Industry News - How Lumber Shortages Are Affecting Home Builds Globally

COVID-19 closedowns coupled with a building boom — even bushfires and a beetle plague — have combined to dramatically limit the amount of wood available for home construction around the world. Houzz editors in affected countries have examined the origins of the problem and the ripple effect on their construction industries and talk to professionals and homeowners on the ground to see how they are responding to this unprecedented situation.

Why Is There a Shortage?

Against all expectations, the Covid-19 pandemic has brought about a housing boom as homeowners around the world strive to adapt their spaces to sudden changes in lifestyle, such as working from home. In the U.S., “our Q2 Houzz Renovation Barometer confirms that construction professionals are experiencing record demand,” says Houzz senior economist Marine Sargsyan. Pandemic stimulus packages are also contributing to housing booms in some countries. The result has been skyrocketing demand for building materials around the world.

At the same time, the global supply of lumber has been hampered by a plethora of problems. A bark-eating mountain pine beetle and several seasons of severe wildfires have decimated the supply of softwood from British Columbia, Canada, which normally supplies about a third of U.S. lumber.

Pandemic-related operational restrictions have also reduced the amount of timber that sawmills can process. For example, while Europe currently has a surplus of timber — that is, felled logs ready for sawing into lumber – the U.K. Timber Trade Federation identifies COVID-related slowdowns in European mills as one factor in current UK lumber shortages.

This comes on top of a slowdown in sawmill operation in some countries, such as New Zealand and the United States, on the heels of several bad business years and fears of a post-pandemic recession that never materialized.

Other pandemic-related shortages and restrictions have further affected the lumber supply. For example, the International Tropical Timber Association reports a shortage of shipping containers has impacted lumber imports into Japan and China, while Brexit has made imports into the U.K. more complicated.

Lumber is not the only material experiencing restricted supply. Affected commodities include resources used in construction, such as steel and copper. For professionals and some homeowners, this situation has translated into staggering and ongoing price increases. In the U.S., the National Association of Home Builders has calculated that the lumber shortage alone has increased the price of an average newly built home by nearly $36,000.

Unfortunately, construction projects’ long timeframes make them particularly susceptible to volatility. “The majority of construction companies are on fixed-price contracts, which places the responsibility for fluctuating costs on the contractor and affects their overall profit or loss. As lumber price volatility persists, some pros are rethinking their business models to avoid shrinking profit margins,” Sargsyan says.

It’s instructive to see how countries around the world rely on different sources of lumber, and examine the ways the shortage has affected the building industry and, by extension, homeowners.

United States

Building and renovation is booming at the same time as the cost of products and materials has escalated and deliveries have been delayed. Labor shortages and longer wait times for subcontractors are creating a challenge for people mid-build.

To keep their projects on track, some homeowners have found promising alternatives. “We wanted to build a deck between our sunroom and screened porch this spring. But when the price of lumber skyrocketed we opted to add gravel to the area as a stopgap measure,” says homeowner Jo Adang of Hazelton, Pennsylvania. “It turns out we like the gravel option so much we may even keep it this way! It is definitely low maintenance.”

Lance Granger says he was about to start a new home build on a property north of Battle Ground, Washington, but because of lumber prices he decided to mill trees from his land into dimensional lumber for the build. “[It is] unfortunate that our supply chains have been damaged so much recently, but this is looking like it will turn into a great experience for us,” he says.

Joseph Graves, the owner of Graves Construction, says they have had to redesign their contracts and plans of action to accommodate floating material costs as well as spending extra time managing the process for contract bidding. “Sometimes we offer clients alternative options, with pricing comparisons, when there’s an affordable solution to high-priced material. We have definitely put a squeeze on every process to minimize losses and raise homeowners’ awareness,” Graves says.

Al Pante, project manager for Decorum Home Improvement in Fredericksburg, Virginia, says they have changed to labor-only contracts now that prices have risen so dramatically. “We still break down estimated costs for the homeowner in advance so they can make an informed decision.”

Japan

In Japan, about 80% of low-rise residential buildings are constructed of wood. And despite the fact that forests make up 66% of Japan’s total landmass, Japan relies on cheaper imported wood. With demand rising globally, Japan has been unable to secure imports for planned construction. This supply shortfall has in turn made it more difficult to secure local lumber. The shortage is so severe it’s now referred to as ‘wood shock’.

Philip Law, a homeowner in western Japan, says his home construction was delayed by three months, with a 50 percent increase in lumber costs. “Our bank loan schedule gets pushed, and if our house cannot be completed by January next year, we will need to re-apply for a loan again,” he says.

Architect Toshio Yasui says he now warns his clients about higher costs and longer construction times. “If clients are planning a building that is on the edge of their budget, I advise them that they might need to think twice,” he says.

However, many professionals hope the crisis will become an opportunity for Japan to reenergize its domestic wood supply. “I think we need to increase the percentage of domestic lumber in distribution and reduce the dependence on imports,” says architect Noriaki Seki. “Using local materials would also reduce transportation costs and carbon emissions.”

The shortage has put renewed attention on those working to sustain the local supply chain. One initiative running since 2012 is Tokyo Wood by Kojima Koumuten Corp. It brings together a network of stakeholders in the supply chain — from forestry to home design and construction — who collaborate to supply locally sourced wood and build homes. “The homes we build still use imported wood for the horizontal material in the structure, but other than that, the pillars, foundations, flooring, ceilings, panels are all wood sourced from the mountains of Tokyo,” says Makoto Kanakubo for Tokyo Wood.

They also take potential homeowners on tours into forests so they get to know where and how their wood is sourced. “If the clients say they want to build with local wood, it will get easier to use more local wood for homebuilding in Japan.”

