Friday, May 18, 2018

Site Builders Facing Higher Costs than Modular Construction

You hear a lot of advantages of modular construction over site building but two things are having major impacts on both.

The cost to build a new home continues to rise for a multitude of reasons: chief among them are a tariff on imported Canadian lumber and an ongoing construction worker shortage.
The 20 percent tariff on Canadian lumber, which was instituted late last year, has added approximately $6,000 to the cost of the average home being built today. Both the modular home and the site building industries are sharing the pain on this one.

Modular has a slight advantage here because much of the lumber that didn’t go into the actual framing of the walls is used for bracing for kitchen cabinets and bathroom accessories, wall bracing and even for fuel to heat the modular production line in the Winter.

Extra lumber at the site built jobsite is usually just thrown in the dumpster.

Even though the tariff may be 20 percent the price on lumber for some areas of the country has actually risen between 45 to 50 percent in recent months.

Tariffs put in place in March on imported steel and aluminum – 25 percent for steel and 10 percent for aluminum – have had less of an impact on the single-family home construction market than they have on the cost to build a multi-unit housing facility, like an apartment complex.

According to the National Apartment Association, the tariffs are expected to add $250,000 to $450,000 to future projects.

As for the worker shortage, it has growndrastically in many regions amid the ongoing construction boom with estimates of 1,000,000 new jobs needed in the new construction industry this year.

The labor shortage is adding about two months and about $5,000 to the cost of every single site built job while the more steady workforce employed by the modular industry has not felt the need to raise costs to their builders regarding labor costs.

While both the tariff and labor problems are impacting both modular and site built, the modular industry is not being forced to raise the price of their homes as fast as site builders and today, that is a good advantage to have!

Related Article: It's Not a Labor Shortage, It's a Labor Shortage


Richard H said...

20% tariff on Canadian lumber.....thank you for making America great once again. So great that no one can afford to build a new house.

Bill Hart said...

Richard you might find if you look into the history of the softwood tariff (see wikipedia) it didnt just start with Trump or the current Republicans! In seems the softwood tariff was/is an on going issue that in fact,overlaps nearly all administrations sine 1982, and perhaps even before that! I think there were some Democrats in charge of our commerce since then, right?

Bow Summit Developments Ltd. said...

Damn Canadians. We sell our forests at a loss to you guys. He should put a tax on foreign oil so your industry has a leg up as well. America's industries that can't produce enough product to supply the us demand need protection