Welcome to the creating shelter Podcast. I’m David Grubb and I have with me today, Michael Grant, our host. And today we are talking about housing and the 5L’s, lumber, labor, land, loans, and legislation, with Michael, to give you a little background. Why are you so passionate about housing?
Why are you so passionate about housing?
Michael Grant 0:16
Well, first of all, David, it’s good to see you again. And I’m glad to have this conversation. You know, my passion for housing goes way back to my childhood. My father was a homebuilder, literally, he’s the guy that swung the hammer and used the hand saw, but he was also just a splendid craftsman, and he loved doing it. And I immediately had a great appreciation for what he did. And in fact, he built a house for my mother, which my family lived in for better than 40 years.
So I got to see the results of his labor firsthand. And I’ve always appreciated that, that we had that home to live in and the fact that my dad was involved in building. But beyond that, I’ve always had a passion for the scale of housing, there’s a human scale that all housing has. And it reflects many ways how we live, there are a lot of other influences that go into how the house is designed and ultimately built.
But it just relates to how we live and whether we’re living in a particular climate, or we have a particularly given lifestyle, whatever it is that your house ultimately ends up reflecting who you are. And I’ve always appreciated that. And it’s something that has never left me, so I relate to that scale of housing quite well.
At what age did you start helping your dad and what did that look like?
David Grubb 1:40
You told the story before about how you’d go around and pick up the nails. So you started at a young age actually helping your dad?
Michael Grant 1:49
Yes, I was 5 years old and my job on a late afternoon is I would go to the job site when my dad and I would pick up the nails the other carpenters had thrown down. And I’d organize them put a rubber band around them and hand them to my dad. So he had a fresh supply of nails for him to use as he was framing that next day. And my reward for it was collecting the coke bottles and taking them to Piggly Wiggly and turning them in for that two-cent deposit. So that’s how I got paid.
David Grubb 2:26
Good. So you’re both an entrepreneur and a helper at a young age.
Michael Grant 2:31
And that has not escaped me over the years.
What are the 5 L’s and how do people perceive them?
David Grubb 2:35
So you recently talked at a builder Association meeting about the five L’s. And, you know, let’s just share with our audience real quick what those are. So those are lumber, labor, lots of legislation, and loans. And but kind of tell us how that meeting went? And how that was received?
Michael Grant 2:58
Well, I think, first of all, I think as I presented it to the builder Association, and it wasn’t just the builders, it was a lot of our associate members, people who are in the business of supplying either materials or services to the construction industries. So that they had ownership and the five L’s as well.
And I kind of the five bills was really kind of the genesis, the genesis of the five L’s came from an article I had read a couple of years ago, put out by the National Home Builders Association. And at the time, they called it the three L’s, and those were lumber, labor, and lots and it did not quite feel complete to me.
And as I started doing a bit more of my research on the University of YouTube, I began to see that there was a huge amount of this that was legislation or the law, as it relates to zoning and zoning restrictions that impacted the cost of homes, as well as what we’re paying for money, the loans that we have our mortgage money, all of those things come together to determine what that cost of a house will be.
Ultimately, what you can afford. So that was, again, the genesis of the five Hills came from that article from the Home Builders Association. And I just extrapolated on it. But it really starts with if you will, a little bit out of your order starts with a lot. You know, once we’ve identified a lot to build on.
That’s the work is just beginning because we now have to develop that lot to receive the house and if you think about it, you got to bring in your infrastructure which is going to be your power, water, whether it’s city water or well or community water in some fashion. You’ve got to have an appropriate way of management. So you got to either put in a septic tank or tap into the local, sewer, local sewer system.
But all those things have an impact on your cost. If you’re going to use other forms of energy like gas, if you don’t have natural gas routed to your property, then you have to put it in a propane tank. And beyond that, you need the ability to, you need the ability for connectivity, which is Wi-Fi in all the means that we require today for how we function and how we live. So the ability to provide the infrastructure to this property.
This is the start of the cost of these houses and is pretty significant. If we’re doing well today, it can be easily anywhere between eight and $12,000. I tell people if you’re going to dig a good plan on that kind of expenditure, and after that, I encourage you to pray and light some candles. And hopefully, you’ll come in under budget on that on that. Well, nonetheless, those are some of the things that you have to do when you’re developing a lot. And that is the start of your cost for your housing.
So what is happening to the cost of a property?
