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Residential construction remains in operation to keep the housing market stable at the risk of spreading COVID-19 virus.
Construction workers worry for their loved ones as they continue to build under an order to combat a national housing shortage. However in San Marcos, realtors say housing inventory can handle a few months of delays even though affordable housing inventory is still miles behind demand.
A 2020 University of Texas at Austin Study “COVID-19 in Austin, Texas: Epidemiological Assessment of Construction Work” projected that the risk of severe COVID-19 within the construction workforce will be higher than that in the non-construction working 18-49 year old populations.
In a scenario with effective social distancing and a large construction workforce, researchers found that the hospitalization risk is expected to be two to three times higher for construction workers than non-construction workers. This is more than 6,000 workers in Hays County according to the Texas Workforce Commission.
Housing construction and related activities are considered essential because they combat the nation’s existing housing supply shortage by creating more units, according to the U.S Department of Homeland Security’s Guidance on the Essential Critical Infrastructure Workforce.
Prior to Governor Greg Abbott’s statewide Emergency Order issued April 3, Hays County listed residential, commercial and public works construction as essential, however Travis County limited construction to residential projects that included affordable housing. The governor’s order overrides local orders and prevents judges and mayors from further restricting essential businesses. Now all housing construction is permitted in Texas including affordable housing, single family homes and luxury homes, regardless of whether a housing shortage is occurring locally.
Since many construction workers live off of weekly income, those restricted from non-essential, non-housing worksites may seek work at essential worksites, the study found.
“This may not only undermine efforts to reduce person-to-person contact, but exacerbate the individual and citywide risk by increasing the number of workers in close contact at single construction sites.”
Without proper precautions, construction sites can be high traffic workplacse involving many different trades to complete one job and a long chain of contact for delivering materials. One anonymous Central Texas contractor felt forced to remain open for fear that shutting down to protect their employees’ and the community’s health in the short term may take food off of their plates in the long term. As long as the state allows construction, they know another contractor would gladly take the work and they may not be able to guarantee work for their more than 100 employees when it seems safe to reopen.
Having no economic choice but to stay open, this contractor did everything they could to prevent the spread of COVID-19: they allowed no more than 10 employees on a site at once, sanitized all trucks and materials, distanced employees 6 feet apart on the job, shut down offices and provided employees with soap in lieu of hand sanitizer after discovering hand sanitizer, gloves and masks are nearly impossible to find. Despite following state guidelines for operation, one employee tested positive for COVID-19.
“There is a huge workforce at risk in construction. First responders, EMS, nurses, are all taking a risk for the greater good of humanity, and then there are true trades folks that are working to keep infrastructure going: water supply, electric, plumbing, etc. All the essential workers are struggling to get adequate safety gear and they are competing with residential housing and landscaping employees for supplies who don't need it as badly,” said an anonymous employee of the contractor.
Work was put on hold for the whole company to quarantine for 14 days. Testing was encouraged but not required for returning to the job. Employees were concerned about exposing their families, some hoped they did not transmit the virus to their immunocompromised relatives who they support in their homes.
Construction is a significant employer in Central Texas and it is growing to meet the demand for housing. The construction industry employed 6,221 people in Hays County in the third quarter of 2019, increasing 15.6% from 2018 to 2019, according to the Texas Workforce Commission. For comparison, total employment growth in Hays County during that same time period was only 5.3%. In the greater Austin Metropolitan area, which includes Hays County, construction employed 71,600 people in February 2020, a 13.5% increase from February 2018.
Central Texas builders and realtors warned that shutting down construction would cause the housing market to skyrocket given the already dwindling supply of housing, according to Texas A&M Real Estate Center. Without work, the construction workforce may move elsewhere further slowing growth and more people may become homeless after being priced out of the market according to a Community Impact article.
“We aren’t going to see a huge housing bubble pop, prices will adjust. A one or two month slowdown on increasing housing supply will have zero effect on supply in the short term. You can’t build a house in one day.” Monica Malorgio, owner and broker for McNabb and Co. and former Texas State business professor explains San Marcos will likely not see the huge ebb and flow of housing prices that larger urban areas like Austin are looking out for even with construction sites making adjustments for COVID-19.
Even adding a month or two to construction progress for the pandemic will result in the supply curve looking the same: vertical, Malorgio said. “People would have to be quarantining for six months for it to really affect anything.”
Many realtors had record first quarters with many closings in March and full Aprils. The effect of buyers and sellers that are waiting to do business until after the crisis will likely not be seen until May since closings take 30-40 days. Rates of showings are decreasing despite the industry adapting like all other businesses, using gloves, practicing social distancing practices and even conducting virtual tours.
“Right now we are not seeing a huge change in our numbers in the market. Our home sales are still up from this time last year. Average sale prices are higher and they haven’t dropped. The inventory is what has caused prices to say high,” said Holly Morris, real estate agent at Century 21.
Central Texas has a low inventory, just under a 3 month supply, which makes a seller’s market according to the Texas A&M Real Estate Center. “It has been difficult for Central Texas to keep up with the demand. Neighborhoods sell fast. For a few years there wasn’t a lot of development and we had some catching up to do,” Morris said. Once a region reaches a 6 month supply of housing, it turns into a buyer’s market.
San Marcos can expect to see fewer homes being sold in the near future because there has been a huge drop off in home loan applications recently, said Professor Steven Flynn, adjunct professor of real estate at Texas State University. Flynn argues the state order to keep residential construction open is very important for the housing market to keep moving.
The general housing supply may be able to withstand some COVID-19 delays for the sake of the community health, but this is not the case for affordable housing supply.
“The income of the majority of our residents is below that of the region, making our need for affordable housing greater. The current pandemic and shutdown is devastating the economy of our city, region, state, nation and world which will make the need for affordable housing even greater if we remain on our current trajectory,” said Councilmember Mark Rockeymoore.
There are currently 283 units of affordable housing under construction in San Marcos, and 1,324 units that have been approved but are not yet under construction. There have been 1,593 units built since January of 2018 and there is still a substantial wait for affordable housing.
San Marcos Housing Authority’s more than 800 people on waiting lists can expect to get off the list and into a unit “in at least two years,” according to Executive Director Lana Wagner. “We need more affordable housing. There is a demand for it and supply has been going at a slow pace.”
San Marcos residents on the list who are lucky wait for housing in friends’ apartments or in apartments they can’t afford. The not so lucky ones live on the street without shelter.
