Labor shortages, red tape mean high home prices, delays

Pennsylvania homebuilders are caught in a bind: labor costs are high and the state’s bureaucracy slows down construction.

The result is a situation where it takes months longer to build a house in the commonwealth and prices are higher.

The lack of housing construction has been a long-standing problem. Experts warned the House Urban Affairs Committee last year that “record-level building” needs to happen to lower the cost of housing. One study estimated that Pennsylvania has a housing deficit of 98,000 units.

Without more workers in construction and the trades, however, costs will stay high.

“Labor is our biggest pain point,” said Chad Weaver, president of Weaver Homes, a construction company that operates in the Greater Pittsburgh area. “A lot of the older craftsmen are aging out and retiring … you don’t have the people coming into the trades, whether to be a plumber, or a brick mason, or an electrician.”

Those missing plumbers and electricians means labor costs go up, driving up construction costs. Inflation, too, drove up costs across the board.

In a three-year span before and after COVID-19, Weaver said his costs went up by 35% to build a home.

“Everybody’s paying more to produce, everybody’s paying more to stock, everybody’s paying more for trucking,” Weaver said.

Federal policy, too, has caused issues. In Philadelphia,

the Inquirer declared the city’s “real estate boom” to be “on hold” due to rising interest rates.

Local and state government policy, too, has caused headaches.

“I feel like labor is the root cause of all of this – but, coupled with that, you’ve got the regulation,” Weaver said. “That certainly adds to it, and makes it even more difficult.”

Neighborhood opposition can limit the size of a housing project, and zoning laws can require bigger lot sizes and bigger home sizes, driving up costs. Smaller minimum lot sizes allows developers to build more homes, making them more affordable.

“Density, from a developer’s (standpoint), drives our cost,” Weaver said. “That’s where you get the more affordable product you can put in.”

Zoning issues regularly appear in housing discussions. In May, Senate Republicans heard how local zoning rules drive up costs and make it impossible to keep construction costs down.

Environmental rules can also delay projects and add costs.

“I am not advocating that we do away with (the Department of Environmental Protection), only inject some common-sense approaches,” Weaver said. “Just expediting the review process and making it consistent across all regional offices would be a great start.”

The growing size of retention ponds, which are used to manage runoff and prevent erosion, can throw off a project. He noted one instance in Allegheny County’s West Deer Township where the required size of the pond drove down the project from 22 to 18, driving up per-lot costs from $110,000 to $130,000.

DEP has long complained of staff shortages that makes its permitting process slow, and Weaver agreed that staffing was a legitimate issue. “I’m not by any means trashing the DEP,” he said. “They face their own challenges.”

But he also worried that the marginal costs of rules and regulations weren’t being considered in how they can create barriers to construction.

“At some point in time, what’s the benefit-cost analysis in doing something?” Weaver said. “It’s really hard to do business in Pennsylvania…Nobody’s asking for a free pass, we’re just asking for things to be reasonable.”

Nationally, Pennsylvania is falling behind other states.

Builders in Texas complain to Weaver when it takes six months to finish a house, while it might take 12-18 months to finish one in Pennsylvania. For the region, those numbers are high, but not by much.

In the Northeast, it takes 10.7 months on average to finish a house, compared to a national average of 8.3 months, according to the Census Bureau. In the South, it takes only 7 ½ months.

The average time has gotten worse in recent years. In 2013, the average house construction took 8.4 months in the Northeast, still lagging the national average of six months at the time — and 5 ½ months in the South.