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Residential Department: Backspace: June 2018

 

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The housing industry faces an immigration challenge

As 2018 advances toward the busy summer months, the U.S. economy continues to expand and create more jobs, giving even more people the purchasing power to enter the homebuying market. That growing demand, however, is exacerbating an already-tight supply of housing — fueling rising home prices and an affordability crunch that is putting homeownership beyond the reach of many first-time homebuyers.

“We’re not building enough homes right now,” says Robert Dietz, chief economist for the National Association of Home Builders (NAHB). “That’s [a major reason] why home prices are growing faster than incomes, and that’s not what you want.”

One way to help the market get out of that bind is to build more homes, but that requires even more workers in a labor market now near or at full employment. That conundrum is compounded by the construction sector’s historical reliance on foreign-born workers.

“Obviously, there’s a challenge,” says Mark Boud, chief economist with housing-research service Metrostudy, a Hanley Wood company. “We haven’t brought back nearly enough workers to the construction industry [since the Great Recession] that we need to, especially in residential construction, where immigrants make up nearly a quarter of that workforce.

“The challenge with the current [Trump] administration [and its immigration policies] is that a lot of those [foreign-born] workers have gone underground, and that’s hurting construction as well as other industries like agriculture.”

Data from NAHB indicates that immigrant laborers (both legal and undocumented) compose about 24 percent of the nation’s construction workforce. The Pew Research Center estimates that undocumented immigrants alone represent about 13 percent of the nation’s construction labor force.

Based on a survey conducted by NAHB this past July, more than 50 percent of the builders polled reported labor shortages across 11 key construction-trade occupations, including carpenters, electricians, roofers, masons, painters and framing crews. U.S. Bureau of Labor Statistics data show that, as of this past January, the labor shortage had not abated, with the construction sector recording some 250,000 job openings nationwide.

On a regional level, some states along the border are particularly reliant on foreign-born workers for construction labor, according to a study prepared for the NAHB. In California and Texas, for example, immigrants comprise some 42 percent and 41 percent of the construction labor force, respectively.

In fact, there are more undocumented immigrants working in Texas than there are unemployed people, says M. Ray Perryman, an economist and president of Waco, Texas-based The Perryman Group. “In other words,” Perryman adds, “the state would be left with a huge gap (several hundred thousand workers) without the undocumented workforce, even if every unemployed person took a job.”

An estimated 226,000 undocumented workers are employed in Texas’ construction industry alone, data from the Migration Policy Institute shows. Perryman says the need for immigrant workers in the state’s construction industry is particularly acute at this time. “With the current growth in Texas and the massive rebuilding efforts along the Gulf Coast in the aftermath of Hurricane Harvey, there remains a notable shortage [of construction workers],” Perryman says.

A recent NAHB study estimated that, in terms of the actual body count, there were 5 percent fewer immigrants in the construction field in 2016 than a decade earlier. The study also points out that “the flow of immigrants into the construction workforce is significantly slower compared to the housing-boom years.”

Despite the nation’s heavy reliance on both legal and undocumented immigrants in the construction trades, official U.S. policy now calls for clamping down hard on new immigration while also ramping up a nationwide deportation dragnet. “On top of that, this administration wants to pour billions of dollars into infrastructure improvements across the nation, which is great, but that takes the few construction workers we have away from the housing industry even more,” Metrostudy’s Boud says. “Then, add the border wall into the mix … and it just puts that more pressure on the industry.”

Both Dietz and Boud say, short of an unlikely change in immigration policy in the near future that opens up more avenues for foreign-born workers in the U.S., another way to address the construction-industry labor shortage is to increase the number of U.S. citizens in the construction field. That is a formidable challenge, however, given many younger workers today “are far more interested in tech jobs and other industries where jobs are already plentiful and oftentimes pay is better,” Boud says.

Another option is to increase the industry’s productivity through strategies such as expanding the number of factory-built homes and increasing automation at the construction site itself, according to Dietz. Still, that is a long-term solution that will likely take decades to achieve, because it’s dependent on a massive retooling of the nation’s construction industry.

Given the pressing nature of the inventory shortage in the housing sector today, however, pursuing only longer-term solutions might require a luxury of time that the nation’s housing market can ill afford. Other issues, such U.S. tariffs on Canadian lumber, are contributing to the affordable-housing crisis in America. Still, addressing immigration issues in the U.S. rationally, Perryman points out, could alleviate labor-supply issues in the short term and provide a sure-footed path to increasing housing supply, promoting housing affordability and fostering wealth creation in middle America.

“A thoughtful, rational and sustainable immigration policy will help alleviate [labor] shortages in the construction sector and across the economy,” Perryman says. “It should rightfully consider safety and security concerns, but it should also recognize that the U.S. is currently at full employment, even with the undocumented workers that we have now. [A rational immigration policy] should also ensure that a growing economy, with an aging population, [will] not be artificially impeded from future prosperity.”


 

Bill Conroy is editor in chief of Scotsman Guide Media. Reach him at (800) 297-6061 or billc@scotsmanguide.com.

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