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COVID-Driven Construction Supply Issues Hit Affordable Housing

As the price of lumber and other building materials rises, the National Association of Home Builders say Americans are paying about $36,000 more on average for new construction homes.
Flickr / CC-by Great Valley Center
As the price of lumber and other building materials rises, the National Association of Home Builders says Americans are paying about $36,000 more on average for new construction homes.

More people are looking for housing than homes are available in the Bloomington Normal market. That has caused new construction to rise sharply—but not without hiccups.

Supply shortages are causing delays. And steep prices on materials are blowing budgets by thousands of dollars. The burden is heavier for those building affordable housing.

New construction in the Bloomington-Normal area is up about 25 percent year-over-year.

Brandon Shaffer, president of the Mid-Illinois Realtors Association, said it's the result of more buyers flooding the market.

"The reason new construction is going up is simply because the existing stock isn't there," Shaffer said. "So when you've got your option between new construction, which might rank just a little higher on the price point than it might have two years ago, many clients are wanting to go that new construction route."

But Shaffer said new builds often come with a higher price tag, especially as the pandemic continues to strain supply chains. The cost of wood, for example, has more than tripled.

“They're doing their best—they meaning the builders—to keep those new construction homes as competitive as they can with existing homes," Shaffer said.

Across the U.S., the average price for a single-family home has shot up nearly $36,000, according to an analysis by the National Association of Home Builders.

While some buyers can stomach the added costs, those building affordable housing say their clients don't have that option

"From a social work standpoint, it's decreasing our impact in the community."

Jim Walters, executive director of Habitat for Humanity of McLean County, said when projects cost more, organizations like his do less.

“We're certainly going to invest more into the houses because we need to pay for these materials," Walters said. "Frankly, we're going to build less than we anticipated. So from a social work standpoint, it's decreasing our impact in the community."

Habitat originally planned to build eight new houses this year. As the cost of materials quickly burned through the budget, Walters said the agency cut back to four.

And he said delays in material shipments mean it takes longer to get houses up.

"Our suppliers are not so sure that they can get the materials to us in a timely manner," Walters said. "We had had designs on starting this year (with a) blitz build. So we were going to start from framing the walls to putting the roof on and windows in—all three weeks. From a supply chain perspective, we just can't do that.”

Walters said it's also hard to coordinate labor when supplies don't arrive as scheduled. He said most of Habitat's cost-savings comes from volunteers—and the family purchasing the house—doing most of the basics. It's no longer easy to pin down build days. Plus, crews are at half-capacity due to COVID.

"There wasn't really much to cut back on in that we are as lean as efficient, I think, as a home builder can be," Walter said.

Still, he said, Habitat could end up spending more on building these houses than its gets back.

The nonprofit offers zero-interest mortgages to qualified low-income buyers. The mortgage covers the appraised price of the home.

"Just because the materials cost more doesn't mean that in six months when we go to sell the house to the homeowner that it's going to appraise for more—because the appraisal is based on market value," Walters said. "The market, not the materials, will dictate the price of the house.”

Walters said some of that difference can be made up through donations—though that's not an option for government-funded affordable housing.

Kelby Cumpston is a Bloomington-based project manager who oversees affordable housing construction in Illinois and Indiana. He said state funds are notoriously strict on unforeseen costs.

Reserves are slim.

"We find out two weeks before the move-in date that a certain material isn't going to show up. I have to be the bad guy to tell them that, 'Hey, this isn't gonna work out.'"

"Those reserves for affordable housing almost always gets spent on upgrades and betterments that would improve either the exterior of the project we're working on or upgrade certain amenities for the common uses," Cumpston said. "Those things are what ends up being cut."

He said the money spent on delays reduces the number of upgrades. It also means spending more to have crews go back into units later to replace appliances, or add finishing touches when supplies do become available.

Cumpston said shortages of refrigerators and stoves make units unlivable until the appliances get there: If you can't cook there, you can't live there.

Cumpston said those delays frustrate future tenants, many of whom are waiting in temporary units.

"They're given a date when they're going to move in, and they're preparing in their life to move in for that date," Cumpston said. "Then we find out two weeks before the move-in date that a certain material response to get doesn't show up. I have to be the bad guy to tell them that, 'Hey, this isn't gonna work out.'"

Cumpston said as soon as one supply issue resolves, another pops up. One day it's lumber, then it's PVC pipes, then it's door knobs and other fixtures.

Cumpston said with more people doing home projects during the pandemic, big box stores and larger vendors alike feel the strain.

"I think construction gets a bad rap for, like any type of renovation, you have an end date and the running joke is, 'Add a couple months after that.' But now it's really all in it is going to be a couple months," he said.

Cumpston said most people are patient, adding they'll likely have to stay that way, with no sign the pandemic-caused glitches will end anytime soon.

Dana Vollmer is a reporter with WGLT. Dana previously covered the state Capitol for NPR Illinois and Peoria for WCBU.
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