Housing in Central Oregon is expensive, and consumers aren’t the only ones frustrated by the situation.
Participants in the Central Oregon Builders Association’s first breakfast panel discussion sounded off Tuesday about regulation, a labor shortage and the cost of developing land. All of those factors are contributing to a slow pace of construction, according to participants from the construction industry. The city of Bend issued about 2,400 residential construction permits in 2007 but only about 1,000 last year, panel moderator Andy High said.
“Building is extremely risky,” said Luke Pickerill, owner of MonteVista Homes and president of the builders association. “Why aren’t builders meeting the demands of today? So many projects just don’t pencil.”
Tuesday was not the first time these complaints have been aired in Central Oregon, but the builders association panelists backed up their claims with detailed numbers.
“I’ve been told by lots of jurisdictions I overstate the regulatory burden,” Pickerill said. Then he offered a comparison: The most expensive line item for a low-volume homebuilder is framing, which costs an average of $10,000 per home, he said, citing data from the National Association of Home Builders. Permits and impact fees add $30,000, he said.
Pickerill said a low-volume builder stands to make $27,000 per home, but that’s before expenses such as job-site errors, fixes required by local inspectors, delays in selling homes and home warranty issues.
While Pickerill complained about regulation, custom homebuilder Mike O’Neil, owner of SolAire Homebuilders, said he welcomes new standards for energy efficient buildings. Although energy efficiency increases up-front costs, the impact on home values is larger, he said.
“Homeowners want to buy a home they can afford to live in long into the future,” O’Neil said.
The labor shortage is a major driver of construction costs, said Steve Buettner, president of SunWest Builders in Redmond. “This is probably as bad as I’ve seen it,” Buettner said.
As a general contractor in commercial construction, Buettner said he hates to field calls from subcontractors who are lined up to do multiple jobs but ask, “Which one do you want us to go to?”
Buettner said he had a project that was five weeks behind schedule from the start because one subcontractor had half as much manpower as was needed. While there are hotels and apartment buildings going up across Bend, Buettner said other projects are being put on hold, and still others are on the edge of cancellation because of rising costs.
SunWest has built several affordable apartment buildings for senior citizens since 2009, and each one was more expensive than the first, Buettner said. Hard costs, which include only materials, site work and labor, are rising so quickly, he said, the fourth senior-housing project, built in 2017, was 57 percent more expensive than the first.
Buettner said construction-industry leaders have been involved over the last 18 months in promoting the trades to graduating students and providing opportunities through Central Oregon Community College to learn specific skills like tile setting and blueprint reading.
Turning around the labor market could take a generation, Buettner said. Many of the skilled workers who left the construction industry during the housing bust were on the verge of retirement anyway, he said. “Now we’re bringing up a younger generation,” he said. “They’re not excited about going into the trades.”
Redmond-based Hayden Homes is working in 35 cities in the Northwest, and Regional Director Geoff Harris said the company keeps a close eye on what’s affordable to median-income families. In Redmond, that would be a home costing $221,744, he said, but the median price is around $289,000.
Land costs, which include buying land and preparing it for building, contribute to that gap, Harris said. A finished lot costs $100,000 to $125,000 in Central Oregon, he said. “At that point you’ve got to carry it.”
That’s why many builders are continuing to work with land they purchased before the last downturn, so-called “legacy lots,” Harris said.
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