David Grubb 6:16
So what is happening to the cost of a property?
Michael Grant 6:20
Well, good question. There are very few developed lots anywhere near any major city unless you’re going into a blighted area where you’re rehabbing or gentrifying property, and you already have a lot there, and chances are good that the utilities are already routed to it.
But if it’s a blighted area that’s in transition, you may have to clean a lot of the existing house that was there, to begin with. So there’s there still added cost beyond the purchase price of the land that the house is going to be built on. But realistically, because there are so few available lots, particularly in our major cities, you’re having to move further away from the city to buy the land and developed a lot. And this is where area zoning becomes a huge issue.
And I’ll talk more about that later. But land prices, particularly land that is convenient to the city have just continued to escalate in cost. I’ve seen it ratchet up 20-30 % annually in some areas. And again, that’s regionally based on where you’re living, how much that price increases, affected.
How has the cost of building materials impacted our housing costs?
David Grubb 7:46
Let’s go back and talk about the first point that the lumber how as the cost of building materials impacted our housing costs?
Michael Grant 7:57
Well, what we’ve experienced since the introduction of COVID, in our country, has been significant. A number of things happened right away, once COVID had the impact on our culture as it did. And we were mandated now to shelter in place. A great acronym for or metaphor for being forced to stay in your homes.
And when that happened, when we had to stay home, we looked around and we actually began to take note of all those honey dues that had been sitting there waiting for us to take care of for a very long time. You now had the time and the wherewithal to get it done. And you cannot deny it any longer. So immediately, the big box stores for building supplies were just flooded with people wanting to go buy that pressure-treated material to fix their decks or the paint to repaint a room or whatever it was.
The big-box stores had tremendous business and I remember very well on a Saturday morning, going to my local supply, big-box supply store and guess what they were limiting the number of people that can go into the store at any one time. So I got there at about 830 in the morning and I stood in line with about a good 100 plus additional people who were rather irritated that we had to stand in line to go into the store to buy what we needed.
But that was the reality of it. The consequence of everybody wanting materials to complete those honey do’s at home as prices started to skyrocket. pressure-treated lumber was the first one I know sawdust, and it increased as much as 300% in a matter of several weeks. That was also true for the other dimensional lumber. And then, as I mentioned earlier, your paint materials, and all the supplies necessary for that PVC pipe and PVC, pipe, fasteners, and fittings, all of those things began to become in short supply and the cost began to increase.
I remember I needed a 90-degree elbow for a PVC pipe, and I went to three stores before I can even find it. So it was a very, very real impact on the availability of building materials. And let’s make it a little bit more irritating. The supply chain continued to be impacted by these by both the demand and now the interruption in the supply chain that we experienced as our container ships were sitting out in a harbor somewhere waiting to get unloaded. And that was impacted by many things that are impacted by the lack of drivers to process it, lack of workers at the various ports, and so forth, it just became a huge issue.
I’ve seen shortages in aluminum, which meant I could not get window screens, shortages, and door hardware because they were in a container ship also very true for plumbing fixtures, windows, and doors. And I could get in six to eight weeks was now as much as 26 to 29 weeks appliances that I could get in 10 days to two weeks. We’re now six months and even today, some two years well into this pandemic. It’s as much as 12 months.
So we the supply, supply chain issues have not gone away, I think they’re going to be with us for a good bit longer. And again, of course, that’s been exacerbated by what’s going on with the whole trucking industry and their inability to get products to us as quickly as we need them.
Enter, American Ingenuity
David Grubb 12:28
So we had, so we had COVID happened. And then somewhere in the middle of that or that winter. You know, Texas gets hit with this freak storm. And just compounded the whole situation with certain materials, like getting glues for things. And so I know that there was another impact there. So and I’m sure that all of our listeners have their own
Michael Grant 12:54
story. They’ve got their own stories about this
David Grubb 12:57
And we would love to hear about those you can put those in the comments down below. But I want to share one of my little stories for myself, I have two boys, and the youngest, James was 11 at the time. And so there we weren’t, we were stuck at home. And our back deck was overshadowed by this hickory tree.
And I’ve been dreaming about just having more sunlight on that deck on the back. And so the bright idea was that we went to cut down the secret tree with a hatchet because I didn’t have a chainsaw at the time. And so the secretory was a good 11 or 12 inches, and it was no more it was less than 10 feet from the back deck. And I started chopping on that thing. And it took hours. It took a long time to chop down a 12-inch chicken tree with a hatchet.
