How the Trade Labor and Materials Shortage has Impacted Renovations During Covid-19 – Forbes Advisor

Table of Contents Compare Quotes From Trusted Local Pros For Home ProjectsWhat Caused The Shortage?Number of Tradespeople Is DwindlingCompare Quotes From Top-rated Local ContractorsLack of MaterialsHow The Shortage Has Impacted The Importance Of ‘Home’Home Is Where the Heart (and Spending) IsDespite the Shortage, Home Improvement Budgets Increased in 2020 and […]

Robert Johnson of Manchester, Connecticut was faced with the tough decision between renovating his home or keeping his business alive in 2020. When it came down to it, Johnson chose his business.

“Remodeling houses is my forte,” said Johnson, “As a woodworker, people are surprised to learn that I haven’t been able to push through my own home’s renovations this year. But I have a good reason not to force it yet.”

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Like Johnson, many Americans have found that while we now have more time to think about improving our homes, a trade labor shortage that has been impacting the industry for several years is making home renovations take longer to complete (or become simply impossible to complete altogether) and cost more money than usual.

Since around 2018, the United States has seen a shortage of tradespeople available to complete projects like kitchen remodels, bathroom remodels, flooring and electrical work. In addition to this, the supplies that they need to complete their jobs—including wood and metal–aren’t available due to a shortage of materials, created as a result of the Covid-19 pandemic, so supply prices are skyrocketing.

The U.S. Bureau of Labor Statistics reported a drastic increase in the price of lumber from 2018 to 2021.

In addition to this, there simply aren’t enough tradespeople available to get work done at the rate at which the demand needs it to be completed. According to the National Electrical Contractors Association, 7,000 electricians join the field each year, but 10,000 retire.

As long as we continue down this road where there are more open positions in the trades than there are workers to fill them, we can expect to see increased prices and longer wait times for home improvement projects.

According to Adecco, the world’s second-largest human resources provider and temporary staffing firm, an estimated 31 million baby boomers who were working in the skilled trades were expected to retire by 2020 and not be replaced.

In a time like now where home improvement demand is up but availability for supplies and the number of labor workers are down, what does this mean for homeowners who are looking to do renovations on their homes?

What Caused The Shortage?

Number of Tradespeople Is Dwindling

Demand for labor is high and supply is low.

Bill Darcy, the CEO of the National Kitchen and Bath Association, or NKBA, says the labor shortage is not new. “Long before Covid-19, the labor shortage has been there, and even for me at 15 years at NKBA, I can tell you that members have been telling me about their worries [when it comes to finding contractors to do work],” he says.

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Why is this? To start, many tradespeople are nearing the age of retirement, and there aren’t enough newcomers entering the trade industry to take their places. According to Darcy, the average age of an electrician or plumber is just shy of 60 years old, and according to data from Natixis Investment Managers’ 2021 Global Retirement Index, the retirement age in the United States averages around 62.

That means the bulk of tradespeople will be at the typical age for retirement within the next two years.

We see this supported by the declining numbers of trade laborers. In fact, the U.S. Bureau of Labor Statistics reported that the number of tradespeople working in construction labor, plumbing, pipefitting and steamfitting, carpet installation, drywall and ceiling tile installation, carpentry, construction trades, painting, and construction maintenance, all dropped from 2018 to 2020 (2021 data is not yet available). While Covid-19 may be at play to some extent, including layoffs, sources say that this number hasn’t increased in 2021.

From 2018 to 2020, the percent decrease in the number of trade laborers in these fields is as followed:

  • Construction laborers: 3% decrease in workers
  • Plumbers, pipefitters and steamfitters: 4.7% decrease in workers
  • Carpet installers: 11.8% decrease in workers
  • Drywall and ceiling tile installers: 2.2% decrease in workers
  • Carpenters: 2.7% decrease in workers
  • Construction trades workers: 1.5% decrease in workers
  • Painters, construction and maintenance: 4.6% decrease in workers

But why aren’t there enough people entering the trades to make up for those who are reaching the age of retirement? According to a 2019 study conducted by StrataTech Education Group, a company that helps with the development of skilled-trade programs, not enough high schools are doing their part to promote entering the trades as a viable path following graduation.

The report found that, even though 70% of the surveyed individuals said that their high school does currently offer some trade-oriented classes (such as welding or shop class), only 32% reported that trade school education is promoted as a potential path following graduation by their school.

The same survey found that 73% of high schools promoted four-year universities, and 45% promoted two-year college programs as potential post-graduations options as opposed to trades.

Data from the National Student Clearinghouse Research Center supports that the number of students enrolling in trade-specific programs has significantly decreased from 2018 to the present.

