Human habitat suffers from high construction costs | Business

Habitat for Humanity leaders working on high construction costs, freed from significant reductions in volunteers during the COVID-19 pandemic, will first admit that they are struggling.

They say they felt like punches one after another last year. First Hit: Habitat’s local affiliate needed to limit volunteers on virus concerns and was forced to fork more money to hire a contractor. Second hit: Revenues fell due to the temporary closure of ReStores, a reuse store run by a local habitat organization. Third: Construction delays caused by pandemic twists in the supply chain. This allows affiliates to wait longer for supply.

What could have been a knockout blow was a surge in construction costs. Timber prices have risen by more than 300% since April 2020, according to the National Association of Home Builders. Experts say that demand for new homes and supply for remodeling projects also kept costs high. Prices have fallen in the last few weeks, but are still significantly higher than they were before the pandemic.

Morgan Fuff, secretary general of habitats for humans in the Wisconsin River region, operating in the countryside of Baraboo, Wisconsin, said the group is the second to build this year as it can’t afford it. He said he had to cancel the house. The one house they are building will cost more because there are not enough volunteers. “At least it’s going to be an additional $ 13,000 contract work we haven’t budgeted for,” Pfaff said. “Then you add the cost of the material, and it’s really upside down.”

Habitat’s network of independent, locally operated affiliates facing all aspects of the challenge will address increased costs, among other things, by taking out loans, increasing funding and using alternative construction materials. It is said. Some affiliates use materials that local stores helped stockpile before the price increase took place. Currently, in the midst of a surge, authorities say donors are also strengthening.

Over the past three years, nonprofits have built an average of 3,000 new homes in the United States. Despite a 4% decrease this year compared to 2019, it remains one of the most affordable homebuilders in the United States. Adrian Goolsby, Senior Vice President of the United States and Canada at Habitat for Humanity International. But experts say that job, and the work of other nonprofits, cannot solve the shortage of nearly 7 million affordable homes in the United States alone.

Habitat received approximately $ 1.5 billion and other in-kind donations across the network, according to the organization’s annual report for fiscal year 2019, which shows the latest figures unaffected by the pandemic. These gifts, coupled with federal grants, help affiliates subsidize mortgages for Habitat homes. Habitat homes are built by the family with volunteers and repaid with an interest-free mortgage that does not exceed 30% of the homeowner’s monthly income.

“One of the challenges facing Habitat is that many affiliates are working with previously approved families on finance packages that do not take into account these increased costs,” South Carolina said. Nancy Lee, Executive Director of Humanity Habitat, said. He oversees 29 local affiliates in the state.

“We see many affiliates absorbing their financial burden as construction costs increase,” she added. “This is not a sustainable approach. The impact seen in South Carolina is to delay expected construction schedules and find alternatives to overcome price increases if this situation persists. Includes affiliates that need to be considered. “

Another reason Habitat’s homes are affordable is that affiliates get materials from Habitat for Humanity International’s corporate partners for free or at low cost. However, affiliates still need to buy at market rates. Suffering from the recent surge in costs, some people are now focusing on home repairs rather than new construction, Gourdsby said.

“Our affiliates are also very innovative and some use alternative materials where permitted,” Goolsby said. For example, instead of using wood exteriors for homes, some are considering moving to rigid board insulation made of foam.

Others choose not to change the building model to counter timber prices and continue to absorb costs. One such affiliate, Montgomery County, Tennessee, Human Habitat, will begin to pass an 8% increase to homeowners for future construction, said its Executive Director Rob Serkow. I will. He says hiking will most of the families of future beneficiaries fall into the same low-income group.

Habitat’s affiliates operate independently, so it’s unclear how many people will pass on more to homeowners. According to Lee, South Carolina, some affiliates base their home sale prices on the sum of their out-of-pocket costs, which could reduce the prices of some families. She said it was a scenario they wanted to avoid.

In South Carolina, affiliates absorb much of the extra cost through a second mortgage allowed. According to Lee, these are usually not repaid to affiliates unless the family moves or sells the house they bought before paying off their first mortgage.

All of this contributes to the retreat of construction. Habitat for Humanity International, which is expected to sustain high construction costs, said, “We will continue to investigate how production has been affected and identify and manage the risks of affordable homebuilding.” Stated.

Recognizing the challenges, individual donors have stepped up their donations to affiliates that were able to subsidize their struggling affiliates, Goolsby says. Others are getting more funding from local community foundations.

Virginia Auler, Executive Director of Westtureness Habitat for Humanity in Forest Grove, Oregon, said: Her affiliate spends more time raising money. We also stockpile debt and construction materials.

“Some of our local suppliers have helped us a lot, and they have helped us work together to reduce costs,” she said. “But you can’t buy a year’s worth of material in advance, so at some point it will catch up with us.”

There are challenges on the left and right, but the recent decline in timber prices is one bright point. Habitat for Humanity International also lifted recommended guidance on volunteer use earlier this month. This will quickly save labor costs for affiliated companies.

However, according to nonprofits, price increases have expanded beyond basic construction costs. Lee Jeter, Sr., Executive Director of the Fuller Center for Housing in northwestern Louisiana, an affiliate of the Georgia-based non-profit housing organization The Fuller Center for Housing. States that his office is also seeing an increase in property and liability insurance payments.

“As a nonprofit, it really costs money to rethink our entire portfolio and how we do business,” he said. “With all these increased costs, how can we maintain the same quality of service we provide to our clients without financial difficulties? These are difficult questions.”

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