But my youngest son James saw what was going on with him. And he was like, Dad, I really want to chop down this tree. And I had notched it really well. So I was like, okay, James, you get over here and you just chop on this other side. You know, and I was like when it starts to creep and fall you just run the other way.
And sure enough, he did. And there was he was at it for 1015 minutes. And that tree was just started beginning to fall. And then before it started to fall and I asked him I was like, I was like, Do you want some help? He’s like, No, I got it. He whacked on that tree. Until it toppled over and he ran in the other direction.
He was so excited. But you know, so lack of money, lack of supply, lack of everything. We were still able to make an improvement and have more sunlight on our back deck. But I just wanted to share that.
Michael Grant 14:41
he was saying that’s a great example of what I call American ingenuity. You know, you take what you have, and you get done what you need to get done with what you have. And I’ve seen that many many times as we have had to recognize when we needed to subsist on one material for another, in order to complete one of our projects.
I would go to my suppliers and say, do you have this in stock? Whether it was a staggered shake panel that we use a lot, oftentimes on our gabled ends in our houses, or do you have it in a straight pattern, and whatever they had insufficient quantity is what we used.
When we got ultimately, got the look we were after, we had to be flexible about it. And I think that that, you know, that’s our clients have also been very understanding about that they realized that it’s not business as usual. So we, we look at, what do we need to do to get it done?
How has COVID impacted labor availability?
David Grubb 15:44
chopping down that tree was so labor-intensive? I mean, we’re talking about maybe a 10-minute job with a chainsaw. That took four hours with a little smile hatchet. So, you know, and I just want to bring that back up to, to, to kind of transition into the next one, which is, which is labor?
I mean, it’s it, we spent so much time doing that one little thing, but you know, we had more time because we weren’t driving around all over the place. We were at home all day, every day. But how has COVID impacted labor availability?
Michael Grant 16:21
That’s a great question. And it’s been significant that, with amusement, our governor, Governor Kemp declared the building industry as an essential business, which meant that we could continue to work, we did not have to stay home, like so many others, we had a significant impact in our economy, and the governor felt like that we were essential to, to our economy in the state of Georgia.
Interestingly enough, he also gave a central business classification, also to professional wrestling, and strip clubs. So I, you know, it kind of had the impact of taking my ego down a notch or two, because I couldn’t differentiate from them or you were, you know, we were essential in some way to some people. So, labor has been hugely impacted by it, then a couple of other things that influence that when the stimulus checks went out, people weren’t stimulated to do anything other than staying home.
So we lost a lot of labor, and people were now getting compensated for staying home in a way that was detrimental. So we saw a good percentage of our labor force just didn’t show up anymore. So that had a huge impact on the skilled labor that we used or even the semi-skilled labor that we use. And that’s still a challenge today, we do not have enough labor for all the construction jobs that are available in the United States. And that is by a significant number.
I’m going to, I’m going to throw a number out, over 500,000 construction workers are still needed in this country. So you know, that’s one of the issues that we bring up to the Home Builders Association is what can we do to improve the labor market available for home construction? So that’s, that’s a process of education and incentive.
So where are the skilled subcontract contractors coming from?
David Grubb 18:29
So where are the skilled subcontract contractors coming from? I mean, other than Are we just stuck with? They’re just not available? Or Is anybody stepping up? Is any group of people fulfilling that?
Michael Grant 18:42
Well, there are some serious things going on, and not in a good way. For everyone young person, and when I say young, somebody who’s in their early 20s, or better, who looks at construction as their career path.
Shockingly, there are five men or women who are in their senior years getting ready to retire for every one new person coming into the construction industry. So we’re about to lose in this country, a significant number of very well-trained, experienced construction people, for everyone who’s younger, just coming into the industry to learn the ropes of it. So that’s a very serious thing.
I remember quite well when I was a teenager and in high school where we were taught shop, we had those those those training for those skills that were considered trades, and it wasn’t something that people looked at as a lesser than kind of a job. It was a very important job to have and if you had those skills, is a very satisfying job. And of course, some of that went away.
With as various school districts and budgets began to alter the courses that they were teaching at the junior high and high school level, there was less emphasis on the trades. But I’m seeing that come back a little bit. I know that our local high school and local schools school system are supporting that type of training at the high school level these days, and I’m really glad to see it.
