Ways Out Of Housing's 'Vicious Circle' Crisis: #1 Guest Workers

In 2005, when U.S. homebuilders started a record 1.6-plus million new single-family homes, roughly 135,000 foreign born workers joined construction teams on job sites in the U.S. As single-family starts plummeted in 2008 to 600,000 or so, the inflow of immigrants into U.S. construction sites, exceeded 50,000.

The most recent data available, the American Community Survey for 2021, shows this:

Here are two paragraphs from NAHB Assistant VP for Housing Policy Research Natalia Siniavskaia, commenting on what the chart above says and what it means.

The annual flow of new immigrant workers into construction slowed to the lowest levels since 2012 despite ongoing skilled labor shortages exacerbated by a pandemic boost to housing demand.

... The fact that construction employment was back to the pre-pandemic levels while single-family starts increased 27% from 2019 to 2021 illustrates how incredibly tight the construction labor market was at that time.

These paragraphs take on even more powerful "why it matters" significance from understanding the data trends in context. Siniavskaia writes:

In the past, the annual flow of new immigrant workers into construction was highly responsive to the changing labor demand. The number of newly arrived immigrants in construction rose rapidly when housing starts were rising and declined precipitously when the housing industry was contracting. The response of immigration had been quite rapid, occurring in the same year as a change in the single-family construction activity. Statistically, the link was captured by high correlation between the annual flow of new immigrants into construction and measures of new home construction, especially new single-family starts.

And then that stopped, or as Siniavskaia puts it, "the connection broke" in 2017.

Now, housing's vicious circle winds tighter and tighter for people sidelined by unattainably high prices and scarce supply.

Underbuilding's impact on house prices and rents feeds back again and again into the vicious circle, steepening the upward slope for households trying to access market-rate properties. As demographics and a strong economy swell the numbers of those households, their options keep narrowing as monthly payments – to own or rent – ratchet higher.

A known but still under-leveraged requirement in the discovery of ways through and out of the vicious circle that's strangulating ground-up home and apartment community development is expanding construction's front-line worker pool. Easier said than done, since that pool has shrunk relative to current and future levels of production needed.

Here's what official NAHB policy platforms state with respect to immigration reform and the crucial role foreign-born frontline skilled workers play in ground-up housing's supply and demand vicious-circle crisis:

Ensuring a consistent, reliable influx of new workers is important in an industry that is continuing to grow. Even as we encourage America’s youth to consider careers in the building trades, we must also pursue immigration policies that complement ongoing vocational training efforts and help fill labor gaps to ensure that the nation has a workforce that can meet its housing construction needs.

NAHB supports immigration reform that protects the nation’s borders. In addition, it must:

• Ensure that employers continue to be responsible only for verifying the identity and work authorization of their direct employees – and not the employees of their subcontractors.
• Create an efficient temporary construction industry guest-worker program that allows employers to recruit legal immigrant workers when there is a shortage of domestic workers.

If there's a way through and out of America's supply-demand vicious circle whose byproduct is less affordability, immigrants will play a present, near-term-, and long-term future role. They're one in three frontline workers today, and the data show we need more today. Then, they're a gift that keeps on giving, economically, socially, and in specifically secular ways, ranging from their tendency to start small businesses in the trades to their evolving importance as a new home customer bases.

Economics analyst Noah Smith – host of Noahpinion – offers a thorough, both-sides-of-the-coin argument for why the U.S. needs a grand-bargain solution that straddles the issues of U.S. border security and the need to keep doors open to a constantly refreshed talent pool. He writes that one big reason why is we simply need more young people than we have, especially ones bound for science, technology, engineering, and math livelihoods. However, he notes:

[That's] not to say that “low-skilled” immigration (a term I really dislike, btw) is bad. We need that too. Research continues to show that immigration of manual laborers doesn’t hurt the wages or the job prospects of the native-born. And even uneducated manual laborers who move to a new country to win a better future for themselves are a highly selected set, which is why the kids of poor immigrants tend to be very upwardly mobile."

An obstacle that runs even higher, deeper, and thicker in the way of, as the NAHB puts it, "reliable influx of new workers" is as much cultural as it is political.

For leaders – at both the industry- and individual organization level – the cultural challenge is about team building and the power of attraction, whether it's from a homegrown, U.S.-born talent pool or one that's full of people seeking a better opportunity and a fair shot at The American Dream.

The days of offering higher salaries to compensate for not having a winning culture have diminished, as the new generation of employees have a powerful desire to work for companies they deeply believe in," say Thomas Carpitella, ceo of FTS, which just published its new Impact Report for 2022. "Culture is an ever-changing existential feature that company leaders must work to constantly improve upon and add to. To attract top talent, you must find ways to retain top talent. People want to join organizations that value them and consistently put action behind their words, mission and vision statements. When it comes to building a great team and gaining an edge over the competition, having established a winning culture is imperative."

This proves to be the case whether it's corporate or management talent, or the people choosing to join your frontline crews on the construction job sites. Shaping that "reliable influx of new workers" is no longer something that happens. It's something every leader in every organization – large, medium, and small – simply does or doesn't choose to do.