Construction delays and rising costs continue to thwart developers, according to the seventh edition of the National Multifamily Housing Council (NMHC) COVID-19 Construction Survey, which was conducted between May 17 and June 1.
A record 83% of multifamily developer respondents reported construction delays in the jurisdictions where they operate. Of this group, 80% cited delays in permitting, up slightly from 77% in round six and comparable with earlier survey rounds.
According to the latest survey, 80% of those respondents reporting construction delays also cited delayed starts over one year into the COVID-19 pandemic.
The main reasons cited for delays in starts included:
permitting, entitlement, and professional services, 70%;
projects not being economically feasible at this time, 56%;
and economic uncertainty, 27%.
Respondents attributing delays to projects not being economically feasible at this time increased to 56% this round from 30% in round six.
“These findings highlight the deep challenges that builders and developers are facing as the economy continues to recover from the depths of the pandemic,” said NMHC president Doug Bibby. “While we are encouraged by the overall prospects for the industry, skyrocketing construction costs and a lack of available labor make it increasingly difficult and expensive for apartment homes to be built—worsening the affordability challenges facing communities across the country over the long term.”
Additional findings include:
86% of respondents said they have been impacted by a lack of materials, the highest share recorded since the survey began in spring 2020;
Another record, 100% of respondents reported price increases in materials, up from 93% of respondents in the previous round. Of those who reported price increases, the average firm experienced a 38% price hike over the past 12 months for its most impacted materials;
On average, respondents reported that they experienced a 201% increase in lumber costs over the past 12 months;
In response to the rising lumber costs, respondents have taken several actions, including repricing projects, 62%; making price-saving modifications/eliminations to other materials or fixtures, 49%; and delaying the start of projects, 39%;
47% of respondents said they have been impacted by labor constraints, up 11 percentage points from round six and up 27 percentage points from round five; and
83% of respondents reported that deals have been priced up, with 69% indicating deals being priced up 5% or more, compared with 14% of respondents in the previous round.