by Marissa Lorenz
As summer nears its close, so too does an industry inexorably linked to the weather and seasons. Building and new construction in Grand County are trying to wrap up for the busy season, a season which, in 2019, has seen positive results for contractors, those they work with, and home buyers.
The past decade has seen some wild swings, with the last recession really hitting Grand County and other tourist industry based communities a couple of years late, around 2009, 2010. But for the past three years especially, the industry has seen a major upswing, according to local builder Brad Bailey of Bailey Building. However, challenges remain for builders and home buyers, as numerous factors continue to nudge building costs higher.
Bailey notes that there are two major drivers of what he calls “hard building costs,” which include raw products — lumber, hardware, paint, et cetera — and labor. That cost does not include land purchase, financing costs, and other factors. He notes that raw products or pre-manufactured building goods remain fairly stable, increasing with cost-of-living between 2 percent and 3 percent per year. Otherwise, there are a few atypical things that can impact material costs, like trade wars and the resulting “bonkers” spike in steel prices in the last few years.
However, Bailey stresses, labor costs are highly variable and this is where contractors “start to have trouble.” Following the recession and the stall in building a decade ago, he explains that many sub-contractors and tradesmen either left the area or changed career paths, leaving a “scarcity in labor and professional services, like plumbing or electrical experts.”
And though development has increased again and should be providing a draw for skilled workers, Bailey says that hasn’t happened. “A disparity has developed between the cost of living, including housing and health care costs, and available wages. So those that might like to come live and work in the mountains are soon dissuaded.” And while those that do remain in the Kremmling area, “are really good with a great work ethic, they can now set their own wages and are not bidding aggressively. They have more than enough work and do not need more.” Even trusted partners, he says, like his own framing contractor, is charging 12 percent more than last year.
Jason Wikberg, another local builder and Kremmling Town Council member, echoes those concerns. “It’s not one particular thing that’s driving up costs; it’s everything added together, including lack of competition among subcontractors.” He points to the fact that one of Grand County’s major concrete suppliers has recently gone out of business, leaving only one local source for the building necessity and causing a rise in price from $107 per yard to about $170 per yard.
“You try to keep homes reasonably priced, so people can afford to buy them, but everything is more and more expensive,” Wikberg states. He also indicates that he tries to support local business is sourcing materials, but that sometimes the savings in going to a vendor in Denver cannot be beat, taking even more commerce out of the county.
The long-time contractors both point to other factors in building costs as well, such as doubled permitting costs and updated building codes. “Requirements for better insulation or safer electrical outlets, et cetera, are going to have a secondary effect of cost that gets passed onto the consumer,” Bailey explains. “They help with environmental cost and will ultimately result in lower gas or electric heating bills, but the up-front cost is born by the home-owner.” But he indicates that many municipalities or jurisdictions are behind in code adoption, stating that as a Council Member of Dillon, they are just looking at 2018 building codes.
The Grand County Community Development Department, encompassing building, planning, and zoning, voted last year to adopt the 2015 building codes put forth by the ICC or International Code Council. The Kremmling Town Council looked at their adoption as well but, in the end, tabled the discussion and never voted. Council Member Erik Woog led the opposition to their adoption, particularly with regard to updated fire codes and sprinkler system requirements, which would require sprinkler systems in both commercial and multi-dwelling structures. “This requirement could prohibit potential growth and new businesses coming to town,” countered Woog.
However, Peter Rempel, Senior Plans Examiner and Inspector for Grand County, explained that sprinkler systems were already required under the previously-adopted 2009 ICC Building Codes. He noted that the newer code only updated maintenance requirements once a system had been installed and that “even 4-unit buildings with complying firewalls would negate the sprinkler system requirement, though the cost of the firewall is often greater than that of the sprinkler system.” Kremmling Town Manager Dan Stoltman continues that train of thought, saying that one concern around sprinkler systems is that they’re often likely to freeze and burst in the cold winter weather, leading to increased maintenance and repair costs that could be avoided without the requirement.
All individuals seemed to think that the fact that Kremmling had not adopted the same code regulations as the County was not an issue of concern. “It doesn’t mean anything,” said Bailey,“unless the Town decides to take over permitting and inspecting.” Wikberg elaborated by explaining that all builders have to apply for their permits through the County offices anyway.
“Technically, a builder could protest a portion on the permit, if building in Town boundaries. But most of the new requirements were given expectations even before they were encoded in regulation.” Ultimately, Stoltman, who was not here during initial discussions last fall, indicates that “I expect that Kremmling will adopt the same code, even if we apply for a specific exemption or two.”
But for now, the avocation is still caught in a challenging situation, where building demand has increased, while property costs have gone up and labor costs have sky-rocketed, given the dearth of skilled labor or professional trades. It means hard building costs of approximately $200 per square foot, according to Bailey — all of which is being passed on to home buyers, who have to also factor in additional costs. In the end, recently finished homes of around 1,500 square feet in town boundaries and with municipal services have a market price of between $280,000 and $380,000 depending on whether they are single family homes or duplexes and with one or two-car garages. That building is taking place and homes are selling is good news. But many external factors mean contractors are struggling to make a profit and want-to-be home-owners will continue to see rising market costs.