Skilled Worker Shortage Hampers Housing Upswing

By MELINDA FULMER

Sept. 27, 1997 12 AM PT

SPECIAL TO THE TIMES

With Southern California’s housing market on the upswing, construction firms that downsized in the early ‘90s are scrambling to find enough skilled workers to handle the new projects, which is causing delays and eventually will lead to higher home prices.

“For the first time in years, we are having delays in getting our projects done,” said Les Thomas, Southern California division president of Walnut-based Shea Homes.

Instead of having nine or 10 subcontractors bidding on a job, today there might only be a couple of firms vying for it, builders and contractors said.

“There is a big fear that if work picks up any more, where are we going to get people adequately qualified to do the work and do it correctly?” said Tom Brooks, president of BCI & Associates.

Builders throughout the Southland report that project completions are being delayed anywhere from a few days to a month as subcontractors use fewer and less-experienced trade workers.

And soon, it won’t only be delays that hurt buyers, but price increases as subcontractors pass along higher labor costs in their bids to builders.

Already, some firms are having to boost wages and add benefits like health insurance and 401(k) programs to retain key employees.

Workers who do two of the most critical jobs in home building--roof cutting and layout--are now garnering daily rates of almost $300, 30% more than last year, Brooks said.

“We are going to have to pay to keep good employees around so they don’t get stolen away by other subcontractors,” he said.

In the first eight months of this year, Southern California housing permits were up 24% from the same period the year before, according to the Construction Industry Research Board in Burbank.

And the number of new projects entering the market from Ventura to San Diego in the first six months of the year surged to 91, up from 18 during the same period in 1996, according to the Meyers Group in Irvine.

But the pool of available skilled construction trade workers in Los Angeles, Orange, Riverside, San Bernardino and San Diego counties has shrunk, declining from 156,200 in 1989 to 136,100 this year, according to state figures.

Work for many Southern California trades people, such as carpenters, concrete masons, electricians and roofers, didn’t survive the early 1990s. Attempts to unionize were struck down, wages plummeted and there were not enough jobs to go around. Companies folded and their workers headed out of state.

“We had a wholesale relocation of [skilled workers] to Las Vegas and Arizona,” said Ken Agid, an Irvine-based housing consultant.

And not all of these people will return to Southern California, he said, considering the amount of growth projected in those areas and other Western cities for the next few years.

Chuck English shuttered his Santa Ana company, C&E; Framing Inc., and began working in Las Vegas in 1995 after the firm failed to land enough jobs to pay its bills.

“We just died on the vine,” he said. “We bid 17 jobs and didn’t get a single one,” he said. In the late 1980s, English’s company was grossing $12 million a year. By the time he left, revenue had dwindled to less than $800,000 and the bottom line was bleeding almost $35,000 a month.

In fact, English wound up selling his luxury home in Yorba Linda and using most of the proceeds to pay off that corporate debt. Now he works as a general manager for a Las Vegas firm, Pointblank Framing.

“Nevada is a much friendlier state financially,” English said, noting the lower prices of car licenses and registration, housing and taxes.

“Some guys are going to bite the carrot and go back to California, but I’ve relocated permanently,” he said.

Indeed, paychecks haven’t gotten fat enough yet to lure many workers from less-expensive communities.

The average hourly wage for trade workers in Los Angeles was up just 2.3% in August (to $22.03) compared to the same time last year ($21.54), according to the California Employment Development Department.

But that should change over the next couple of years, as housing demand increases and firms have to pay more to keep the most qualified people, said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange.

Some firms like Riverside-based John L. Ginger Masonry are already placing advertisements in Las Vegas newspapers to lure back workers.

“As wages start firming up, they [workers] are going to come back to the area,” Adibi said. “I think this is probably a short-term phenomenon.”

None of this is making Victor Burrola very happy. He is going to have to wait another month before moving his family from a rented residence into a new home in Foothill Ranch.

The 45-year-old project manager from Scottsdale, Ariz., expected to move in this weekend, but was told that the home he purchased in May wouldn’t be finished until late October.

“All they can say is, ‘I’m sorry. We’re going to deliver it as soon as we can,’ ” Burrola said.

Coming from a construction background, he said he understands the difficulties builders face in getting projects completed. All he had wanted was to be told at the outset that it would take more time, so he could juggle his schedule.

“It’s been really inconvenient,” he said.

An increase in well-paying jobs is bringing more home buyers like Burrola into the Orange County housing market. Sales in August reached an eight-year peak and prices have finally begun to rise, allowing some homeowners to move up to larger homes.

At the same time, many older projects are finally selling out, allowing builders to start new developments.

“We are seeing far more [community] plans in the last six months than we did in the [previous] year and a half,” Brooks said. And many of these communities are larger than those built in recent years, he added.

But finding firms that can finish these new projects on time is the problem. Contractors say jobs are taking longer because experienced workers, who might have worked as a team before, have been split up to train less experienced laborers.

“Most of the companies are relying on on-the-job training, but unfortunately nobody on the job has time to show somebody else what to do,” said Randy Thornhill, business representative for Carpenters Local 2361.

That could have implications for the types of homes builders choose to sell and for the quality of those homes. It will mean more basic homes with flatter roofs and straight staircases. Gone may be some of the luxurious manor homes with custom touches that builders have been putting up over the last 18 months.

“You can’t find too many people who can do that kind of finish carpentry,” said Agid.

And with the threat of construction defect litigation looming, analysts said home builders may have to pay more for a contractor who can provide experienced workers.

“It’s important to have somebody who can supervise the project properly,” said Newport Beach attorney Thomas E. Miller, who specializes in construction defect litigation. “That’s one of the principal reasons for our cases.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Working World

The number of skilled construction workers employed in Southern California has been growing since 1993 because of a building boom. Here are August employment and hourly earnings trends:

Regional Employment*

1989: 156,200

1990: 142,200

1991: 127,800

1992: 117,700

1993: 106,500

1994: 117,600

1995: 126,100

1996: 128,200

1997: 136,100

* Los Angeles, Orange, Riverside, San Bernardino and San Diego counties; skilled workers include those in masonry, plumbing, electrical, heating/air conditioning, carpentry, floor work, roofing, siding and sheet metal, among others.

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Average Hourly Earnings

Los Angeles County

1995: $21.18

1996: $21.54

1997: $22.03

Orange County

1995: $17.53

1996: $18.42

1997: $18.11

San Diego County

1995: $18.13