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However, while carpenters’ wages fell by 7 percent during this period, iron and steel workers saw a 4.9 percent increase in wages at the same time. For example, adjusted for inflation, construction workers overall saw a 2.1 percent reduction in wages from 2010-2019 (that’s very bad news during a time of economic expansion). We refer to a 2019 proposal co-authored by California YIMBY’s own Darrell Owens for more on this particular issue.Ĭritically, though, some sectors of the construction industry have recovered better than others.
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As a highly cyclical industry, construction labor is particularly sensitive to demand shocks, but trained workers are still difficult to recruit as workplace safety and job security remain uncertain in good times. Fear of deportation under the Trump administration has only made the labor market tighter in an industry heavily dependent on immigrants. While employment has fallen greatly since the great recession, the construction labor pipeline has not kept pace with the economic recovery relative to new housing permits. Labor presents a much more complicated policy puzzle.
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Another theory seems more plausible: “It could be that higher construction costs and a hotter housing market have increased spending on finer floor coverings and other finishes to build out more expensive units and meet the expectations of a higher rental or sale price point.” The price of metal and lumber, meanwhile, has remained relatively stable relative to inflation. There are several reasons why this may be happening, but the researchers are quick to rule out a shift in overall industry trends toward more expensive housing types, as these cost increases were most concentrated in type V (wood) construction. Notably, the line-items with greater cost increases consist of wood, plastics, composites, concrete, and finishes. But that’s all of California-these cost increases are magnified in the Bay Area and Los Angeles. On average, construction costs per square foot rose from $177 to $220, a 25% increase. The data shows that hard costs accounted for roughly 63 percent of construction costs for residential buildings in California from 2009-2019. Since developers and contractors categorized different line-items differently, Raetz et al standardized the data using the Construction Specifications Institute MasterFormat categories. The best way to get an accurately itemized receipt, so to speak, is to stick to the initial estimates, even if projects go over their budget during construction. The methodology for this study offers a tradeoff between completeness and accuracy, and may generally be underestimating hard costs of construction by analyzing bid costs from initial estimates, rather than final construction costs.