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As Houston rebuilds after Harvey, construction labor shortage looms

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An already-tight market challenged by the demands of repair and reconstruction

The aftermath of Hurricane Harvey in Houston, Texas: many flooded houses, owners throw away their belongings, materials that were under water.

As Houston begins to rebuild and recover from Hurricane Harvey, many questions need answering in the aftermath of a natural disaster that according to Texas governor Greg Abbott may cost between $150 billion to $180 billion.

But one question that may quickly become a pressing one is where to get the construction labor force needed for such a vast demolition, renovation, and construction effort. Some estimates suggest more than 200,000 homes were damaged by the storm.

Due in part to booming construction and development in many cities and regions across the U.S., construction labor has been in short supply recently. Last month, roughly 77 percent of U.S. builders reported a shortage of framing crews, and 61 percent faced a shortage of drywall installation workers, according to the National Association of Home Builders.

The Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS) shows that nearly 200,000 construction industry jobs are unfilled across the country at a boom time for homebuilders, an increase of 81 percent in just two years. At 4.5 percent, unemployment in the U.S. construction industry hit its lowest levels in a decade earlier this year, putting increased pressure on foremen, project managers, and developers.

In fast-growing Houston, that has certainly been the case, according to Jonathan Brinsden, CEO of Midway Companies, a major development company based in Houston. With the incredible post-Harvey rebuilding effort expected to get underway—and Hurricane Irma potentially creating even more demand on skilled labor—finding qualified workers may quickly become an urgent issue. While the market has died down a bit over the last 12 to 18 months, Harvey will create another inflection point in the local construction market.

Before Harvey, says Brinsden, Houston had gone through its own booms and busts, especially in its energy industry, and particularly in shale oil. Before that industry suffered a significant downturn a few years ago, it was driving economic development as well as construction, including office and multifamily projects.

Beginning in 2012, the industry’s growth drew in labor, leading to shortages in framing crews for buildings and truck drivers for concrete firms. Brinsden says competition for workers was so robust, there were stories floating around of crews being paid to leave a job site and work somewhere else. The delays carried over to larger developments: Prices spiked for real estate projects, increasingly rough 1 percent a month, while shortages of crews led to delays.

While labor demand in the Houston construction market previously focused on commercial work, post-Harvey realities will swing that back towards the residential sector.

Both the competition for labor and materials will delay rebuilding. Brinsden, who himself is dealing with a flooded home, expects that many homeowners have at least a six-month rebuilding process in front of them, if not a longer, which will have staggered starts due to the availability of construction crews, materials, and funding. Many homes will need new sheetrock, expected to be in short supply.

Brinsden sees the gap being filled in numerous ways, as construction companies recruit the unemployed—and talent from other areas, especially nearby Texas cities such as Austin, San Antonio, and Dallas—to come to town and help satisfy demand.

There’s also the question of undocumented labor. According to a Vox story, in the aftermath of Hurricane Katrina, undocumented workers made up roughly 25 percent of the labor force that helped remove debris, reinstall roofs, and rebuild homes. Brinsden says, from a big-picture standpoint, Texas has always benefitted from immigration and the resulting labor force, in terms of skill and cost structure.

“Whether this situation drives additional immigration, that’s something we’ll have to wait and see about,” he says. “Intuitively, you think it would. But immigration policy is probably curbing that right now, compared to prior years.”