Contractor shortage, inflation could delay Gaylord rebuild by years
Gaylord Mayor Todd Sharrard took the stage at a tornado relief concert on a sunny June 14 afternoon in downtown Gaylord.
He addressed a group of a few dozen residents and thanked local first responders, volunteers and donors.
“The resilience of this community and surrounding areas immediately started to pick up the pieces,” he said.
However, looking forward, Sharrard said Gaylord will have to contend with economic concerns that are out of its control as it continues to recover from the devastating May 20 tornado.
“We've seen the impact of what mother nature can do,” Sharrard said.
As demand rises for skilled workers needed for rebuilding projects of all sizes, the industry will struggle to keep up due to an already dwindling workforce.
On the national level, the construction industry will need to attract nearly 650,000 additional workers on top of the normal pace of hiring in 2022 to meet the demand for labor, according to a model developed by Associated Builders and Contractors.
ABC of Michigan President and CEO Jimmy Greene said that means longer wait lists nearly everywhere, but especially in high-demand areas like Gaylord.
“(It could take) 18 months,” Greene said. “Homebuilders are just as tightly constricted in terms of manpower and availability as the commercial guys are. It's not just a commercial issue. It's an issue with our industry - period.”
Contractor shortages are not new. Many date it back to the 2008 recession when thousands of trade workers left Michigan or changed careers.
Dan Goodchild is the interim director of the technical academic area at Northwestern Michigan College. He said many of the employment pipelines that once supplied the industry with workers are gone.
Educators like him are trying to change the narrative about the trade workforce for young people.
“You don't have to go to a four-year school to have a rewarding and successful career, Goodchild said. “Construction is good paying. It's hard work, but very rewarding.”
Greene said it’s working. Last month, Gov. Gretchen Whitmer and the Michigan Department of Labor and Economic Opportunity awarded an $8 million grant to the Michigan State AFL-CIO Workforce Development Institute to support pre-apprenticeship programs.
However, Greene said most new trade workers are a long ways away from owning and operating their own companies.
And in Gaylord, it’s not just the lack of contractors that causes delays. The rising prices of building supplies and equipment creates more concern.
According to the latest Producer Price Index report released by the Bureau of Labor Statistics, the prices of goods used in residential construction climbed about 8 percent. Those goods include lumber, materials used to make drywall, plasters and ceiling tiles.
The price of building materials increased 20.4% year over year and has risen 33% since the start of the pandemic, according to the National Association of Homebuilders.
Homebuilders Association of Michigan Chief Executive Director Bob Filka said pricey materials can be a good thing, in some ways.
The demand at the high-end of the market for luxury homes and large-scale projects will subside, leaving room for contractors to take on projects in low-income areas.
“(The contractors) that might otherwise be working on high six-figure or million-dollar homes… might have an opportunity to, hopefully, rebuild Gaylord,” Filka said.
But in the meantime, high prices are still putting pressure on Gaylord residents.
The Gaylord Habitat for Humanity ReStore has been providing low-cost solutions for residents to replace furniture and appliances. It also helps by connecting them with local contractors for repairs.
Director Aini Abukar said most materials need to be special ordered because they are flying off retailers' shelves. She said it took two weeks to help a customer find a replacement door. The cost of even the smallest projects are concerning.
“Something like a roof job that would have cost $8,000 even just a year ago would cost $15-16,000 now,” Abukar said.
Contractor shortages coupled with high local price has opened opportunities for companies outside Gaylord to offer their services.
This is common in areas that recently experienced natural disasters. However, hiring a contractor you’re unfamiliar with poses its own risks.
These are contractor companies that flood an area after a natural disaster that could be unlicensed or charging unfair rates.
“Some (companies outside Gaylord) are there to help,” Deflorio said. “And some of them don't always have the best intentions.”
Deflorio said he recommends having basic background information before hiring a contractor. To ensure they are licensed, customers should ask for the contractor’s license number and verify it on Michigan Department of Licensing and Regulatory Affairs’ website before accepting any bids.
The state of the construction industry matters — especially in an area like Gaylord. While contractors contend with the backlog of projects ahead of them, Mayor Todd Sharrard said local nonprofits are here to help.
The Otsego County United Way has spearheaded efforts to mobilize volunteers and set up emergency housing in local hotels. Director Erin Mann said the displacement from the tornado will add to the already sizable housing crisis in Northern Michigan.
“I moved to Otsego County seven years ago. It was a challenge then, and I think it's still consistent,” Mann said. “The tornado just really put a bright light on the problem.”
Gov. Gretchen Whitmer — along with U.S. Representative Jack Bergman (MI-01), U.S. Senator Gary Peters (MI), and U.S. Senator Debbie Stabenow (MI) — asked President Joe Biden on June 8 to declare a major disaster in Otsego County. That would make funding available through the Federal Emergency Management Agency (FEMA).
This assistance includes Individual Assistance for individuals and families, and the Hazard Mitigation Grant Program to prevent damage that might occur in the future, according to the lawmakers’ letter.
Bergman’s office was contacted for an update on the FEMA assistance and has yet to respond.