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This doesn't make much sense to me. Why would construction costs be rising so much? Did we run out of trees or something? Are safe modern materials (like not using asbestos and lead-based paint) just massively more expensive than the alternatives? I could see labor costs rising to some degree due to the baumol effect, but that doesn't come close to explaining the total rise.
My naive guess would be mostly wages. None of the post-70s technology has really mitigated the need for a bunch of men to stand around in the sun and lift heavy objects. The same forces which push of cost of living up mean those guys won’t do it for $7.50/hr.
Is there a worker supply shock after fifteen years of collapsed demand? That is enough time for a good number to think about getting out of the business.
If an economist told me permitting or materials costs had ballooned since 2008, I’d believe that too, I suppose.
I don’t know about permitting- in my area you can usually get away with just not pulling a permit on anything and hoping no one notices- but materials costs skyrocketed during the pandemic supply chain disruptions and only lumber really came back down at all- concrete, paint, asphalt, etc is all ludicrously expensive. It’s also hard to get labor but that has to do with the reliability issues from hiring drug addicts and illegals as much as with the post-pandemic labor shortage.
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I am not a construction worker. But I have been a construction worker(pre-pandemic), work in a trade that is sometimes categorized as construction, my grandpa was a GC who retired recently, and I’ve overseen minor construction projects recently. A few points:
Construction workers in general have always been unreliable people who have lots of no call no shows, sometimes for months at a time, waste materials, do things other than the ones they say they’re going to do when not supervised, and just disappear for long stretches at a time. Also lots of them do drugs, because the industry has never tested, so there’s plenty of them with what the industry refers to as ‘crackhead tendencies’. This has gotten worse with the supply crunch for blue collar labor, and ‘crackhead tendencies’ make already-rising labor costs rise exponentially because the guy demanding to be paid early because he’s out of cigarettes(he was paid on Friday and ran out of money Saturday morning) now has a lot more negotiating power than he used to.
Lumber rose and then fell to where inflation would predict it should be. Everything else stayed high, and concrete in particular is ludicrously expensive right now. The usual construction industry explanation is that Amazon buys up all the supply for building warehouses.
In addition to the labor issues I already noted, construction is one of the least pleasant jobs that’s widely available. In a general blue collar labor crunch construction will see a particular supply drain, which introduces lots of delays that the customer pays for.
Construction costs rise partly because construction foremen and contractors have no incentive to keep costs down- everything just gets billed back to the customer so nobody cares. Yes, that means the customer eats the bill for lots of waste, dishonesty, and sometimes theft(remember, plenty of the workers are literal crackheads).
Put all that together and it’s not really a mystery why construction is particularly affected by the post pandemic inflation and enshittification.
I was talking to my lawyer friend about construction workers, and he has a few construction worker clients and he says they're all on meth, so yeah, this checks out. I always kinda envisaged them as only slightly classier than a depressed Walmart worker, so it's good to confirm that with people who come into contact with them, as I certainly don't do so often.
This is just crazy to me. Such a moral hazard that nobody I've heard really talks about defending against.
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"Enshittification" doesn't mean "turned to shit". It means "turned to shit because of user, and later business, lock-in".
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It is a lot of baumol effect. There is simply not much more productivity to be squeezed out of the trades if we insist on high quality stand alone housing. People have been trying for decades with manufactured housing or building off site. Nothing seems to bring costs down. Housing, the way people want it, is too bespoke and every single housing lot is different and has different challenges. Building a nice modern house requires a dozen specialized trades to all work in concert in the same space and at specific times. Or one very dedicated person building their own home over years and years. The non-labor inputs are also vastly more expensive than they used to be. A high quality gallon of paint is 80 bucks at the local ACE hardware store.
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