There’s work to be had, but Valley builders are suffering from shortage of talented laborers

Arizona construction workforce

Arizona construction workforceBy Philip Haldiman, Editor-in-Chief | Dealmaker

It’s so hard to get good help these days.

If you’re a builder in the Valley, this adage probably rings true.

Since 2010, the number of housing permits in Arizona has gone up nearly 55 percent, states the U.S. Census Bureau. But construction employment is down 17 percent nationally since 2006. In Arizona, it has far from recovered, being down 45 percent from its pre-recession peak, the Bureau of Labor Statistics reports.

The disproportion has left builders in search of workers.

A number of manufacturers has said a lack of skilled laborers hasn’t killed deals, but has affected their business in a number of ways, from higher labor costs to longer lead times.

One builder recently reported his costs to construct a home in Phoenix went up $2,500 to $3,000 per house in just one week, because of increased costs in plumbing and framing.

Jim Belfiore, president of Belfiore Real Estate Consulting, told Dealmaker the lack of skilled laborers has affected builders’ pocketbooks.

“We are starting to see builders attempt to pass along labor cost increases to buyers,” Belfiore said. “In some submarket areas, builders are successfully able to do this. But in other areas, they’re being forced to absorb these additional costs.”

Dennis Hoffman, director of the L. William Seidman Research Institute at ASU, told Dealmaker that in 2006 there were 250,000 construction workers in Arizona, and now there is half.

Hoffman said that when the recession hit, a number of construction workers headed other places to find work and never returned, leaving Arizona with a shortage of workers when the housing industry came back. Also, a large number of Baby Boomers in their 50s with talented construction skills did not return to that work force, post-recession.

“A builder once told me, ‘A talented construction worker is like a pro athlete, when you’re done, you are done,’” Hoffman said. “Also, construction is highly mobile. Workers will go where the jobs are, so they left here. They moved to Denver, Salt Lake, Vegas. Those markets continue to be strong, so why come back here?”

But Hoffman said one of the least talked about reasons Arizona has a shortage of laborers was the passage of the Legal Arizona Workers Act, more commonly known as the Employer Sanctions Law, which went into effect January 1, 2008.

The law made it much more difficult to hire someone who isn’t authorized to work in the United States.

Before that, Arizona had an abundant supply of talented workers, Hoffman said.

“Immigrants left after 2007 because of the sanctions, and it became more difficult to get workers,” Hoffman said. “A lot of politicians like to say the economy is over-regulated. What’s interesting is that by their own actions, they have stifled an industry. We could create a viable and enforceable guest worker program to solve this problem, but that hasn’t happened.”

Anthony Sumner, co-founder and principal at Sandbox Development Consultants a Phoenix-based land development consulting firm, told Dealmaker that as the market was recovering, people started to build really quickly, and either construction workers couldn’t do the job or builders had to wait.

People are hungry for work, but the Valley definitely has a skilled labor shortage, Sumner said.

“Now we have longer lead times and limited crew availability,” he said. “Builders can go with low bidders but they might not get workers on-site in time. So, you may have to pay a higher bidder to get workers there in time.”

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