From spring 2018 to spring 2021, the percent decrease in the number of students enrolling in these programs is as followed:

  • Construction Trades: 19.6% decrease in enrollment
  • Mechanic and Repair Technologies/Technicians: 9.9% decrease in enrollment

Lack of Materials

In addition to the absence of trade professionals, we’re also seeing the recent added stressor of the lack of available industrial supplies.

“That didn’t really start to be a pain point until the pandemic,” Darcy says. The United States imports a lot of its goods from other countries. These goods include everything from fruits and vegetables to construction supplies, and as factory work slowed during the peak of the Covid-19 pandemic, regular scheduling of material transportation became delayed.

In the early months of 2020, Richard Branch, Chief Economist of Dodge Data & Analytics, a provider of analytics and software-based workflow integration solutions for the construction industry, commented on what he thought would be some potential impacts that Covid-19 might have on the construction industry.

“The construction industry is also not immune to challenges presented by the outbreak. A rough calculation suggests that nearly 30% of products typically used in U.S. building construction are imports from China, making the country the largest single supplier to the U.S.,” said Branch.

But according to Census data, the United States spent almost $100 million less in 2020 on importing industrial supplies than in 2018.

How The Shortage Has Impacted The Importance Of ‘Home’

While the Covid-19 pandemic caused (and continues to cause) stress, trauma and devastation, if there is one positive to take from it, it may be this: Americans have learned not to take their homes for granted. Despite the labor and materials shortages and increased costs for remodels and upgrades, home improvement projects have persisted, and at a rate that is higher than ever.

In fact, researchers at Harvard University found that 2020 was a record-breaking year for home improvements. Last year alone, Americans spent nearly $420 billion on home improvement projects. Having been required to stay inside for so many months, Americans are deciding that having a functional, comfortable and livable home is a top-priority—even in the face of sky-high material costs.

And 2021 has proved to be no different, with no signs of home improvement spending decreasing any time soon. The recent Leading Indicator of Remodeling Activity (LIRA) report from Joint Center for Housing Studies of Harvard University found that “homeowner improvement and maintenance spending are set to accelerate in the second half of [2021] and remain elevated through mid-year 2022.”

In fact, they anticipate that “annual growth in home renovation and repair expenditures will reach 8.6% by the second quarter of next year.”

What’s even more shocking is that the United States spent around $100 million less on foreign materials (as shown in the chart above), forcing Americans to spend more than ever on U.S. materials. Due to the pandemic, we weren’t able to safely import foreign construction materials, so we had to rely on American-made supplies, which this massive shortage has proved, just weren’t enough.

If the United States is unable to sustain the rate and scope of all these projects without imported goods from other countries, it appears that our current manufacturing and home renovations-focused industry is failing, and without Covid-19, or some other worldwide crisis, we might not have ever noticed. But now that it’s been made apparent, will something be done to correct it?

Especially with the trending year-over-year increase in home improvement spending, we should be doing more to make sure that we’re able to self-sustain if there comes another situation where we might have to.

Home Is Where the Heart (and Spending) Is

Darcy said that from his research, most people have actually enjoyed spending so much time at home and plan to continue to spend much more time at home, compared to what they would have done pre-Covid-19, and because of this, they’re willing to invest more in their home improvement projects to make them more luxurious and elaborate than they once felt they wanted or needed.

“For me,” Darcy says, “it’s logical why you’re seeing this shift to ‘more’ because there are those dollars available to people, and because of our lives within a Covid-19 environment, the home is the central place.”

“Forty-two percent of our member design firms say that their clients are requesting higher-end, higher priced materials and finishes; a noticeable jump from the 34% last quarter,” Darcy said. “More people [are] using [design] firms [with] designers to complete projects, more people are spending money on higher-end products and more people are increasing the scope of their projects—even within the growth, we’re seeing growth.”

Despite the Shortage, Home Improvement Budgets Increased in 2020 and 2021

The average household spending on home improvement projects in 2020 was $13,138, a drastic increase from the average spending in 2019 of $9,081.

In an ideal world, homeowners could make the improvements that they wanted and needed during a time spent inside, but that’s not realistic for everyone. Big home improvements, like interior painting, remodeling a bathroom and installing new flooring (which were the top three projects completed in 2020) are expensive, and most households would need to save money over time in order to complete them.

However, a decent percentage of individuals had the money to take on these projects, despite the numerous previously discussed factors that made them more expensive than normal, which may leave you wondering—how?

Even though homeowners had to spend more money to complete their projects, most individuals used their relief funds on home improvement projects, which shows a clear shift in financial priorities. In fact, according to the National Kitchen and Bath Association’s Darcy, many homeowners went as far as to increase both their budget and their scope of work for an even more elaborate end result.

