Southern California’s construction industry is gaining traction after years of decline, but it still has a long way to go.
That’s the upshot of a report issued today by the Los Angeles County Economic Development Corp. The study notes that the 313,700 workers who were employed in 2015 fell 23.7 percent, or nearly 98,000, below the number who were employed at the industry’s peak in 2006.
The employment ripple effect
The report notes, however, that those 313,700 direct payroll jobs were supported by an another 189,600 jobs through indirect effects of supply chain purchases that were not made within the industry itself and an additional 151,900 jobs that were supported through the household spending of employees in the industry and its supply chain.
Construction permits have risen
And construction permits, a forward indicator of activity to come, are on the rise.
Since the housing market collapse, new home construction in the five-county region has been sharply divided between a surge in new multi-family units — primarily apartments — and a more gradual recovery in single-family homes.
In 2015, 29,000 multi-family building permits and 15,000 permits for single-family homes were filed. Those numbers have gradually risen each year since 2009, which saw just 6,000 building permits for multi-family units and 9,000 for single-family homes.
L.A. County leads in construction employment
Los Angeles County had the highest level of employment in the industry in 2015, with 125,747 jobs or 40.1 percent of all construction jobs in Southern California.
Orange County came in second with 89,360, followed by Riverside County (52,844), San Bernardino County (31,737) and Ventura County (14,077).
But those gains fell nearly 20 percent below the peak seen in 2006.
The report also offers a breakout of job declines seen in various areas of construction.
Employment in the construction of buildings, for example, declined 17.9 percent from 2005 to 2015, while heavy and civil engineering construction employment fell by 4.8 percent. Specialty trade contractors, which account for more than two thirds of all construction employment, were hit hardest with a 22.4 percent decline in job counts over the 10-year period.
This Santa Clarita company is keeping busy
But economic conditions have improved and people have more money to spend these days, according to Tony Ciaramaglia, a supervisor with Tme Construction in Santa Clarita. His company does all kinds of work, although the business specializes in kitchen and bathroom remodels.
“We’re very busy,” he said. “And we’re lucky because we built up a good client base over the years. I will take on even the small jobs. We have so much business that I’m turning a lot of work down. But I don’t want to expand because I have a really good crew and a really good group of subcontractors.”
Ciaramaglia said his company isn’t the only construction firm that’s grabbing lots of business these days.
“People are spending money now,” he said. “I was talking to a guy with another construction company at Lowe’s the other day and he said he’s never seen it like this in December.”
Single-family construction lags behind multi-family building
Single-family home construction has been slower to recover in Southern California because of sluggish wage growth and tighter lending standards. But a host of other factors, including constraints on land, competition for available parcels and intense regulatory standards also figure into the mix.
“As for new homes, development is skewed towards more expensive homes as developers try to maintain profit margins in an environment of rising land values and higher impact
fees,” the report said. “The result is very little inventory at the low end of the market, which makes it very difficult for first-time buyers to purchase a starter home.”
Not enough homes are being built
And California’s supply of available homes is not meeting the demand.
California’s nonpartisan Legislative Analyst’s Office estimates that in addition to the 100,000 to 140,000 units California is expected to build on an annual basis in the coming years, the
state would likely need another 100,000 units each year to (almost entirely in coastal communities) to offset housing affordability issues caused by the limited supply.
Median home prices in Southern California have risen on a year-over-year basis for more than four years and are closing in on pre-recession peaks. But the price hikes have been driven by a lack of inventory — not a surge of buyers.
