Why there are supply chain issues

Many industries have shut down for periods or had limited production capacity during the various points of the pandemic. This has ranged from lumber mills, to manufacturers, to shipping, and much more. The resulting backlogs, delays and uncertainty, and scarcity of products, increased production costs and higher shipping costs have resulted in increased prices for building materials as well as production. At the same time, there has been an increase in demand for new homes and renovations globally, putting still more pressure on supply chains for construction materials and products.

Delays across Canada

The Bank of Canada reported in their January 2022 Monetary Policy Report (MPR) that production shortages on various goods, such as appliances, plumbing fixtures, windows, as well as shipping bottlenecks at ports all over the world continue to cause closing delays for many builders.

CHBA’s quarterly Housing Market Index (HMI), a leading indicator for builder sentiment in the Canadian residential construction industry showed that, in Q4, construction timelines were delayed on average 10 weeks due to supply chain disruptions. Almost half of respondents indicated that supply chain issues have resulted in over 9 weeks in delays. This is double the amount of people who said the same in the Q3 survey. Overall, the panelists outlined several key challenges due to supply chain issues. Plumbing materials and plumbing fixtures are now the most impacted, followed by appliances and windows.

Effects on construction prices

The combination of slowed production and increased demand has substantially impacted the price of building homes in an unprecedented way. According to CHBA’s HMI, almost 72% of respondents said that their construction costs due to lumber went up by more than $20,000, and 35% indicated that their costs increased by more than $40,000 as a result of surging lumber prices. Beyond lumber, about 70% of respondents said that their construction costs as a result of rising material costs (outside of lumber) have gone up by more than $20,000, which is double what we saw in the Q3 survey. When we combine lumber and other material price increases, the national average construction cost increase for a 2,482 sq. ft. home was up $68,060 per home at the end of 2021. In addition to this, the cost of labour/trades has gone up 20% compared to prior to the pandemic, adding more costs for builders.

CHBA Action

CHBA has been communicating the extent of the problem to the federal government, using data from its HMI to quantify the impact that supply chain issues are having on industry and on homeowners. Supporting the residential construction supply chain was one of the main action items included in CHBA’s Pre-Budget Submission.

CHBA has also engaged with media, helping to shed light on the challenges the industry is facing and legitimizing the struggles by providing global context.

For builders who are looking for support to explain the issues to their clients, CHBA has a public-facing page on supply chain issues here. Members can access a PDF version on official CHBA letterhead here if they wish to print or email copies to homeowners.