COVID-19 Survey: Q&A With NMHC on “Off the Charts” Concerns
A survey of National Multifamily Housing Council (NMHC) members unveiled that the COVID-19 pandemic is impacting construction firms and multifamily projects by causing unprecedented delays stemming from labor, permitting problems and more.
The national survey, conducted in late March, asked 135 NMHC members to weigh in on construction permitting, starts, completions, materials and labor.
More than half (55 percent) of respondents noted that they are currently experiencing construction delays in the jurisdictions where they operate. Additionally, the survey revealed 76 percent of firms are dealing with delays in permitting, 59 percent indicated there are delays in starts, and 41 percent of respondents said that COVID-19 outbreak-related labor constraints are affecting construction operations.
Commercial Observer spoke with Paula Cino, vice president of construction, development and land use policy, and Caitlin Walter, vice president of research, about the survey and what might be ahead for the multifamily construction landscape.
Commercial Observer: What was the genesis behind the survey?
Caitlin Walter: We’ve been hearing from our members that they were starting to see some delays in construction, and we’ve never had anything like this happen ever. We don’t have any historical data to look back onto. All we have to rely on are member experiences to try and get a handle on the situation. Our goal was to get a survey out to our membership — our developer-manager members who do construction — as quickly as possible. We had a really quick timeframe with the goal that we want to do this every couple of weeks so we can keep an eye on what’s happening in the industry.
What were the biggest takeaways from this survey?
Paula Cino: The most critical numbers are that the vast majority of projects are seeing delays. That’s important because even after we get out of this, in what hopefully will be a relatively short-term period of true shelter in place orders and a shutdown experience, those delays are going to have a meaningful impact that may not be immediately resolved. Many members say the delays are indefinite in nature at this point and we are anxious to see how those delays and start numbers change as our surveys progress over time. We are concerned that we will see a severe drop in starts for the rest of the year.
What is the level of concern among those in the construction business?
Cino: Off-the-charts high. There are a lot of moving parts here. The survey shows it wasn’t just things like materials and supply chain concerns that we thought might initially be a challenge. It’s moving into labor, which we hope is short-term in nature. But the consequence of not being able to move forward on development fundamentals and things like permitting, which involves human components, those are things that once they get stifled, you are not going to be able to get them up and running very quickly. These are the things that will cause some long-term stress on the construction and development pipeline.
Based on the survey results, how might this impact multifamily housing in the foreseeable future?
Walter: We’re going to see a shortage of labor and there’s a variety of reasons for that shortage. People aren’t comfortable, people are going to get sick, people have family members who are getting sick, and that’s going to create a big impact. In the 2008 crisis, and this has happened in other recessions as well, we saw a shortage of labor as many moved on to a different type of work and we’re already experiencing labor shortages now and that could be exasperated.
We’re also going to have a shortage of materials. Elevators is one prime example, because they are sourced from Italy. When you look at the type of development occurring in the most recent cycle, it’s high-density, urban stuff that requires elevators. That’s also an issue on the property management side for renovations and upkeep.
The survey shows 24 percent of respondents said a lack of materials is affecting their construction operations. Besides elevators from Italy, what other sorts of sourcing materials might be problematic in the months ahead?
Walter: Anything from China. Countertops is one that comes to mind a lot. Anecdotally, we are starting to hear that folks are starting to source from other areas due to trade stuff, but that’s definitely one we’re hearing a lot about in the surveys.
In the survey, 67 percent of respondents indicated they have implemented new strategies to replace in-person transactions like inspections and approvals. What is being done here?
Cino: What we’re hearing is a number of jurisdictions have made video inspections permissible, or some sort of photo documentation process in lieu of an in-person inspection, utilizing some sort of conference abilities.
How will you be keeping tabs on what’s happening with members in the weeks and months ahead?
Cino: We will be doing a series of these surveys and keep an eye on what’s developing. The next one will be done sometime in the next couple of weeks and will be the same questions most likely.