So how are the current zoning issues affecting housing?
David Grubb 20:24
Well, we already talked about a lot. So we’re going to skip on to the fourth one, which is legislation. And there’s, you know, there’s this comment that, that we heard at that, at that builder’s meeting that one of the teachers in our local high school actually left her position at the high school to go because she couldn’t find a place that she could afford to live here. So back to legislation. So how are the current zoning issues affecting housing?
Michael Grant 21:00
That fourth L if you will, of legislation is also you could also call it law, how the laws of the county or the city have impacted zoning within your area. Either make a house affordable or not affordable when you have zoning that only allows single-family housing with a given minimum lot size and minimum square footage for the new house construction.
It begins to limit what can be built on that lot. And when it’s single-family housing. You can’t you don’t have the privilege of density. You can’t have the duplex triplex quad Plex or apartment building that can take up less actual land and house more people. So zoning restrictions have had a huge impact on the ability of somebody who needs affordable or available housing within close reach to their jobs.
And to your point, I’ve heard that same story about the school teacher, that could not keep their job because they cannot find adequate housing in the area that they were teaching, so they had to leave. And I’ve also heard that other first responders are some of the people in enforcement as well as the private apartments and so forth.
These are not high-paying jobs, and they simply cannot afford the mean price of a house today, in some of the readings that I’ve done recently, the average house cost in the United States last month was $417,000. That’s a high dollar for people who are working in a job where they’re making 3040 $50,000 a year they cannot afford to buy a house.
David Grubb 22:57
It seems astronomical to me and I feel very fortunate that I even am buying a home in because I started 15 years ago, but I certainly don’t feel like I would be able to afford or buy a home at this point. With the cost is so high.
Michael Grant 23:18
Well, let me see there’s an interesting trend if you will, that’s happened. If you looked at the number of houses that were built, even 10 years ago, probably not probably the statistics say that about 40% of those houses were, well what we call starter homes. That’s your entry-level home.
They were smaller, they were on smaller lots and but they were affordable. And young families were able to buy these homes and begin to build wealth as a consequence of owning that house and building equity in their house instead of just paying rent. Interestingly, today of all the new housing starts, only 7% are starter homes.
So that there they are excluding a huge demographic, from even the opportunity to buy a home because those lower-cost homes are not available. And particularly in the city. what it costs to buy a home inside the city, particularly when you’re looking closer to any successful business district has just become prohibitive. Even when you’re looking at high-density circumstances where you may be going into a condominium building or even an apartment complex in the city.
The rents for these things are extremely high, and the mortgage cost of these homes is extremely high. So they’ve somewhat become prohibitive.
I had the opportunity to be here I’m looking at the master plan from one of the wealthiest areas in North Georgia. And I asked the mayor, where was the workforce housing? And he told me it was in Gwinnett County, which was a good 30-minute drive away. And I said, Why is that he said, the two reasons, the citizens don’t want it, and the builders don’t want to build it, they can, through the same effort.
They can make more money by building more high-end luxury homes. So it’s a very interesting consequence that we’re having to deal with, as we look at what we consider available, affordable housing today.
So what are the consequences of increased interest rates?
David Grubb 25:47
So what are the consequences of increased interest rates? And yet, we’re talking about the fifth l loans now, and you’ve already kind of led into that with new affordable, which, you know, you several words, they are together affordable, available?
Adequate, you know, because it’s I think there’s a lot of misnomers comes around the word affordable. And you can talk about that, as well as what is happening to the interest rates.
Michael Grant 26:16
Well, again, when I go back to that article I read a couple of years ago about the three l’s and I expanded it to five loans is number five. And we’re seeing it now working against the homebuyer, as we’ve watched, interest rates ratchet up for a good while, for several years, we had very low mortgage interest rates. And unfortunately, in the last 12 months, we’re beginning to see these interest rates ratcheted up,
I’d expect it to do that four times in the next 12 months, which essentially, is just further increasing the cost of homeownership because you haven’t, you’re having to pay a higher percentage rate for your mortgage money, which increases the cost of the mortgage loan or the monthly payment.
So again, it’s just hurting that, particularly that entry-level buyer, or better yet, it’s hurting a senior who is now needing to downsize. And they could have sold the home they were in for 30 years that may have been paid off. But they’re recognizing the cost of a single-level house, a smaller, but the single-level house may be as much or more than what they originally paid for a house that was three times that’s that size.
