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WNC Business

Product and labor cost inflation creates challenges in construction industry

Mar 06, 2024 08:33AM ● By Randee Brown

The exponential growth of the WNC region maintains the area’s residential construction industry, according to Grove Manor Flooring Co-owner Sarah Cosgrove. While current residents haven’t been as eager to build new homes, Cosgrove has seen an increase in additions to and remodels of existing homes.

Cosgrove said many contractors are still booked for services a month out, less time than contractors had booked one year ago. Those using a subcontractor model may be more cost effective but less predictable with their availability timelines. Those hiring direct employees have a higher overhead, as it is becoming more expensive to pay living wages and offer health benefits. 

“Quality and predictability means keeping quality employees and taking care of them,” Cosgrove said. “It is harder to run a business with this model, and sometimes we do lose jobs because of cost for this reason.”

Other cost factors for companies with this model include maintaining showrooms, owning their own equipment, and marketing campaigns.

The biggest challenge for contractors is finding staff who can afford to live in the area despite earning living wages, and Cosgrove said this applies across the region, not just in Buncombe County. The workforce as a whole needs to be paid well and have some sort of benefits, but for those wanting to build their contracting business, this can be a challenge.

“Gas prices and reliable transportation may become prohibitive for how far away people have to live to find affordable housing,” Cosgrove said. “We see a lot of people working here that live in Greenville, SC, and that’s a huge commute for a four-day project. It gets complicated to hire good folks who want to work.”

Cosgrove said major growth in housing will likely happen soon in areas like Transylvania and Madison Counties, or in outlying Henderson County communities like Edneyville. In many rural areas, there is a fine line between maintaining the availability of farmland and needing to increase the amount of available housing. 

“We are at a housing crisis at this point,” Cosgrove said. “We need more that is affordable, and that doesn’t mean Section 8. We need housing that police, nurses, and teachers can afford, and right now we don’t have enough. We need to see a change in available housing for everyone, even with inflation, without taking shortcuts, and we’ll see that in more rural areas of these counties, not just in Asheville and Hendersonville.”

The lack of housing affects the workforce, and according to Cosgrove, if people can’t afford to live in WNC, they can’t come to WNC to work. The irony is that the people needed to meet the construction industry’s demand for either affordable or custom luxury homes are not able to afford the cost of building a home of their own.

In addition to the cost of the workforce, the cost of materials in general is also higher. A popular trend in Asheville and Hendersonville is to use sustainable reclaimed lumber, but that happens to be the most expensive product to put on a floor. White oak is becoming more popular than red oak, though inflation is affecting the cost of those quality materials. 

“We are seeing people choosing to use more economic materials as they want to get more bang for their buck,” Cosgrove said. “Our wheelhouse is hardwoods, but more people are choosing materials like luxury vinyl because of cost. People are being more cautious with their spending.”

After seeing price increases between 2020 and 2022 due to COVID impacts on lumber mills and vendors, the cost of subfloor materials is leveling out as there are fewer material shortages now than in recent years. Contractors working in painting, roofing, and other portions of the residential construction industry are also seeing prices leveling out, but Cosgrove said prices are not going down.

Serving on the Government Affairs Committee for the Builders Association of the Blue Ridge Mountains, Cosgrove said the team is working to keep additional unnecessary regulations off builders’ plates in order to keep costs down for homeowners. 

Everything a builder has to pay for increases the price of the home, according to Cosgrove. Regulations on aspects of homebuilding including electrical and insulation work can lead to added costs, and the Builders Association is working so these don’t have to be passed on to the homebuyer.

“I’m really excited to know so many builders and developers in our region have sustainability, affordability, quality, and ethics at the core of their mission,” Cosgrove said. “Partnering with people thinking about more than the final dollar feels good, and that’s one thing I love about this region. It means a whole lot to be part of an organization that stays up on trends and ways to protect the homeowner. They think about the things that really matter.”