Thursday, November 30, 2017

The Condition of the HOA Construction Industry

This posting almost didn't hit the presses. Every revision sounded like I was either complaining or making excuses. To you, the Community Association professionals who, alas, specialize in fielding complaints and excuses, I knew that track was a non-starter. 

But having gained a reputation for being mildly controversial, and having largely gotten away with it, here's my shot at giving you the state of the construction side of the HOA industry - running the risk of sounding like I'm, well, complaining and making excuses.

Does the following sound familiar?

Contractors are really:
  • Hard to communicate with,
  • Picky and turning down work,
  • Expensive; charging too much.
 Well, there's more truth there than I would like to admit...but there are reasons.
The market is flooded with work. From a pure economics perspective, 2017 placed the liability of demand in the HOA Customer column and the power of limited supply in the Contractor column. When customers are begging for help - at "any cost" - the cost is inevitably going to go up. At the busiest of the summer, I had told customers that there was no way I could get to a job quickly unless I sent technicians on overtime - because the calendar was completely full. ...Time-and-a-half with a 4-hour minimum - APPROVED! Time after time I just shook my head and sent the technician. Many of us pulled back to the corner of work we knew we could do best, and had no choice but to turn down the other work. 
Hard to communicate with - I suspect that there are some who will blame me for this also - though I tried...I really tried. And I know my team, and other great contractors who were doing their best also - and failing.

Why is the market flooded?

  • Heavy rains and leaks last winter backlogged repairs into the spring and summer. The regularly scheduled summer work never had a chance.
  • The economy, in general, is on an upswing and customers are ready to spend money on maintenance.
  • Deferred maintenance is catching up with so many HOAs and, favorable economics or not, the time is NOW to do those repairs.

But the problem isn't limited to the quantity of contractors to hire. Contractors are also facing a shortage - Laborers.
In our far-reaching recruiting, I've had restaurant waiters from Florida responding to employment ads. The demand for construction labor is crazy high. When was the last time you drove into SF? All those buildings rising from the congestion require armies of labor to keep them climbing.

I'll admit, I'm as guilty as the next contractor. It's been hard to honestly keep up with the demand. I hate to turn down work, but at some point - we have to say no, or risk failing you, our beloved customers.

The short-term good news!
  • So far this fall and winter have been reasonably dry. Summer projects naturally fall off as winter approaches, and the bloated summer labor force should be able to start catching up on the backlog.
  • With all the water last winter, it's possible that a majority of undetected leaks were finally addressed, and the leak work-load will be decreased this winter.

That didn't sound too much like complaining - did it?
There are some legitimate reasons for contractors acting like...well, contractors. We, contractors, are an odd variant of human. We need, shall we say, refinement. Many thanks to the customers out there who have been patient and offered those kind and timely admonitions. The partnership is appreciated.

And a Bonus: Interested in the future?
Me too. Here are some parting thoughts:
  • What will be the effect of the North-Bay fires on materials, labor, and architects?  We will not know the true effect until everybody starts to rebuild all at once.  
  • Hurricane Harvey and his conspirators could draw manpower away from California.  
  • Political forces have left many laborers feeling uneasy about working in America.  If that worsens, what might be the consequence to the labor pool?  
  • Also, looming ahead is AB721, the deck structural inspections bill, which is a two-year bill and may be approved.  This bill in its present form would require inspections of 15% of all elevated decks and walkways, requiring an immense amount of destructive testing.  Who will perform all of this work, when we are at full employment, and now every multi-unit development in the state needs to conduct these inspections all at once?

The good news is that we have time to plan.
The HOA industry is poised to be a driver for sociological change in this millennium. Join me - in making it good.

Have a great Holiday Season!

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