As we enter 2022, it’s clear that the California construction industry continues to face pandemic recovery challenges due to a confluence of rising material costs, worker shortages, and supply chain disruptions. In a recent NAHB study, an astonishing 87% of respondents reported a shortage of windows and doors while 90% reported a shortage of plywood. These material shortages, among others, inevitably lead to delayed projects and increased costs.
As we have previously reported, California construction has suffered and continues to suffer a worker shortage due to multiple aspects of Covid-19. However, it’s not only the construction industry that has been affected. The worker shortage has cut a broad swath through the rest of the economy contributing to supply chain disruption. Manufacturing plants, in general, have been operating with fewer employees and sometimes shorter hours, reducing production. Freight trucking companies have reported a shortage of qualified drivers, an increase in fuel prices, and at times a lack of working vehicles, forcing them to lease trucks to make deliveries – resulting in higher costs and fewer supply shipments.
Material scarcity due to disruption in the supply system has fostered sometimes astronomical cost increases in a wide range of construction materials. Lumber and steel prices, for example, are at the highest level in years, although steel is still cheaper than lumber. Between April and August 2020, lumber prices shot up by about 130%. The increase is significant for builders as well as home buyers, as framing lumber comprises approximately 20% of the material cost of home construction.
Unfortunately, the lumber supply has been affected by more than Covid-related disruptions. About 83% of our imported lumber comes from British Columbia which has been severely impacted by proliferating pine beetles as well as torrential rains and flooding in 2021. As of November, weekly lumber shipments from Vancouver had fallen by at least 30%, adding to the ‘scarcity cost.’
Other notable increases in building supplies include steadily rising prices for gypsum and concrete. Semi-conductors have been unavailable, resulting in a shortage of appliances.
To minimize project delays, builders are sourcing alternate materials. Substitutions for everything from pipes to wood paneling can increase costs and complicate construction, which may still be a better option than delaying a project waiting for supplies. In a desperate and creative frenzy, builders have sourced everything from concrete planks, alternate insulating materials, cross-laminated timber, and bendable concrete to complete their projects.
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