So it’s not a loan, the luck cost of loan money is it’s just adding insult to injury as it relates to the overall cost of the house.
What are the solutions for people impacted by housing problems?
David Grubb 27:55
We’ve talked about the five L’s and kind of where we are now, what is the future? How are people that are impacted by housing now? What are they going to do? What are the possible solutions for them? That’s that’s available?
Michael Grant 28:14
That’s not an easy answer when we’ve made efforts in the past, and this happened to me personally, several months ago, as I tried to develop a property to put 188 workforce apartments on it, where the entire master plan was done so that we could have good looking comfortable workforce housing at an affordable rate for people to live in. Regrettably, the city council turned it down.
There’s this not in my neighborhood mentality. People don’t want it close to them. And I think that’s very selfish and very short-sighted. The people that would occupy those apartments, were the very people that were first responders, people in foodservice people who were working in retail, those jobs that people need as you go out into the community for services and in for a meal and so forth.
So I was really disappointed that they would not provide us or offer us the zoning rate or variance for us to build this housing on that site. It was really quite alarming but that is not unusual. So people are going to get are getting creative accessory or Auxilary dwelling units is a trend that we’re seeing.
California has already adopted auxiliary dwelling units, which are basically alike almost like a tiny house that can go on a single-family lot but serve as a secondary A living space, it might be for a college student and maybe for your, aging parents, it needs to be close by, or it could just be as a rental unit for additional income.
But auxiliary dwelling units or ad use is a good solution to be able to get more people into a given area. We’re already seeing housing types that are segmented for demographic. Obviously, there are active senior living facilities, as well as assisted living facilities.
Apartments in major cities are huge increases in apartments. But regrettably, those apartments also have largely increased rental rates. So it’s not an easy solution. But for this to really take place and begin to show some good results. Your city council, your county commissioners, and people of influence, who do make these laws for how we can go about putting in more density of housing in these given areas are going to have to begin to make these things happen.
And then, of course, there’s always government resources that can play into this, with the different types of programs that they have, whether it’s through the Department of Consumer Affairs, it could be via HUD financing, or event, we’re even hearing about this with a Habitat for Humanity, there’s a number of different both state and federal government programs that can be helpful.
But you’ve got to go after it, you’ve got to be active in that pursuit of it. So that you can begin to put a more broad-based diversity of housing into your communities. One of the things that I’m paying attention to also is the fact that because we have a decrease in our labor force, and we’re having an increase on materials cost, we’re seeing other types of building and the modular building is becoming a major player in providing housing. And the thing that modular has in its favor is that you have virtually factory-built housing.
So this, it’s climate-controlled, you have no waste on the job site. These homes are designed to maximize the materials that are being used in them. They’re actually quite well built, because they have to be picked up, transported and picked up again and sat in place to complete the house. But it’s really a quality construction system modular is taking on a major role in providing housing, but it still comes at a cost. It’s no cheaper than building a site-built, conventionally built home.
Final Words of Inspiration
David Grubb 33:14
Michael, you’ve been the designer for Modern Rustic Homes for decades. At this point, you’ve, you’ve won numerous awards, I’m looking at your wall and looking at all the awards that you’ve won there. So I want to say especially say thank you for your time today for hosting this podcast with me. And also I really want to appreciate your passion for housing. And if we could leave our listeners with one inspirational thought about housing.
Michael Grant 33:51
Don’t give up would be my advice to you. Again, going back to my earlier comment where there is a void, it will get filled. So people are looking at how they can impact housing, and provide an appropriate solution and an affordable price point.
So but also speak up, you know, you have an opportunity to write a letter or to send an email to your city council or your or your other legislative bodies within your community that have any influence and what does happen. So don’t give it up. Let them know your feeling about this.
It’s critically important that you speak up about these things. But I do believe that we can improve on it. We simply must. We have, depending on which source you read it from, a deficit of housing in the United States on the low end of about 1.5 million houses that are needed today and I’ve read those Some people say it’s in excess of 7 million, which I find astonishing, but there’s definitely a lack of housing and we’ve got to do something about it.
David Grubb 35:09
Wow, that’s incredible. And I think with Michael’s closing comments there, don’t give up. Think about this is the time, you know, do you create shelter or is a shelter creating you? And that is something to think about. We want to hear from you. Please leave us comments on our blog, and let us know what you want to hear about housing. Thank you.
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