BRITISH COLUMBIA – While construction continues to top the economic drivers in British Columbia, the industry could be much more productive if several major issues are dealt with.
Despite extensive lobbying, the provincial government has still not enacted Late Payment legislation that other provinces have, and this seriously impedes cash flow on construction companies. The 2023 Construction Industry Survey released by the BC Construction Association (BCCA) notes that 82 per cent of contractors were paid late for work at least once, and over one third were paid late more than a quarter of the time. At the same time, 35 per cent of contractors have been involved in fixed price contract disputes during the last year.
While the province continues to make noise about compelling municipalities to quicken their residential building approval times, the delays continue, which means the great needs for housing continue. Builders and developers are constantly hung up by endless city-level regulations and delays that keep them from building the housing the province recognizes it needs.
So, while the industry is still busy, it could be busier and help alleviate housing shortages if it was allowed to do so if local governments are willing to tweak their service times and levels to allow more building.
Minister of Housing Ravi Kahlon re-announced November 7 that the introduction of Bill 44 will allow upfront zoning that will require local governments to shift their planning process to an up-front framework, pre-zone land to meet their housing needs and reduce the use of current rezoning processes.
The government also includes an Amenity Cost Charge (ACC), that would give builders a clearer understanding of costs associated with housing projects at the start, as opposed to the current situation where developers face piece-by-piece “community contributions”, i.e. extra financial levies that must be paid prior to starting construction.
BCCA construction statistics show that the value of current construction projects in B.C. is $157 billion, which is up 109 per cent over the past 5 years, and 16 per cent year over year.
There are 26,262 construction companies in B.C., 92 per cent of which have less than 20 employees, and a total of 163,900 trades employees amongst the 218,000 workers in the sector. Their average annual wage is $72,252.
Some startling facts that should raise alarm bells moving forward are that, although there will be 22,700 jobs open due to retirements and expansion by 2032, the number of construction jobs expected to be unfilled due to labour shortages in the same time frame is 6,000. The federal government’s immigration expansion could provide many of those workers who bring their skills from other countries, but there are plenty of opportunities for Canadian young people to obtain a well-paying, fulfilling career in the sector if they’re willing to take advantage of apprenticeship opportunities and training.
The BCCA also released a document titled “The Challenging State of British Columbia’s Industrial, Commercial and Institutional Construction Sectors” in October, put together by the Sage Policy Group of Baltimore, MD.
The report states that investment in the non-residential sector declined 21 per cent between October 2019 and December 2021. Any momentum that occurred during the first nine months of 2022 following the pandemic’s easement has dissipated, as a combination of high interest rates and excess inflation have made real investment in the ICI sector essentially flat.
The only growth segment has been institutional and government instruction since the start of the pandemic – the non-private sector – which has expanded over 45 per cent since February, 2020. These investments in infrastructure are completely taxpayer supported.
The only region in BC to report more jobs than prior to the pandemic was the area represented by the Northern Regional Construction Association, with a 4.4 per cent increase.
Construction costs between the first quarter of 2020 and the second quarter of 2023 have risen 29 per cent, according to the Statistic Canada nonresidential building price index. This is due to a combination of supply chain issues and global commodity prices. The prices are up 7 per cent over the last year.
The Sage Policy Report states: “While recent declines are a welcome development for contractors and project owners alike, materials prices remain severely elevated by pre-pandemic standards. Many commodity categories are up more than 40% in price since February 2020. Barring additional supply shocks, input price escalation should remain relatively tame during coming quarters, but already elevated price levels will continue to suppress project volume going forward.”
Labour costs continue to rise, and are up almost 15 per cent since the start of the pandemic, increasing at a faster rate than nationwide construction wages.
Across the country, BuildForce Canada has forecast that more than 244,000 construction workers will retire over the next 10 years, and until the provincial labour supply improves, compensation costs will continue to exert upward pressure on provincial construction costs.
Another added cost comes through the NDP government’s introduction of legislation requiring employers to provide at least five days of paid sick leave to any employee who has worked for the organization for at least 90 days, which is a direct offload of costs to the private sector that were previously assumed by the government.
As expected, employees are viewing the extra sick days as an extra week of vacation, further increasing costs to employers. The policy increases cost pressures on contractors, especially in the context of provincial construction wages rising significantly faster than nationwide construction wages in 2022.
The Sage Report concludes that real investment in ICI structures in British Columbia is nearly 14% below the all-time high attained in late-2019. Despite stagnant demand, contractors continue to struggle to find workers. Half of BCCA members indicate concern regarding worker shortages. As a result of human capital shortages, construction wages in British Columbia increased 70% faster than economywide wages in 2022, placing particular financial pressure on newer and smaller contractors.
Business Examiner Staff