Construction Is Coming Back To Phoenix, But Not The Workers
For several years, the housing community of Lantana at Power Ranch in the Phoenix suburb of Gilbert was left partially unfinished. The master-planned community included a smattering of vacant lots, a victim of the housing market crash.
But now the industry here in the Phoenix area is coming back to life, and those last houses are going up.
While building rates are nowhere near the height of the building frenzy, in which upward of 60,000 homes were built in a single year, new home and condo starts increased 70 percent in 2012. Projections this year suggest 17,000 new homes will be built in Maricopa and Pinal counties, which would be a 40 percent increase over last year.
On a recent afternoon in front of one new house, a worker prepared a granite countertop for the kitchen inside.
Down the block, a crew hammered in the first studs of a housing frame.
Homebuilders have been waiting for a recovery for years. But now that there are signs of it, relief isn’t their only emotion.
“It makes me very nervous,” said Buddy Satterfield, division president for Shea Homes in Arizona. His company is building dozens of homes in Lantana at Power Ranch. “We are very challenged from a labor perspective.”
Satterfield said the subcontractors he works with can’t find enough workers to fill their drywall, concrete and framing crews. As a result, he claims delays of up to 25 percent in how fast his company can build, and additional costs for labor.
He blames the recession for the labor shortage, and a construction workforce slashed by half after the market for new homes collapsed.
Satterfield also points to Arizona's own state policies as a culprit.
“We passed some of the most restrictive immigration laws in the country,” Satterfield said.
In 2008, a law took effect that required employers to check new hires against the federal database E-Verify to see if they are in the country legally, and in 2010, the legislature passed the state enforcement law, SB 1070.
“A number of workers left the market,” he said. “Now, they may be legal but may have someone living in their house who is not. So we have a number of Hispanics that left the area and they are not returning and so that is very challenging for us.”
According to calculations from the Public Policy Institute of California, roughly 92,000 Latino immigrants left Arizona after E-Verify became mandatory in 2008. A study by BBVA Bancomer Research estimated that 100,000 Latinos left the state in 2010.
Cole Johnson, who runs a drywall company that operates throughout the state, said key employees moved away, even though they were legal immigrants.
“They feel like they are discriminated against in Arizona,” Johnson said.
It is common for there to be construction labor shortages when a market is just starting to rebound after a stagnant period, but Johnson said this time is different.
He said many Latino workers in other states won't be interested in moving to Arizona because of the political climate.
Johnson said it isn’t easy replacing the employees he lost.
“It is very hot work, it is intense, it is heavy,” Johnson said. “It's physical manual labor, which doesn't seem to be very appealing to high school students anymore.”
He has 450 people on staff, which can triple when times are busy. And since the 1990s, it’s a workforce that is overwhelmingly Latino.
“For our company it shifted at the point our company started doing mandatory drug testing,” Johnson said. “And all our Hispanic labor could pass the drug test, and all our white or Anglo workforce couldn’t pass their drug test.”
Lately, Johnson said he’s been turning down contracts because he doesn’t have the staff, even though he’s been actively trying to recruit.
He said he’s even willing to train unskilled workers and every week he processes 80 applications. New hires must go through a drug test and E-Verify.
“It is a tiny fraction, it is a single-digit percentage of those that end up working here,” Johnson said. “That either pass their E-Verify, pass their drug test, actually show up to work, have a willingness to work and have a willingness to show up at time.”
Bill Martin with the local carpenter’s union insists that there is no shortage of skilled workers willing to do hard work, but said the price has to be right.
“It’s very simple, pay a livable wage and benefits, and the skilled workforce and the worker pool will be there for anybody and everybody,” Martin said.
The issue is how high that wage needs to be to attract those workers.
According to Department of Labor statistics, the prevailing wage in January in Maricopa County for a general laborer working residential construction was $10.18 with no benefits. Hanging drywall in the residential sector was listed at $15.00 an hour and 58 cents in fringe benefits, and the wages for carpenter was listed at $18.16 with no benefits.
Martin said he considers a fair wage for a skilled worker to be around $30 an hour and benefits.
Martin says his union hasn’t been involved in residential building since the early 1980s, and has instead shifted to complex industrial, heavy construction and highway projects.
He said the high number of undocumented workers who once worked in Arizona’s housing construction sector meant subcontractors could drive down the wages, particularly in framing.
During the boom in the mid 2000s, construction wages in Arizona trailed the national average by about 15 percent, according to federal data. In contrast, retail wages in the state were only about 5 percent below the national average.
“There is nobody hardly left that is willing to work for the low wages that were once upon a time being paid to these undocumented workers,” Martin said.
That could mean a real shift for Arizona’s economy, said Dennis Hoffman, an economist at Arizona State University’s W.P. Carey School of Business.
“Part of the growth in Arizona has been fueled by the fact that it is a place that is dynamic, it’s affordable when it comes to housing construction,” Hoffman said. “The reason this is going to be fascinating going forward, is the old way is not anything we can replicate because we are going to enforce these undocumented labor laws.”
Hoffman said that the bottleneck in labor is likely to grow more severe in the coming years. He said absent some kind of guest worker program or immigration reform -- which is what local subcontractors and homebuilders are now advocating for -- construction wages will have to go higher.
“It is going to be tougher to get a U.S. citizen to crawl up on a roof when it is 120 [degrees], you are just simply going to have to pay more,” Hoffman said.
“I think construction companies are going to have to adjust, people appraising homes are going to have to adjust, people buying homes are going to have to adjust.”