Construction Industry Trends: November 2023 Roundup
November might be marked by the return of cool weather, but the news in the construction industry was red hot. Manufacturing construction announcements, the strain on steel, massive housing exemptions from federal regulations, a $2 billion investment in low-carbon asphalt, and a lawsuit against a company providing creative financing are topping headlines. Here’s what happened in November 2023.
Another Massive Chip Plant in the Works in Arizona
The microchip and semiconductor industry continues to thrive, as the world just can’t seem to get enough chips. As a result, Amkor Technology announced plans to build a massive plant in Peoria, Arizona. The cost of the project? A cool $2 billion, some of which the company applied for through the CHIPS and Science Act.
In a company announcement posted on November 30, Amkor stated its expansion plans. Already the only US-headquartered OSAT (outsourced semiconductor assembly and test) service provider, this new 500,000-square-foot facility will become the largest packaging plant in the U.S. And it will create roughly 2,000 jobs.
Arizona is already home to several packaging facilities. Major players like Taiwan Semiconductor Manufacturing Company (TSMC), Intel, and Applied Materials each have facilities in The Grand Canyon State. TSMC has its second facility, which will open in 2026, under construction at the moment.
There’s no telling whether more chip companies will build in Arizona, but the outlook is positive. The state’s climate, reliable utilities, and local universities’ focus on STEM industries make it a great place for these companies to put down roots with the help of the construction industry.
Steel Demand to Create Challenges for Small Contractors Despite Low Prices
Everyone’s aware of the volatile materials landscape, but there’s an intensifying demand for steel. And the smaller contractors are caught in the middle.
Part of the challenge is the renewed push for onshore manufacturing plants for microchips and other items traditionally manufactured off-shore. Semiconductor plants, battery manufacturers, and data centers (all of which are seeing a boom in construction) are steel hogs, requiring more metal than a typical non-residential construction project.
Smaller contractors (those doing less than $30 million annually) are feeling the squeeze. Despite an overall price drop of 10% in 2023, steel prices are still roughly 60% higher than they were in early 2020, due in part to supply challenges spilled over from COVID-19 shutdowns and the war in Ukraine. And a small part of the price drop in 2023 was due to the autoworkers’ strike, but that relative calm is over, as the manufacturing plants are back at it.
As more multi-billion dollar manufacturing and data center projects break ground, the steel demand will likely stretch project timelines for smaller contractors who struggle to find steel sources. That’s tough news for this segment, as it’s already one of the most impacted by the rising costs of borrowing.
Major Exemptions for Workforce Housing, Says FHFA
The Federal Housing Finance Agency announced that a major segment of the housing market will be exempt from its multi-family housing caps. Fannie Mae and Freddie Mac will both be capped at $70 billion each in 2024. Of the total $140 billion, 50% of the Government-Sponsored Enterprises businesses must be mission-driven, affordable housing.
However, the new mission-driven category known as workforce housing will be exempt from the cap. The FHFA’s goal in establishing loan caps while exempting workforce housing is to continue to address the need for affordable rental housing.
According to the Freddie Mac website, characteristics of the workforce housing mission-driven category include being:
- Affordable to renters with lower incomes; such as firefighters, teachers, health care professionals, and service workers
- Privately-owned and operated
- Older buildings with limited amenities and basic interior finishes; usually outfitted with older appliances
- Newer properties built to serve workforce populations and/or have units affordable at specific area median income (AMI) levels
While the FHFA reassesses multi-family housing caps and adjusts them annually, these exemptions aim to provide a long-term solution. According the FHFA Director Sandra L. Thompson, the exemption should “encourage conventional borrowers to commit to preserving rents at affordable levels for extended periods of time.”
Government to Invest $2 Billion in IRA Funds to Projects Utilizing Low Embodied Carbon Materials
Some federal projects featuring greener building materials will see a boost in funding soon. In early November 2023, the U.S. General Services Administration announced that it’s redistributing $2 billion originally set aside by the Inflation Reduction Act to government construction projects utilizing low-embodied carbon materials.
The $2 billion will be distributed to 39 states, D.C., and the Commonwealth of Puerto Rico. The money is to support the American-made market for greener, more environmentally friendly asphalt, concrete, glass, and steel products. The hope is that this investment will boost the output of manufactured goods long-term while also countering the effects of man-made climate change and creating manufacturing jobs for American workers.
The GSA identified 153 federal projects prioritizing low-embodied carbon materials. Of these projects, the distribution for each material will be:
- Asphalt: $384 million
- Concrete: $767 million
- Glass: $464 million
- Steel: $388 million
These projects include infrastructure and repaving, seismic upgrades, structural repairs, facade work, and window replacements. With this investment, the GSA expects to reduce 41,000 metric tons of greenhouse gas emissions. It will also support about 6,000 U.S. jobs, annually.
D.C. Attorney General Files Suit Against Curbio
While expensive borrowing might be spurring creative financing, D.C. Attorney General Brian Schwalb is watching like a hawk. The AG’s office recently filed a lawsuit against home renovation property technology company Curbio, citing unfair contracts, low-quality product, and even unlicensed lending.
Curbio’s platform allows home sellers to finance the cost of their renovation against the home’s future sale price. Borrowers hire Curbio and its contractors to handle the renovation, paying the company back upon sale. But what Schwalb is claiming Curbio actually does is far more predatory.
The lawsuit states that Curbio “ensnares customers” and targets the elderly. It also stated that the contractor’s finished product is poor quality, making the cost of the renovation overly expensive for the return on investment. And while Curbio does require a real estate agent to represent the home seller before signing the contract, it also offers real estate agents compensation for sellers who receive estimates or sign contracts.
While there is a lot to sort through, the majority of the lawsuit focuses on exploiting the elderly. This demographic has more consumer protection than most others, providing plenty of ground for the AG’s office to build a case.