Podcast: Why has construction become so expensive?

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It’s not breaking news in the construction sector that construction costs have gone up.

Canada’s residential construction price index has soared 51% since the start of the pandemic, putting new pressure on home prices amid a severe housing affordability crisis. 

Compared to 2017, residential building costs are now 79% higher in Calgary, 65% higher in Edmonton, and 57% higher in Metro Vancouver. For the 11-city Canadian composite, the comparable increase is 73%.

The deeper question is why these costs have skyrocketed in recent years. SiteNews Editor Russell Hixson stopped by the Free Lunch by The Peak podcast to share how much construction costs have gone up and what the major forces behind these increases are.

“Without question, the number one thing that keeps builders up at night … we are going off a demographic cliff,” said Hixson, highlighting the impact worker shortages are having on rising costs. “You have a lot of people who have been in the trades , they are highly skilled workers, they are electricians, project managers, carpenters, and they are getting to retirement age. And there are not as many people going into the industry.”

According to BuildForce Canada, overall hiring requirements in the industry are expected to exceed 299,000 by 2032 due to the retirement of approximately 245,000 workers (20% of the 2022 labour force) and growth in worker demand of more than 54,000. They are predicting a possible retirement-recruitment gap of more than 61,000 workers.

To compete for this smaller pool of workers, the industry has had to offer better wages and more benefits. And many builders are having to turn down work. According to the Independent Contractors and Business Association’s most recent survey in B.C., in 2025, the industry’s average hourly wage – before any bonuses, benefits, profit-sharing or overtime – will reach $37.51, or about $78,000 annually.

Hixson also spoke about the challenge builders have acquiring materials and how those costs have also gone up due to supply chain disruptions and high demand. Some of these disruptions include COVID-19 causing reduced mill capacity, storms cutting off highways in B.C., port strikes, the war in Ukraine and more.

When asked by the hosts what can be done to address these challenges, Hixson spoke about the movement to enact prompt payment, contracts that encourage more project collaboration, technology that can reduce labour demands and more.

“More and more what we are seeing is that builders on a project need to work together to share risk,” said Hixson. “There is always going to be volatility. Stuff is going to happen. If you just try and gouge each other and beat each other, everyone is going to lose. Builders will go bankrupt and you won’t have that partner to work with in the future.”