“Homeowners have demonstrated that they’re willing to spend more to renovate with higher-end products,” Darcy said. “Luxury products are accounting for the largest percent of the industry growth; almost 30% is in luxury,” he continued. “Sixty-two percent of our design firm members reported an increase of the size and scope of the project compared to pre-Covid-19, so people that have been mapping out these projects decided to increase the scope over time within Covid.”

In 2019, home spending habits were only slightly different. The top three projects completed that year were room remodels (with bathroom remodels topping the list), new flooring and landscaping. For both 2019 and 2020, interior painting and bathroom remodeling were part of the top three most completed projects, with the only difference being new flooring in 2020 vs. landscaping in 2019.

This makes sense as our lives were centered around staying indoors in 2020, so home improvement was focused more on updating the inside of our homes, rather than the outside and landscaping.

Spending Elsewhere Decreased

While home improvement spending undoubtedly increased amidst the pandemic and most regular activities slowed or paused, most Americans were both receiving supplemental income in the form of stimulus payments and and spending less money on things like:

  • Vacations
  • Dining out
  • Gasoline
  • Movies and other forms of entertainment

According to public reports, the average American received about $3,450 in stimulus payments. It’s likely that those supplemental funds, in conjunction with money saved while in lockdown, is what many homeowners used to complete their home improvement projects.

What About Those Who Can’t Afford Their Remodel?

While for many, the available supplementary funds from the pandemic was the push they needed to renovate their homes, others weren’t able to justify the spend.

According to the Pew Research Center, “Roughly 9.6 million U.S. workers (ages 16 to 64) lost their jobs, based on averages of the first three quarters of 2019 and the first three quarters of 2020.” For many in this situation, there was no such thing as “extra dollars” for home improvement projects, as they were simply trying to stay afloat.

Additionally, projects that were once attainable were now completely over budget.

Billy Daniel and his wife flip homes together. In early 2020, before Covid-19 and the materials shortage had come to a head, they purchased a home in Arkansas, which needed a complete remodel. However, by the time his project started, the quotes that he originally received for the work were no longer applicable.

“At the time, repairs were estimated around $60,000. By the time the paperwork was done and we were ready to start work, the cost had ballooned to over $80,000, based solely on material costs. The focus has been on lumber, but electrical wiring and plumbing are experiencing the same rapid growth in prices. We were unprepared for such a jump,” Daniel told Forbes Home.

Claire Hunsaker of San Francisco encountered a similar situation with her recent renovation.

“We are wrapping up a major renovation, and the cost of our all-wood back fence was quoted at [around] $6,000 back in February. By the time all the plans were approved and it was time to buy the wood for it, in May, it was literally the peak of the wood pricing spike. We paid over $16,000 for that fence. It’s beautiful. Everytime I look at it, I don’t know whether to cry or laugh,” Hunsaker said.

While Billy and Claire were both lucky enough to be able complete their projects amidst the drastic price increases, others could not.

Johnson, who chose to keep his business afloat instead of completing his home projects, explained how the Covid-19 pandemic has been especially trying on his business.

“[The pandemic] triggered increased costs in raw materials that, in turn, affected our overall sales. In fact, wood’s price is at an all-time high and shipments are always delayed. [The] labor shortage also influenced our production on top of the added costs of adhering to Covid-19 health protocols. As much as I would like to continue with my home improvement projects, I had to save my business and divert my funds. Hopefully in the coming years, my company will recover enough for me to fulfill my dream house, even if I do it all by myself,” Johnson told Forbes Home.

And he is not alone. While yes, many individuals have been able to continue with their renovations and even make them more elaborate than normal, many Americans, like Johnson, had to put everything on hold, causing emotional and financial strain.

Will This Shortage End Any Time Soon?

There are several factors that are responsible for the trade labor shortage including the retirement of many trade laborers, the Covid-19 pandemic and the lack of emphasis being placed on the trades as a viable post-graduation option by schools. But is it possible to correct these problems and put an end to the trade labor shortage?

The short answer is yes, but in order to do so, many things need to change, starting with containing the Covid-19 virus so laborers can get back to safely doing work and the importing and exporting of supplies can return to normal.

“If the virus is not quickly contained and quarantines remain intact, supplies will continue to tighten causing building costs to continue to escalate, and potentially causing projects to be delayed or cancelled outright,” said Dodge Data & Analytics’ Branch. “The exact extent to which this happens will depend on the ability of U.S. builders to substitute products from China to domestic or other international suppliers,” he continued.

In addition to this, schools (K through 12) need to do more to further present trade schools as an honorable and acceptable post-graduation option, and encourage it to students equally as much as they do traditional four-year college degrees.

