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This is NMHC’s sixth installment in a series of surveys aimed to help the industry stay on top of changing construction market conditions during the COVID-19 pandemic.
Here are the major takeaways. (Click here to view full survey results.)
Three-Quarters of Respondents Are Still Experiencing Construction Delays
Three-quarters (75 percent) of respondents reported experiencing construction delays in jurisdictions where they operate, an increase from the results reported in the prior five rounds. In the last round of the survey – conducted from October 6 to October 27, 2020 – 57 percent of respondents reported delays.
Of the group that cited overall construction delays, 77 percent reported experiencing delays in permitting, down from the 90 percent in the previous round and comparable to the results seen in the first two rounds (76 and 77 percent, respectively). Similarly, 75 percent of those that faced construction delays were experiencing delays in starts, relatively unchanged from the 77 percent that reported delays in round five.
Permitting, Entitlement, and Professional Services Most Cited Cause of Delays in Starts
Beginning in round four of the survey, we asked several new questions to better understand how the ongoing pandemic is impacting multifamily construction. For example, respondents who reported delays in starts were asked what they see as the cause of their delays. When asked this in the most recent iteration of the survey, nearly three-quarters (72 percent) of respondents cited permitting, entitlement and professional services as the cause of their delays, up from 67 percent in the fifth round and 56 percent in the fourth round. Economic uncertainty was again the second-most common response at 37 percent, though down from 58 percent in the previous round. Economic uncertainty was followed by projects not being economically feasible at this time (30 percent this round/38 percent in round five/16 percent in round four), availability of construction financing (21 percent/46 percent/48 percent), and health and safety concerns (14 percent/13 percent/28 percent).
When asked to estimate the length of their delays in starts, the majority of respondents reported a year or less, with 65 percent indicating less than six months – the highest share since the question was added in round four. An additional 30 percent of respondents reported 6-to-12 month delays, up from 21 percent last round. Some respondents (five percent) reported experiencing delays lasting 13 to 18 months this round – similar to the four percent of respondents indicating the same during the last round.
Vast Majority of Respondents Are Affected by a Lack of Materials
Eighty-three percent of respondents reported a lack of materials impacting their construction operations, the highest share recorded since we began conducting the survey in late March last year (compared to 80 percent in round five, 36 percent in round four, 29 percent in round three, 28 percent in round two and 24 percent in round one).
When those respondents affected by a lack of materials were asked to cite specific areas of issue, the top three responses were appliances (71 percent in this round/60 percent in round five), lumber (53 percent in this round/49 percent in round five), and doors and windows (29 percent in this round/19 percent in round five). Several other materials specifically cited include cabinets and countertops (10 percent), metal/steel components (8 percent), drywall/insulation (6 percent), electronic components (6 percent) and AC/condenser units (6 percent). Many of these materials were cited at higher levels in previous rounds, highlighting the strain felt more recently in specifically sourcing appliances, lumber, and doors and windows.
Share of Respondents Seeing Increases in the Price of Materials Rises Again
In this round of the survey, a record 93 percent of respondents indicated seeing price increases in construction materials, up from 82 percent of respondents in round five and 18 percent in round four.
When asked to cite the specific materials where price increases have occurred, the overwhelming majority of respondents indicated lumber once again (81 percent this round, 86 percent in round five, 55 percent in round four). However, smaller shares cited increases in other structural materials such as steel and concrete (26 percent this round/7 percent round five/18 percent round four) and drywall/insulation (16 percent). Lastly, nine percent of respondents reported that they have seen price increases in both copper, and PVC (polyvinyl chloride) and other piping.
Respondents who indicated seeing price increases for materials were also asked to specify the magnitude of these increases for those materials most impacted. Roughly one in five respondents (19 percent this round/23 percent in round five) reported price increases of zero to five percent, and 22 percent of respondents reported price increases of six to 10 percent (compared to 18 percent in the last round). An additional 13 percent (compared to 18 percent last round) reported increases of 11 to 15 percent. And while just six percent saw material prices increase 16 to 20 percent, 40 percent of respondents reported price increases of greater than 20 percent. These shares are both virtually unchanged from the levels reporting the same magnitude in round five of the survey.
Respondents Seeing Some Increase to Stress on Labor Availability
The majority of respondents indicated experiencing no issues with labor availability. Thirty-six percent reported impacts to labor availability — an increase from the 20 percent seen in the last round, and similar to the 39 percent in round four. When asked to expand upon their issues of labor availability, two-thirds (67 percent) reported a general scarcity of laborers. The shortages were cited to be brought on for a variety of reasons, including COVID-related absences, delays and furloughs lengthening projects, and lack of competition allowing the laborers to be selective with jobs.
Respondents Seeing Some Increase to Stress on Labor Availability
Over half of respondents (54 percent) indicated they have implemented new strategies to deal with the hurdles formed by the virus’s continued presence. This compares to 60 percent in the last round, 52 percent in round four, 59 percent in round three, 75 percent in the second round and 73 percent in the first round – with many of those firms indicating they have implemented more than one strategy.
The most popular strategies implemented by respondents include sourcing materials from alternative locations (68 percent this round/80 percent in round five), sourcing alternative building materials (51 percent this round/57 percent in round five) and using technology to replace in-person transactions like inspections and approvals (41 percent this round/50 percent in round five).
Other strategies reported include staggering shifts to reduce on-site exposure (22 percent this round/37 percent in round five) and offering workforce incentives or other benefits (11 percent this round/23 percent in round five). Those sourcing alternative building materials and sourcing materials from alternative locations remained elevated from the increases seen during the previous round of the survey – both of which are in line with the stress respondents have indicated experiencing on availability and prices of materials.
Background
This survey was open from February 10 to March 5, 2021 and received 76 responses from leading multifamily construction firms. Results will be compared with each of the four previous surveys, the first of which was conducted March 27-April 1, 2020, and the most recent from October 6-27, 2020.
