apartment building under construction

Construction Industry Reeling From Shortage in Materials, and Labor

The housing market only received a boost during the pandemic. While many industries across the world suffered, people continued to buy and sell homes, creating a shortage of available properties and raising the cost of housing. In 2021, as restrictions loosen due to wide-scale vaccination efforts, there is high demand for the construction of new buildings.

Shortages Hit Construction Industry

However, now, the industry is facing multiple problems. While contractors are busy receiving calls from clients everywhere, they are experiencing constraints due to global supply chain shortages, the rising costs of building materials, and not enough capable workers.

The problem has been going on for a while now. The pandemic lockdowns also halted the production of building materials. Aside from government restrictions, the spread of the virus among workers forced suppliers to pause operations. Moreover, the pandemic restrictions also affected ports around the world, causing congestion and delays in shipments.

More recently, China partially closed one of its biggest cargo ports after a worker tested positive for the more contagious and deadly Delta variant of COVID-19. The Ningbo-Zhoushan, located in eastern China, is the third busiest in the world. No doubt, its temporary closure will further cause disruptions in the global supply chain.

Meanwhile, the demand for new buildings continues to rise. Since January 2012, about 12.3 million homes have been constructed across the United States. However, according to a recent report, more than 5 million homes are needed to be built to satisfy the demand.

There is also a severe lack of single-family homes. Between 2012 and 2021, only 7 million single-family homes were erected all over the nation, the slowest pace since 1995.

The construction industry will need to double the number of new homes being built in the next five years to address the shortage.

Because of the challenges that the industry is facing right now, it might not meet its goals.

construction workers

What is in Short Supply?

The U.S. is not the only nation in the world that has been struggling to procure construction materials. Everywhere, the demand for these items is high, but contractors are fighting for the limited resources. It is driving the cost of construction materials up.

Lumber, a material that is used in construction a lot, is in such short supply but the demand remains sky-high. In a recent report, 31 percent of contractors surveyed cited lumber as the most difficult to source. Contractors also cited steel and electrical supplies except coppers as well as lighting supplies to be experiencing shortages.

There is also a lack of available construction equipment and parts. Both new and old are seeing dwindling numbers as the industry remains busy. Some suppliers of construction equipment have long wait times. Auctions also now have low numbers of available used machines.

It has caused soaring prices. The cost of lumber, in particular, had a steep rise. Meanwhile, prices for large construction equipment like earth moving machines went up by around 8 percent in the second quarter of 2021.

Shortage in Labor

Labor has been a problem within the construction industry even before the pandemic. It started in 2008, during the Great Recession when 600,000 skilled workers left construction for other industries. They never came back when the economy recovered and, to this day, construction has been feeling the loss.

Baby Boomers are leaving the workforce, too, exacerbating the lack of skilled workers in the construction industry.

Almost all (91 percent) of all contractors said that they have trouble finding workers to fill in open positions, according to one survey. The shortage of laborers has caused commercial construction to slow down in recovery in 2021. Many contractors also admitted that the inability to find skilled workers has forced them to turn down projects. Over half are also admitted that the shortage has made meeting project deadlines more challenging. Moreover, nearly 60 percent of contractors said that they are placing higher bids for projects to be completed.

As a result, many contractors do not expect to see their revenue increase this year despite falling cases of and hospitalization for COVID-19. If they have to turn down jobs because of the shortage in material, equipment, and labor, contractors are losing potential income.

Only 37 percent of contractors think that their revenue will rise this year.

The U.S. and many countries around the world experienced an unprecedented housing boom during the pandemic. This caused a shortage of available property in the market. However, the construction industry has been facing several challenges, including major shortages in supply and labor, that have delayed projects. It is still struggling to build enough homes to satisfy demand.

Scroll to Top