Housing Hurdles: Labour and Materials

In the last post I quoted the former Deputy Mayor of Toronto, who pointed out that there are three things you need to get housing built: “You need the approvals, you need the people to build these things and you need a way to finance it…Right now, we’re having issues in all three.” The Ford government set a target of building 1.5 million homes in the coming decade, and changed the rules around approvals because they said that the slow process was behind the lack of construction. But at that point there were already 1.25 million housing units in approved projects that are largely not being built. In Toronto alone, city planners approve almost twice as many units annually as are actually built. In this post we’ll look at why there are approved projects that aren’t breaking ground.

Labour Shortage

There are a lot of numbers in this article from July, but I’ll pick out two: Ontario is currently short 72,000 construction workers, and another 80,000 are set to retire over the next decade. The result is that many projects that have been approved, and even started, are delayed.

There are few things as complex as labour economics, so there’s no simple explanation here, but there are a few general points worth mentioning as to why we have a shortage of construction workers:

The aging workforce has been a demographic time bomb for a long time now. The Baby Boom created a population surge that grew the economy quickly; the bulk of those people are at retirement age now, and while there’s no lack of human beings on the planet, the sheer number of people does not make for a simple 1/1 replacement in an established industry.

Trades are always important to society, but there has historically been a cultural division between “blue collar” and “white collar” work. Trades involve physical labour and on-the-job training and/or college programs, and are traditionally associated with the lower classes. Most “white collar” work involves office jobs and requires university degrees. As university education became more accessible to more people, these cultural factors funneled more young people toward degrees and careers dealing with data, finance, and research, or toward the arts. Labour, in the sense of physical work, is increasingly outsourced to other countries or to new Canadians and temporary foreign workers. Those people also need places to live, increasing the demand for housing even as they’re here to help build it.

New technologies have also expanded the scope of the trades, increasing the number of positions required for a construction project and the amount of training necessary for many of them. Electricians not only wire a home to use power from the grid, but they can also specialize in solar and wind installations and battery backups. An “energy concierge” is a specialist who can help homeowners retrofit their homes to manage their energy usage; others specialize in “smart home” features that integrate the “internet of things” such as “smart” appliances and fixtures, security and safety systems, and more. Some of the workers who now specialize in such things would otherwise be part of the building crew that is now short-staffed.

For these and many other reasons, the labour shortage in construction is worse than many other industries. One partial solution that has been suggested is to recruit more women and Indigenous people to work in construction, an industry that is notoriously sexist and racist.

Materials and Inflation

Global supply chains took a massive hit during the lockdowns of the early COVID era. At a time when everyone with a yard realized they needed a new deck, the cost of lumber surged by over 400%.

The cost of lumber, found at Lumber Prices – 50 Year Historical Chart

Note that the costs came down again relatively quickly. While the rising costs of materials through general inflation, increased trucking costs, and other factors have had an impact on the cost of construction, it doesn’t account for housing unaffordability; housing markets have increased far faster than inflation, and developer profit margins have increased over this time (more on that in a future post). So materials costs are not to blame for high housing costs.

But the high cost and low availability of materials does have a major impact on delays. Even when builders can get the materials they need in a timely fashion, higher costs means that they need more financing, which can cause further delay in even starting a project.

NIMBYism and Delays

We hear a lot about NIMBYism preventing or delaying housing projects from being approved by municipal authorities. But even projects that have been approved can face significant delays as builders navigate the ongoing challenges of building in a neighbourhood that opposes the development.

It’s a very good thing that residents can complain to authorities about unsafe worksites, too much noise and dust, etc. As a councillor, I take these complaints very seriously and direct them to the Planning and Public Works departments through the CAO as appropriate. Addressing these concerns often necessitates a site visit from a Building Inspector or other municipal staff, sometimes even Conservation Authority staff. But there is no construction activity that has absolutely no disruption to the lives of the people around it, and if people are constantly making complaints to the builder or municipality, it creates further delays to construction. For people who are actively against the development occurring, these processes can be a way to hold up construction.

In order to avoid this, developers will sometimes spend months or even years trying to work with the neighbours to collect feedback, adjust their plans, and build goodwill (or just let anger die down).

The Cost of Delay

Assuming all of these projects will eventually be built, the delays in building come with significant costs. Materials get more expensive over time, shifts in the labour market make labour more expensive, subsidies on some products or projects expire, new standards are introduced…and above all, the market value increase over time makes housing more expensive by the time it’s built.

Back in 2018, a developer proposed a new neighbourhood in Brighton aimed at affordable housing for seniors. I don’t know which of the above issues caused the most delay, but between the public meetings for feedback and the start of construction (just now underway), houses that were supposed to cost $200-300k will now cost twice that. Is that the fault of a greedy developer? If only it were that simple! We’ll look at financing, developers, profit margins, and commercial landlords next time.

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