that the number will remain essentially flat at 1.59 million units.

The number of open construction sector jobs currently averages between 300,000 to 400,000 each month; in July, open positions totaled 321,000, the report said.

Construction sector hiring was at a rate of 5.2% in July, compared with a post-pandemic peak of 10.2% for May 2020. Except for weather-related reasons in March, hiring has generally slowed since then due to a lack of workers.

"The U.S. is experiencing a historically low supply of homes for sale, especially at the lower price points that newly formed households tend to need," Brady said. "For residential construction to expand and housing affordability to increase, more skilled building trade workers must be recruited and trained for the home building sector."

However, it will become harder to attract new workers as the overall labor market strengthens, the report pointed out.

Residential construction represents 3.1 million of the total 7.42 million people employed in the sector. The median age of industry workers was 41, but the workforce is aging. The share of construction workers aged 25 to 54 decreased to 69.0% in 2019 from 72.2% in 2015. Meanwhile those who are 55 or older made up 20.3% of the construction workers in 2019, up from 18.1%, as the baby boomer generation ages, the report said. That implies a substantial portion of people could retire in the near future, highlighting the need for more efforts in attracting talent in the industry, the report said.

"The construction worker shortage has reached crisis level," Brady said. "The situation will only become more [extreme] in the coming year when other industries rebound and offer competitive wages and benefits to prospective employees."

Its latest report had six suggestions for homebuilders to increase the pool of skilled workers: Reach out to secondary school students, and those who influence their decisions, to change their perception of careers in the construction trades; increase worker pay, while balancing the need to keep homeownership affordable; attract more women into careers in construction; train and place more minority and lower-income youth and adults for job opportunities; increase trade skills education for veterans and transitioning military; and work for bipartisan approaches to sensible immigration policies.

While the share of women working in construction increased 0.6 percentage points between 2019 and 2020, it was still a meager 10.9%, the report said.