Australia

Catastrophic bushfires burned through 46 million acres and destroyed more than 2000 homes in Australia in 2019-20. This, combined with the federal government’s Covid-related HomeBuilder scheme, created an unprecedented demand for renovations and new builds.

“This year Australia will [begin construction on] 30% more homes than last year,” says Tim Reardon, chief economist at the Housing Industry Association. “Australia imports about 20% of its timber requirements in a typical year. The volume of timber we are now importing is 10% higher than this time last year.

“Global demand for timber is high and, just like in the rest of the world, it is taking time for timber suppliers to increase output.”

People who started builds or renovations are suffering months-long delays. The price of lumber is also up to 30% higher; but as most residential builds are on fixed-price contracts, increased costs are, for the most part, borne by builders.

But there is good news. The output from Australian mills is increasing. Some mills are working double shifts and new mills are being commissioned. Reardon believes that in the second half of 2021 there will be sufficient supply to meet the enormous volume of homes about to commence construction.

France

The shortage, brought on by production pauses during lockdown and increased demand, affects lumber as well as raw materials such as steel, metallurgical products, polyurethane, concrete and glass. Compounding the problem, the upcoming French Environmental Regulation (RE2020) encourages individuals to use more wood in construction or renovation projects, as it corresponds to low-carbon requirements, says the French Union des Industriels et Constructeurs Bois et Biosourcés, the body that represents the wood and natural materials construction industry. Added to this is a strong enthusiasm for custom-made interior fittings in wood, plywood and MDF.

Bernadette Krasikow, a general contractor at Sweet Home Paris, says there is now no supplier near Paris with stocks of MDF. “We can’t do the furniture on our projects,” she says. “MDF is hard to replace. You cannot replace MDF with oak veneer, for example, because it would be much more expensive.

“There is also a shortage of hinges. So even if we have the panels, we cannot install the doors. The shortage even affects paint, because some of the components come from China. I’m also seeing a shortage in plumbing products, such as copper elbows, an element without which a bathroom cannot be finished and which cannot be replaced.”

She reports a 5% to 10% increase in prices. “In addition to the increase in the prices of raw materials, there is the cost of container transport, which has quadrupled.”

The situation is so dire that the French government announced measures to help companies, including the freezing of penalties in the event of late delivery and the establishment of mediation processes to identify exploitative practices and secure supplies.

Architect Tina Merkes says the shortage means she has had to adjust her workflow, for better or worse. She tells us that on the client side, it is important to:

  • Place orders at the start of a project and not in continuous flow as we used to do before the crisis.
  • Make decisions with customers — for example the choice of tiling, [faucets], kitchen facades — as soon as possible. We used to have a certain margin of time for the products to be installed at the end of the work, which we no longer have.
  • Provide for a certain flexibility on the replacement of materials by other technically equivalent materials.

For her as an architect:

  • Exchanging with fellow architects on material alternatives; learning more about the choice of materials; and finding plan Bs. It’s rewarding!
  • Ordering French products to have better product tracking. It is also much more environmentally friendly to operate locally.
  • Finding recycled/reused materials, which is both an economical and ecological solution.
  • Planning for longer deadlines.
  • Investing in alternative materials. On a current project we are looking for doors which are very difficult to find at the moment. The company looked at various stores in Ile de France and finally bought several doors from the same supplier in different stores. This means a lot of time spent by companies which is not billed back to the customer.

Germany

Carpenter Jörn Brenscheidt of Hokon says Germany is suffering from lumber shortfalls, but he also points to the bigger problem of a shortage of coatings like lacquers and hard wax oils because of production shortfalls in Europe and Asia. “[One example is that] paint buckets are made up of several components, each manufactured in different countries. If parts are missing there, the bucket for the paint cannot be manufactured and the paint subsequently cannot be supplied,” he says.

Adi Brandl, head of planning and project management at Lebensraum Holz in Bavaria, says delivery times on insulation materials are currently just as long as for wood: 10 weeks. “Steel is available, but expensive. For plastics, we are already being warned of shortages and increases in price.”

Brenscheidt points to the importance of professional networks to secure supply. “Where we knew there were shortages of paint, glue, oil, and screws, we made orders and payments in advance. Fortunately, we have private connections to a paint supplier. He lets us know when there are favourable offers and then places an order for us. We also have good contacts with a large sawmill, so networks come in handy in these times,” he says.

And while Brenscheidt points to globalization as the root cause of the shortages, he also anticipates that prices will be settled by the market in the future. “In this sense, it means that the shortage of materials will ease again. Because when prices rise, demand also falls.“

Italy

Paolo Fantoni, vice president of FederlegnoArredo, the association that represents companies in the wood furniture sector, says the whole wood production chain in Italy has been shaken. “It started last year and it hasn’t stopped. This is the reason behind a something like 20%-30% increase in wood prices.”

Angelo Marchetti, the president of Assolegno, which represents about 500 Italian primary wood processing and construction companies within the FederlegnoArredo, says it may provide the impetus for much-needed change. “In the last 70 years the amount of wooded land in Italy has increased 60% to 70%. Today it is 38% of the national territory. But wood is only 0.08% of the national economy.”

Italy currently imports 80% of the wood it uses used for furniture and construction. “The proposal is to start using local wood, as a way to have cheaper wood, with a new programmed management of our territory,” he says. “We have to go back to our wood and consider it as a starting point for a new economy, avoiding the importation of so much wood from other countries.”

Article provided by www.houzz.com, How Lumber Shortages Are Affecting Home Builds Globally, June 1, 2021

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