The construction industry is facing a significant labour shortage in both the United States and Canada, contributing to a housing shortage in many areas, particularly in urban areas where demand for housing is high and land prices are expensive. In Canada this was recently put into stark terms in Ontario where it was reported the province needs 1.5 million new homes over the next decade, but will need an additional 100,000 construction workers to meet that demand. The commercial and industrial real estate market isn’t spared the pain either. Let’s explore the causes of the labour shortage, its impacts on the real estate market, and how builders can survive and thrive in this new labour market.

Causes of the Labour Shortage

The labour shortage in the construction industry is due to a variety of factors, but anyone working in construction can anecdotally speak at least a few of them. In the US and Canada, these factors include an aging workforce, fewer young people entering the trades, and a lack of emphasis on vocational training in schools. The COVID-19 pandemic has also contributed to the labour shortage, as it has caused disruptions to supply chains, delayed projects, and led to a decrease in the number of immigrants entering the workforce. And plenty of research backs up these observations.

1. According to a report by the National Association of Home Builders (NAHB), the average age of construction workers in the US is 42.5 years old, and nearly a quarter of the workforce is over the age of 55. This indicates an aging workforce that will likely retire in the coming years. 
2. In the US, the number of high school students enrolled in vocational education has declined significantly over the past few decades. According to the National Center for Education Statistics, the percentage of high school students enrolled in vocational education programs decreased from 27% in 1990 to 8% in 2013. This decline in vocational education has contributed to a lack of interest in pursuing careers in the trades.
3. In Canada, a report by the Canadian Home Builders’ Association (CHBA) found that the average age of construction workers is 42 years old, and 19% of the workforce is over the age of 55. The report noted that there is a need to attract more young people to the trades.
4. According to a report by the Royal Bank of Canada (RBC), the COVID-19 pandemic has contributed to the labour shortage in Canada by causing disruptions to supply chains and delaying projects. The report noted that the pandemic has also led to a decrease in the number of immigrants entering the workforce, which has added to the shortage of skilled workers.
5. In the US, the Bureau of Labour Statistics (BLS) projects that employment in the construction industry will grow 5% from 2019 to 2029, which is about as fast as the average for all occupations. This indicates that there will be some new workers entering the industry to replace those who are retiring, but not enough to fully offset those exiting the workforce. 
6. In Canada, a report by BuildForce Canada estimates that there will be a need for 307,000 new construction workers between 2021 and 2030 to replace retiring workers and meet the demand for new construction projects. However, the report also notes that there are currently not enough young people entering the trades to meet this demand.

Impacts on builders and the real estate market

The shortage of skilled workers has led to slower construction times and higher costs for builders in both Canada and the US, which is leading to fewer homes being built and higher prices for those that are constructed. In some areas, the shortage of construction workers has even caused projects to be delayed or canceled altogether, exacerbating the housing shortage. Here’s just a few examples:

1. According to a survey by the National Association of Home Builders (NAHB), 90% of builders reported a shortage of framing subcontractors in 2020, up from 84% in 2019. This shortage can lead to slower construction times and higher costs for builders, which can in turn lead to higher home prices.
2. A report by the Associated General Contractors of America (AGC) found that construction employment increased in 2021 but remained below pre-pandemic levels. The report also noted that 80% of contractors are having difficulty finding hourly craft workers. This shortage can cause delays or even cancellations of construction projects.
3. According to a report by the National Low Income Housing Coalition, there is a shortage of 7.2 million affordable and available rental homes for extremely low-income renters in the United States.
4. A report by the Canadian Home Builders’ Association (CHBA) found that the labour shortage in the construction industry is leading to slower construction times and increased costs for builders. The report noted that the industry needs to attract and retain more workers to address the shortage.
5. According to a survey by the Canadian Federation of Independent Business (CFIB), the construction industry in Canada is experiencing a labour shortage, with 43% of small businesses reporting a shortage of skilled workers. The report noted that the shortage is leading to increased wages and higher costs for businesses.

Premanufactured Solutions to the Labour Shortage

One potential solution for construction companies facing a labour shortage is to use structural insulated panels (SIPs) in their building projects. SIPs—like ZS2 TechPanels™—are prefabricated building components that can be quickly assembled on-site, reducing the need for skilled labour, and allowing projects to be completed more efficiently. Because SIPs provide a high level of insulation, they can also help reduce energy costs for occupants and improve the overall sustainability of a building. Additionally, using SIPs can make construction companies more profitable by reducing labour costs and allowing them to complete projects more quickly, meaning more project completions each year. Taking advantage of alternative building solutions like TechPanels and other innovative building technologies is one way construction companies can position themselves to thrive in an industry that is facing significant labour challenges.

Estimating Labour Costs with SIPs

According to a study conducted by the National Association of Home Builders (NAHB), builders reported labour savings of up to 55% when using SIPs instead of traditional framing for exterior walls. This is due in part to the fact that SIPs are pre-cut to the exact specifications of the project, reducing the need for on-site cutting and waste. Additionally, because SIPs are prefabricated, they can be assembled more quickly and with less specialized labour than traditional framing methods.

It’s difficult to provide an exact amount a company could save on labour by using SIPs instead of traditional framing, as labour costs can vary widely depending on factors such as location, project size, and the level of expertise required for the job. However, one thing’s for certain: Building with SIPs can lead to significant labour savings compared to traditional framing. At ZS2, we’ve put together a bit of a cheat sheet to help builders figure out what kind of labour requirements they’ll need for their project, so they can make their own calculation on savings.