Construction costs are on the rise around the Greater Houston area as ongoing development and Hurricane Harvey have led to a robust demand for materials and labor.
In the aftermath of Harvey, certain key materials needed for reconstruction and renovations have become harder to find in the region, including the Cy-Fair area. However, industry experts said construction costs were already on the rise before Harvey, and they expect the effects of the disaster to be temporary with prices stabilizing in about a year.
The current issues—including strong demand for lumber and gypsum as well as a general lack of labor—should subside as repairs are completed throughout the next few months, said Will Holder, president of Trendmaker Homes, a developer with multiple projects in Cy-Fair, including the Hidden Arbor residential community. However, he said obtaining certain construction materials could prove to be a challenge in the near future.
“[The storm] impacts Sheetrock for sure, and flooring is receiving a lot of business,” he said. “If you’re trying to renovate your home from the flood, it’s going to be difficult.”
Meanwhile, other projects underway in the area were delayed by Harvey.
Todd Johnson, vice president of development and construction for Caldwell Companies, said the company lost a month of construction time. Caldwell developments in Cy-Fair include the Towne Lake master-planned community, which features residential and commercial elements.
“We lost probably a month of time when it came through afterwards,” Johnson said. “We work with people all across the Houston metro. … So everybody was affected differently.”
Construction jobs in the North Houston area have increased within certain industries—such as flooring and Sheetrock repair—due to flooding and damage from Harvey, according to experts. As a result, contractors in those industries said they have more open positions than there are workers to fill them.
Roy Sprague, Cy-Fair ISD’s chief of operations officer, said, although the district tried to prepare for the worst when it prepared bond packages for voters in 2007 and 2014, labor issues may increase operation costs and extend timelines for future elementary school projects. He said surplus funds from the 2007 bond will help with projects funded by the 2014 bond referendum.
“We factored in 7 percent inflation when [the 2014]bond program was developed, and we’ve been pretty much right on track,” he said. “I think where we will see the impact is in labor resources available. … You have a lot of labor forces that may go from the commercial side to the residential side to help deal with the demand that’s needed to repair and restore houses.”
According to the Associated General Contractors of America, a 26,000-member trade association for the U.S. construction industry, many Texas contractors are reporting problems hiring personnel. In a 2017 survey of 158 Texas contracting firms conducted by the AGC, 69 percent said they had issues filling hourly craft positions. On top of that, of the
81 percent who said they plan on hiring additional hourly craft personnel within the next year, 65 percent said the hiring was for expansion while only 16 percent said it was to replace existing workers.
The sheer demand for jobs is a big part of the rising costs, according to Michael Burns, dean of instruction, career and applied technology with the Lone Star College System.
“You have more demand on the same amount of resources,” he said. “You’ve got the same amount of people but doing four, five, seven, 10 times the amount of work.”
To help alleviate the labor shortage, LSCS’s fast-track construction programs are moving students straight from the classroom to the workforce, Burns said. LSCS is working with the Texas Workforce Commission to provide the necessary certification and education for students to start working as soon as possible in the industries most in need after Harvey.
“We have two-year degrees in this area, but it takes a while to get ramped up,” he said. “We’re giving them enough to become employable right now. We’re running it like a job. It’s all day, four days a week. Some of these are three-, four-, five-week programs.”
LSCS celebrated the grand opening of its skilled trades technology center Oct. 30 at the LSC-North Harris campus. Burns said hundreds of students can be trained at the same time within the fast-track programs where they learn to work with carpet, concrete, drywall and windows, among other materials.
Students in construction courses in the applied technology program are employable after one semester, while students in the fast-track program are employable after a few weeks. As of this fall, more than 900 students in the program are earning certifications every week as they work to complete a degree, Burns said.
“In three weeks, you can finish Carpeting 1; that’s basic framing and carpentry,” he said. “You are not going to be able to build a house, but you will be able to get hired on to a crew to be able to rebuild.”
Demand for materials, land
According to the AGC, the price of lumber and plywood increased by 6.3 percent between October 2016 and October 2017. Meanwhile,the price of gypsum products—which are used for Sheetrock and plaster—has increased by 8.5 percent.
Holder said the last three major hurricanes in the Gulf Coast this year—Harvey, Irma and Maria—have affected the prices of these materials around the U.S., not just North Houston, due to the strong demand to renovate commercial and residential developments.
Holder said although he thinks the cost of materials will normalize within the next year, the larger problem in Cy-Fair relates to buildable land for new developments. Flooding has made large available parcels less viable for building due to structural integrity, he said.
“Our definition of buildable land would have to change,” he said. “If you had land that hadn’t flooded ever and you have this kind of event, it’ll affect different parcels and their viability.”
However, Sprague said the increased demand for materials is still an issue. The rising cost of materials like wood, which is heavily used in many different types of construction, affects both residential and commercial buildings, he said. The material issue might affect the repair schedule of Moore Elementary School, which flooded during Hurricane Harvey and is set to reopen for the 2018-19 school year.
“There’s a lot of wood products that are typically built in buildings,” he said. “Casework and cabinets are [some]of them. Obviously, there’s been a lot of need for plywood out there. We typically have plywood underneath our gym floors. We’re already going to start seeing an increase in certain products and systems that make up an overall project.”
Getting back on track
Even before Harvey, the respective prices of concrete and gypsum were increasing steadily according to AGC data. Holder said as long as Greater Houston area residential builders can get over the initial bump in prices caused by Harvey, construction rates should stabilize, albeit still increase over time.
With regard to commercial construction, Sprague said the toughest issue is timing. He said the increased volume of residential projects could affect commercial construction as well, including Middle School 19 and elementary schools 57 and 58, which were slated to open in 2020, 2021 and 2023, respectively.
“We’ve got several more projects where we’re finalizing design, and we’ll be putting on the streets for proposals or contractors,” he said. “We may start seeing some of [the labor issues]. I think a lot of it has to do with the timing of the market. A lot of people are just trying to go through their cleanup and remediation just to be able to start the [rebuilding]process.”
Burns said the labor and material issues existed before Harvey, and LSCS is hoping to alleviate those problems. With the increasing cost of labor, LSCS is hoping to get students into the workforce as fast as possible, shifting courses when disasters hit, Burns said.
The rise in labor costs should subside after lighter jobs, like finishes and cabinets, are done, Johnson said.
Holder said he expects these trends will fade within the next eight to 12 months, faster than anticipated.
“This is an event-driven market, and this is not a structural market move,” he said. “It’s like a strong cup of coffee; it’ll give it a bump, but it’ll never last. It’ll take a year to stabilize—like a bell curve—and it is declining right now.”