Wednesday, March 15, 2017

Site Builders Fear Loss of Illegal Workers

It’s an open secret that many illegal immigrants work in the construction industry. While they represented a 5 percent share of the U.S. civilian labor force in 2014, they made up about 13 percent of workers in the construction sector that year. Only farming had more.

The NAHB, the powerful voice for home builders, is in favor of a guest worker permit to allow legally approved workers from other countries to work in trades that require little training like carpentry, painting and drywall. With so many unemployed in inner cities you would think they could fill those jobs before any foreign worker could but that really isn’t an answer.

Workers waiting for site builders to hire them for the day
Immigrants, both legal and illegal, that come here to work in the construction trades have no trouble moving from job to job or place to place, as most do not have friends and families like the inner city unemployed.

The days of the CCC have passed. The Civilian Conservation Corps (CCC) was a public work relief program that operated from 1933 to 1942 in the United States for unemployed, unmarried men from relief families as part of the New Deal.

The lack of labor has depressed construction levels throughout the housing recovery, contributing to an imbalance between supply and demand for homes and thus driving up prices.

Tighter controls on immigration, whether legal or illegal, under President Trump may only exacerbate the homebuilding industry’s labor shortfall.

So what is the answer? One answer is the rise of big HUD and Modular home builders like Warren Buffet’s Clayton Homes buying regional site builders and starting to ramp up production of off-site home building to fill the building lots of these recently acquired site builders.

Another answer is European type of off site construction popular in Sweden, Germany and England. Build a lot of similar looking houses, both panelized and modular, rapidly in factories and ship them to the job site. Heavy use of expensive robotics and CNC machinery as well as shorter delivery mileage makes this a tough sell for US manufacturers but it is an answer.

Lastly, move more site built construction to off-site modular home factories. Wouldn’t that be great if the modular industry across the US could pick up simply the houses that site builders can’t build in 2017?

That is actually starting to happen in the New England and Mid-Atlantic states where most modular factories are running near or at capacity for Winter with a couple of factories telling me their backlog is building quickly.

But the modular home industry faces two big challenges to making inroads with site builders that are losing 13% of their workers.

First is the stigma of site builders not understanding why our process is advantageous to their customer, their lead-time to move in for their customers, the ability of today’s modular home factory to build custom homes, especially in the East and they don’t understand that their bottom line would improve.

The second challenge is that no one seems willing to put up the huge investment to build modular home factories to meet a demand that should be there from site builders but isn’t. Yet!

For a new custom modular home factory to come on line would require an investment of $8-10 million dollars. If that factory could turn out 30 line moves a week at an average of 3 modules per house, it would produce 500 homes a year.

Using 1.3 million new home starts in the US as the benchmark, it would require our industry to build 26 new factories to simply raise our percentage of new home construction from 3% to 4% of the total.

26 new factories at $10,000,000 each means an investment of over a quarter of a billion dollars for every 1% increase in market share.

Modular home construction is in a position to build those factories close to high unemployment cities and give steady employment to thousands of new, trained production and management people but our industry simply can’t afford to do it.   

1 comment:

Bill Hart said...

I lived thru the CCC, the NRA and most of Roosevelts stuff and thats sure as hell not the answer!