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As the Bay Area scrambles to find housing for its growing population, developers are running into another kind of shortage: There aren’t enough construction workers to build the homes the region needs.
Builders throughout the area say they are struggling to recruit skilled laborers. Some bring in employees from Southern California or even Seattle, putting them up in hotels. Others hire workers from the Central Valley who spend hours driving to job sites in the wee hours of the morning only to arrive exhausted, forced to squeeze in quick naps before the workday starts.
The challenge of finding workers only exacerbates the Bay Area’s housing shortage. Despite a dramatic increase in permits for residential construction since 2009, construction jobs have increased at less than one tenth the pace of permits. As a result, wages and the overall cost of building are increasing, forcing some developers to delay projects or, in some cases, not build at all.
“There’s been several projects we declined to bid or just don’t even look at because we know we can’t man them,” said Walt Oxley, owner of Ciarra Construction, one of the builders of the Santana Row townhomes in San Jose in 2003.
In San Francisco, a parcel in the city’s SoMa neighborhood lies vacant even though Eric Tao, CEO and managing principal of developer AGI, received city approval to build a 300-unit apartment building on the site in January 2017.
When he was underwriting the project, the economics worked. But Tao said construction costs have increased a whopping 50 percent in the past five years — which he attributes largely to the worker shortage driving up wages for skilled labor — and now he can’t turn enough of a profit on the SoMa building. So he’s shelving it until conditions improve, and that means fewer options for the 500 to 600 people who could have lived in the new building.
Tao says he’s not the only one with this problem. “There’s probably a few thousand housing units in the San Francisco area, Oakland, that can’t be built because construction costs are too high,” he said.
Other projects are falling behind schedule.
“Pretty much every project that I’ve been associated with lately, there’s been delays,” Peter Friis, project manager at SRM Construction, said from the job site where his team is building a 130-unit apartment complex on Broadway in Oakland. “And the reason is manpower.”
A look at the numbers suggests skyrocketing demand for new housing in the Bay Area is far outpacing job growth in the region’s construction industry. The number of local residential building permits issued jumped 351 percent between 2009 — in the wake of the housing market’s collapse — and 2016, according to U.S. Department of Housing and Urban Development data for Alameda, Contra Costa, San Benito, San Francisco, Santa Clara, San Mateo and Marin counties. During that time, the number of construction jobs increased just 29 percent, according to the U.S. Census Bureau.
The construction worker shortage, coupled with lengthy permitting procedures, complex building codes and strict environmental rules, is contributing significantly to rising construction costs that have made San Francisco the world’s second most expensive city to build in, according to a new report from UC Berkeley’s Terner Center for Housing Innovation. Fewer experienced workers also means today’s labor pool is less skilled than 10 years ago, resulting in decreased productivity, more reported mistakes and higher insurance and litigation premiums as developers use new subcontractors, the report’s authors said.
It’s not a problem that’s unique to the Bay Area. In a recent study by the National Association of Home Builders, 82 percent of builders surveyed said the cost and availability of labor was a significant problem last year — up from 13 percent in 2011.
Dee McGonigle, director of construction for SRM Development, LLC, builds large residential and mixed-used projects up and down the West Coast and sees the worker shortage from San Diego to Seattle. His company is forced to shell out big bucks to bring his top talent, mostly based in Seattle, to the Bay Area to work.
He’s been paying for one of his job site superintendents, Jackson Buck, to live in the East Bay for the past two and a half years — at a cost of roughly $50,000 per year. Initially, that included Buck’s family, with the company renting a home in Moraga for Buck, his wife and two daughters. Now, however, Buck is commuting to his home in Seattle every other weekend to visit them while living at an apartment in Walnut Creek, expenses McGonigle is paying.
“I would be lost if I didn’t,” he admitted.
But the distance away from family has been hard, Buck said. With one daughter in middle school and the other entering high school, he wishes he could help usher them through the often trying experiences that arise during adolescence.
“There’s just stuff they need their dad around for,” he said.
California’s construction workers are some of the best paid in the nation, according to 2016 data from the U.S. Bureau of Labor Statistics. Workers earned around $50,200 in the South Bay and $52,200 in the East Bay. But that’s still not enough for many to afford homes in the Bay Area, and that’s driven some out of the industry, said Ben Field, executive officer of the South Bay AFL-CIO Labor Council. It didn’t help that after the housing bubble burst in 2008, droves of workers fled the trade and never returned.
“An awful lot of guys retired from the industry, and young people aren’t interested in doing this type of work,” said David Lorber, the owner of Superior Bay Builders, a remodeling company. “Nobody is replacing them, and nobody cares.”
When factoring in inflation, wages for blue-collar construction workers in California have declined almost 25 percent since 1990, according to a 2017 study by pro-labor non-profit Smart Cities Prevail.
To make ends meet, Heriberto Leon, a military veteran who began working as an electrician’s apprentice roughly six months ago, wakes up at 4 a.m. to make the hour-and-a-half or two-hour drive to Oakland from the Central Valley. Even with military benefits, Leon says it’s hard to live in Stockton as a single man.
“I can’t imagine what it’s like for people who don’t have those benefits,” he said.
Leon isn’t alone. David Hernandez, a foreman with H&H Wallboard, says most of his drywall installers live in the Central Valley and other distant places, spending at least four hours a day driving to and from Bay Area projects. Some workers, exhausted from an early morning commute, sleep in their cars at construction sites before starting their shifts.
And while many cities in the Bay Area have added construction jobs in recent years, they are increasingly filled with inexperienced workers, said Matt Weins, a superintendent for West Coast Framing Inc. That means he’s spending more time on training, especially when it comes to safety.
“The inexperienced people are more dangerous,” he said. “It takes more time, and you have to watch them more so they don’t hurt themselves or others.”
The market has gotten so competitive, Cierra Construction owner Walt Oxley says recruiters from Southern California are trying to steal workers straight from his construction sites in the Bay Area.
“They just kind of walk out there and start offering people jobs,” he said.
The worker shortage, and the problems it brings, all contribute to the skyrocketing cost of housing in the Bay Area, some experts say. As developers pay more for labor, they raise their price tags for home buyers, said Mehdi Vatani, CEO and owner of Valley Home Builders. Though rising construction costs can’t be blamed for the entire increase, the median price for a single-family home in the nine-county Bay Area climbed nearly 14 percent over the past year — hitting $765,000 in December, according to the most recent data from real estate data analytics company CoreLogic.
“We’re just passing along the cost increase to our clients to maintain our gross profit and be able to be a business,” Vatani said.
So, what’s the solution to the shortage? Pay construction workers even more, to entice them into the jobs the industry desperately needs filled, says Gary Painter, an economics professor who specializes in housing at the University of Southern California.
“It’s not so simple as to say, ‘Oh, we have a shortage of construction workers.’ We have a shortage of construction workers at the price people want to pay,” Painter said. “The simple way to solve shortages is to pay people more.”
