Big Reason Builders Aren’t Building Enough Houses

Performance Property Real Estate Question

Q: Gerald, you’ve been writing about a housing shortage for a while.  Why are builders not building enough houses to meet demand? Evan, Tinton Falls, NJ

A: Evan, you can’t blame the low housing inventory levels in many local real estate markets on builders entirely, but insufficient construction is a big reason for sure. In addition to archaic zoning ordinances and homeowners who still don’t have enough equity to sell even if they wanted, one of the biggest reasons builders aren’t taking on enough new constructions projects to satisfy demand is that there is a shortage of skilled labor. Builders don’t do construction in a vacuum–they need land, permits from local municipalities, capital, building materials AND skilled labor to put up houses. The construction industry lost over 2 million jobs between 2006 and 2011, so you’d assume it wouldn’t be hard to find skilled labor now. The problem is that during the last housing downturn many construction workers dropped out of the industry entirely, older workers are retiring and many young people don’t see construction as a viable long-term employment opportunity so they are not entering the industry at the rate they once did.

Thanks for your question, Evan.

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