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Rising Construction Costs An Obstacle To Recovery After California’s Year Of Natural Disasters

Smoke from the Thomas Fire in Ventura County
Smoke from the Thomas Fire in Ventura County

With California’s wildfires contained and flooded areas drying out, residents and business owners have started to rebuild. But a combination of labor shortages, rising construction costs and the potential for price gouging could delay the recovery process.  

Fires and mudslides dominated the news late last year and into January. In Sonoma and Napa Valley, natural disasters claimed 8,900 structures, including 3,000 housing units. Property losses are estimated around $4B and include homes and local businesses. In Southern California, the Thomas Fire destroyed or damaged more than 1,800 structures, most of them homes.

Charred earth turned to rivers of mud last month when heavy rains washed away homes in the affluent Montecito section of Santa Barbara, adding to the growing list of damaged property. 

Despite the economic and personal devastation natural disasters cause, periods of heavy reconstruction and redevelopment can create opportunities. California is known for having some of the nation's strictest environmental and building regulations. In the wake of the destruction, Gov. Jerry Brown ordered the suspension of tough zoning and planning requirements. While relaxing these laws opens the door for faster recovery and increased business among professional services like contractors, some companies have taken advantage of the high demand. 

Sonoma County prosecutors have already charged six landlords with price gouging for raising rental rates by more than 30% while wildfires still burned throughout the county. It is a misdemeanor to increase prices for lodging, food, medical products and building supplies by more than 10% in California after an emergency is declared.

This is not the first time California residents have had to deal with skyrocketing costs in the wake of natural disaster. Following the 1994 Northridge earthquake, which led to $20B in property damage, Los Angeles residents saw contractor quotes rise exponentially. It was in this environment that John Parker and Scott Brown formed what would become general contractor Parker Brown and refused to jump on the bandwagon.

Rising Construction Costs An Obstacle To Recovery After California’s Year Of Natural Disasters
The Kaiser Permanente Building after the 1994 Northridge earthquake

Parker, who brought with him years of construction experience in Ireland, teamed up with Brown in 1993. Brown owned and operated Accent Interior Systems, a framing, drywall and acoustical ceiling company. They formed Parker Brown and provided much-needed construction services after the Northridge earthquake.

“We had been in business for only a few months when the earthquake hit,” Brown said. “There was so much work to be done in the Valley, where the quake hit hardest.”

After seeing rampant price gouging following the disaster, Parker Brown continued to offer fair prices to clients. Parker Brown’s commitment to Californians helped establish a reputation in the construction industry for integrity and quality.

“We were given some advice by a person with a long history in the business,” Parker said. “He advised us to resist raising our prices like a lot of contractors were doing. ‘You’ll make less money now, but you’ll have customers forever.’ We took that advice and he was right. We have customers who have been with us for more than 20 years because we treated them fairly after the Northridge quake.” 

Specializing in quality tenant improvement construction, Parker Brown started out with four employees and grew to a company of over 50 construction professionals.

Following the Thomas Fire and the Montecito mudslides, contractors now have to contend with a lack of laborers to meet construction demand. A survey from the Associated General Contractors of America showed that 75% of West Coast firms were struggling to fill construction positions, up from 71% in 2016. The shortage comes as California added nearly 50,000 construction jobs in the period of July 2016 to July 2017, with 34,000 projects in the Southern California region. That was two months before the fires began.

The Golden State is already planning its comeback. Rebuilding efforts could provide additional opportunities for more density in suburban areas, and city officials have expedited permitting timelines. Along the way, Californians have contractors like Parker Brown with the experience to help them regain homes, livelihoods and communities. 

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