If you are surprised and frustrated at how your community association’s construction project is delayed, you are not alone. Not only are all community associations experiencing this, but all industries and most businesses are too. We spoke to Jack Mancione, CEO of MI Construction & Roofing to hear first-hand how this is affecting homeowners’ associations. Let’s dive into what Jack shared.
Many construction vendors are back-logged
When COVID-19 hit in early 2020, the economy was pretty strong, and most established construction vendors already had a full, steady schedule. Subsequently, interest rates dropped significantly. As a result, many communities decided to move forward on large capital projects. Therefore, demand is high for qualified, educated vendors. Meanwhile, labor and material shortages, explained below, are constraining vendors from having more capacity to deliver on this higher demand.
The full set of causes of the current labor shortage has been difficult for experts to decipher. Most conclude that it is a complex combination of many factors. Factors commonly cited include:
- workers demanding more than they were pre-pandemic
- people choosing to leave the workforce for reasons such as to retire earlier than planned, or to care for children
- immigration has slowed, and therefore the labor force has shrunk
The labor shortage has cascaded into a materials shortage. While labor may not be the only factor in the materials shortage, it is likely the largest factor.
First, at the start of the pandemic, production in general fell as many companies, especially those “non-essential”, were forced to halt work and furlough employees. The economy rebounded extremely quickly and demand across many industries increased. However, a labor shortage remained, per reasons cited above.
As a result, most industries are impacted by supply chain issues. Because of the labor shortages and increases in demand, shipping yards have not been able to fulfill their demand. That has put pressure on train and truck transportation, where labor shortages and increased demand also apply. Meanwhile, many products are made with several materials from both in and out of the U.S., complicating production as different materials have been delayed for different reasons. Most manufacturers, even those with the best in advanced planning for foreseeable and potential COVID impacts, did not forecast that materials they were promised by vendors would fail to arrive on time, or at all. All of this has perpetually compounded lead times for materials from weeks to months.
Unfortunately, construction materials are not immune to all of this. Roofing and lumber are just two of the products impacted by both price and availability.
Inflation has risen, as of December 2021, to the highest it has been since 1982, at 6.8%. In addition, as workers strive to fill their labor needs, wage costs have increased. Likewise, as demand has increased for shipping, shipping container costs have increased many times over. The cascade of all of the moving and quickly evolving factors has left manufacturers no choice but to increase prices, often on shorter notice than was previously typical.
An additional cost factor for community associations is handling a capital project delay while waiting for materials. Many capital projects have been staged and must be monitored by ongoing maintenance in the interim. Unfortunately, this drives overall cost of the project.
Advice for community association boards
It is crucial now more than ever that you only use vendors you trust, and who are in tune as much as is possible with the evolving landscape as it relates to their specialty. Express to vendors your requirement to stay informed with industry updates and status reports. Both you and your vendors must be good at keeping the communication lines flowing. Before beginning a capital project, query them about material availability, scope of work, and potential foreseen and unforeseen delays.
No one knows how long this situation will last, but it will be at least well into 2022. Education and communication is your best remedy for frustration and budget decisions.