Worker shortage may be causing rising construction costs in Bay Area

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A scarcity of workers may be a major factor in the Bay Area’s rising construction costs and the shortage of affordable housing, a UC Berkeley study found.

According to a report from the UC Berkeley Terner Center for Housing Innovation regarding the drivers of housing construction costs in San Francisco, the number of workers in relation to the number of units being built is below the historical average, meaning that the demand for housing is outpacing the ability to fulfill construction demands.

Local construction companies have also felt the effects of worker unavailability. According to McCutcheon Construction Inc. president Mick Coonan, the demand for construction workers has increased over the past few years, and the company has had several positions that were difficult to fill. Coonan added that his company, along with other contractors, experiences a shortage of employees in the spring and summer.

Coonan attributes the higher construction costs and lack of workers to the higher cost of living.

“The cost of housing is so prohibitive that employees need to be paid more just to live here,” Coonan said. All costs in the Bay Area are high, which impacts construction costs.”

To compensate, the company has had to hire workers from places as far away as Tracy. According to Berkeley’s Zoning Adjustments Board chair Igor Tregub, there is a shortage of workers hired in Berkeley who can actually afford to live in the city.

Berkeley is suffering from a housing affordability crisis,” Tregub said in an email. “It is a tragedy that there are so many construction workers that are being brought onto a non-union project and are working to construct residential housing that (they) themselves cannot afford to live in.”

Another element of the shortage and rise in construction costs is a lack of skilled laborers, the report said.

A less-skilled pool of construction workers, according to the report, can result in increased insurance, loss of productivity and defects. In order to hire qualified supervisors, Peter Downey, president of Peter Downey Construction Company Inc., has had to increase hourly pay from as low as $50 to as high as $80.

“It becomes tough to find a person cut from supervisor cloth who can handle the really complicated and demanded work that we do,” Downey said. “There are jobs that I have not taken because I did not have a supervisor to do it.”

Downey’s company has experienced rising construction costs in recent years. According to Downey, doing a high-end remodeling job in San Francisco previously cost $500 per square foot, but over the past few years, it has risen to $800-$1,000 per square foot.

North Berkeley Design and Construction creative director Erol Yildiz said, however, that the company has not experienced a shortage of workers. Though he said the cost of construction materials has slowly increased, there’s “still plenty of work available in the residential construction business.”

Contact Andreana Chou and Mariam Zagub at [email protected].