“I honestly think the supply chain part of it will be corrected over time. We have amazing manufacturers in our industry and they’re trying to make things as fast as they can and they’ll balance out the demand…but the thing that worries me most is really the labor side because there’s not really an easy fix to [that aspect of] the shortage,” says National Kitchen and Bath Association’s Darcy.

More Trade School, More Tradespeople

“We’ve had this [labor shortage] situation for a number of years…There’s not a lot of new people entering these fields, so the ones that do will earn an amazing living and have the opportunity to be a business owner. I think our message to the consumer is if you have a young person in your life, encourage them to consider the trades,” Darcy said.

Introducing students to the trades earlier is equally as important.

“Comprehensive career exploration should begin at least as early as the middle school grades to ensure students understand the full breadth of education and career opportunities available to them in the American economy, including the skilled trades,” said Alisha Hyslop, Senior Director of Public Policy for the Association for Career and Technical Education (ACTE). “Career exploration and development should be a systematic part of students’ education at the K through 12 level, and high school students should have a wide variety of options to pursue high-quality career and technical education programs (CTE) that set them on a path toward stackable, industry-recognized credentials, certificates and degrees.”

“Across the country, these high-quality CTE programs are already connecting students with employers seeking to fill high-wage, in-demand positions in the skilled trades workforce, as well as other key in-demand career fields like health care and IT, and should be expanded to ensure all students have equitable access to these important opportunities,” Hyslop concludes.

5 Tips For Saving Money During a Home Renovation

Sometimes, home renovations are unavoidable. While now may not be the most budget-friendly time to do them, if you want (or have) to complete your project now, here are some tips for making your home renovation more affordable.

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Start with a Plan

Blindly going into a home renovation project is an almost guaranteed way to spend way more than you anticipated (or needed to). Start with a plan, a detailed one, and have a specific end-goal in mind. This will help you stay on track and on budget. While the plan may change slightly as your project progresses, having a starting off point will help keep the project moving, and help you get to your goal without breaking the bank.

Know Your Budget

In order to stay on budget, it’s important that you have one. Before your project starts, decide how much you’re willing to spend. This will help you decide where you can splurge and where you should save. Always account for a buffer of 15% to 20%, just in case of emergencies.

Keep the Cabinets

New cabinets can be expensive, and your kitchen remodeling dollars are better spent elsewhere. But that doesn’t mean you can’t transform the cabinets that you already have. Instead of tearing down and replacing your current cabinets, paint them instead. Painting your cabinets is a fairly simple and cost-effective way to help keep your kitchen remodel within budget, while still making drastic visual changes.

Shop Around

This goes for almost every aspect of your remodel: paint, decor, appliances and more. Take the time to shop around to find the best price. More often than not, stores will be willing to price match, so make sure to ask about that if you find a better price elsewhere. Don’t forget about thrift stores, too. You’ll be amazed at what you can find as far as decor, hardware and more.

Know When Not To DIY

One of the most costly mistakes that homeowners can make when renovating is trying to DIY a project that they should have hired a pro for. If you don’t have the skills, ability, equipment and time to take on a project, it’s usually better left to a professional. Moreover, just because you do have the skills, ability, equipment and time to take on a project, that doesn’t make that you should.

Be honest with yourself about your abilities, and don’t bite off more than you can chew. You could end up spending more by having a pro come in to fix the project you tried to DIY than you would have spent just hiring a pro off the bat.

The Bottom Line

When it comes to homeowner’s ability to do renovations on their homes, the labor and materials shortage, in conjunction with the Covid-19 pandemic, has really been make-or-break. While to some degree, the statistics suggest that renovations have continued on, and were even more elaborate than once planned, there are many others like Robert Johnson who had big plans that were quickly crushed.

The Covid-19 pandemic and the materials shortage mixed with the retiring of most tradespeople has created the perfect storm which has brought to light some major pain points in the home improvement and trades industries in our country. This has all proved that without the help of imports from other countries, the United States is not manufacturing enough supplies to meet their home improvement material demands.

In addition to this, the very present gap in the number of retiring tradespeople vs. the number of new workers entering the field is an issue that needs to be addressed. While eventually, it’s likely that the supply chain will smooth itself out and materials will become less scarce and more reasonably priced, the future of the trades is uncertain.

Unless schools take the initiative to place emphasis on the importance of the trades, it’s fair to wonder if inflated labor pricing will become the new norm, causing many more situations like Johnson, Daniel and Hunsaker’s to arise.

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https://www.forbes.com/advisor/home-improvement/labor-materials-shortage-impacts-renovations/

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