Residential Construction Jobs Decline Due to Low Housing Inventory

Image of Residential Construction Jobs Decline Due to Low Housing Inventory

It’s no secret that there is a shortage of skilled labor in the US construction sector. Many cities within the United States have had an extremely difficult time filling out positions on upcoming projects. However, no subsection within this industry has been quite as hard-hit as residential construction.

The current state of employment within residential construction has left economists at a loss for words. Across the nation, the average price of a home is almost up to what could be considered crisis levels. The densest markets have been seeing record-high home prices due to a lack of inventory. In fact, inventory has sunk so low within the United States that home availability is now at the lowest point within the past 30 years.

One might think that this demand would precede a ramp-up of home production in America. Instead, the amount of new homes being built per year is just under 20% less than it was 10 years ago. This decline has translated directly to jobs in residential construction. Currently, approximately 767,000 individuals work in residential construction. When compared to 2007, this translates to a 20% decrease as well.

The biggest question is why residential construction and the jobs that get it done are declining. America’s real estate market is presently in a climate that should facilitate the growth in both areas. When analyzed further, various factors are preventing the residential market from thriving as it should.

The Economic Connection

In prior economic recoveries, the home industry has been the predecessor in revitalizing other sections of the economy. Unfortunately, there seems to be an under-building of residential buildings in the US. The rest of the economy is beginning to ramp up while residential construction is lagging and getting left behind. While jobs should be up, this lack of growth is preventing a spike in employment from occurring.

Skilled Labor Shortage in Residential Construction

Another contributing factor to the decline in employment in home building is the increasing deficit of skilled workers. Essentially, this shortage is preventing contracting firms from building the amount of homes necessary to meet demand. In fact, just under 80% of construction businesses reported that lack of qualified laborers to be their main concern. This is a stark contrast when compared to the low of 13% in 2011.

However, critics contest that hourly wages for construction workers have more or less remained the same over the past 10 years. Home-building firms counter that higher wages would translate to home prices that the average American simply could not afford. For the time being, it appears that this issue is at a standstill.

Issues with Government Intervention

An additional hurdle that contractors must encounter is government regulations. As seen with the low-income housing ordinance issued by the city council in Portland, the involvement of the government poses a threat to further growth. Common worries of construction firms include fees, code violations and the new infrastructure required in building new housing developments.

Financial Restrictions

Most home builders borrow capital in order to finance their projects; this poses an issue with the current state of American financing. Lending growth in residential development has been steadily declining, and outstanding loans have decreased 60% from 2007. Banking regulations and hesitation (stemming from the 2008 real-estate crash) has made it hard for firms to obtain the financing they need.

What Should We Do?

There are a variety of steps that must be taken to remedy the residential construction market. Successful action will require a conjunction of the following moves:

  • An influx of financial backing
  • An assessment of what regulations should be adjusted or removed
  • Setting programs in place to prepare the workforce for employment in construction
  • Increases in hourly wages for construction workers

If these routes are fully explored, it is likely that construction firms in the residential sector will see growth, both in production and in qualified employment.


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