Good Company: Ted Leighty
Voice of homebuilders in a challenging time
Ted Leighty has been CEO of the Colorado Association of Homebuilders (CAHB) since 2017 as well as CEO of the Homebuilders Association of Metro Denver since late 2020. The CAHB has 10 local builder associations across Colorado and a statewide membership of nearly 2,000, representing 40,000 jobs in the industry. The CAHB advocates legislative solutions for the homebuilding industry and opposes measures it believes impair the ability to deliver housing.
In the aftermath of the Marshall Fire, Leighty has been an authoritative voice as questions about the rebuilding process arise. The fire destroyed at least 1,084 homes and seven businesses on Dec. 30, making it the most destructive fire in state history.
ColoradoBiz spoke with Leighty on January 25 about the Marshall Fire and rebuilding issues, as well as his association’s role in remedying the state’s housing shortage. The interview has been edited for space constraints and clarity.
CEO, Colorado Association of Homebuilders / Home Builders Association of Metro Denver
Websites: hbacolorado.com, hbadenver.com
Hometown: Born in Boulder, grew up in Minnesota and Oklahoma; Leighty attended the University of Colorado at Denver, where he earned a degree in political science and a master’s in public administration and never left the area.
What he’s reading: “I just re-read Patrick Lencioni’s ‘Five Temptations of a CEO’ and ‘Five Disfunctions of a Team,’ because I’m about to take my team through some exercises in the ‘Five Disfunctions of a Team’ book. I love him as an author as far as professional development goes. I usually go back and forth between fiction and nonfiction.”
ColoradoBiz: What are some of the questions you’re getting from Marshall Fire homeowners?
Ted Leighty: A big question we get is, “Can we rebuild at scale – treat it like it’s a new neighborhood and have a few builders come in with floor plans?” And that becomes the new look and feel of a neighborhood. That might be easier said than done in neighborhoods that don’t have HOAs than those that do, because they’ll have to re-do their covenants and that type of thing.
CB: For people in areas outside of the Marshall Fire who had hopes of having a new home built, should they expect to put those plans aside because of the enormous needs of Marshall Fire homeowners?
TL: It’s too early to tell. It depends probably on where you are in the process. If you haven’t engaged anybody yet and you don’t engage somebody soon, there may be some of the custom builders already engaged in a rebuild scenario who say, “Yeah, I don’t have the time right now.” Contract-builder availability has been an issue because of labor issues we’ve had already in the marketplace.
CB: Turning to the overall housing market, it seems Colorado swiftly transformed from a buyers’ market with rampant foreclosures as recently as about 2010, to now, the prolonged imbalance, demand far exceeding supply.
TL: I don’t know that it was “swiftly.” I guess 10 years is somewhat swift in the grand scheme of things. There are a few reasons. In construction we talk about the “four Ls,” really five Ls: land, labor, lumber or all materials, loans or capital, and local government. All of those have been a challenge. Obviously, we had huge net in-migration in that period of time. We’ve had labor issues that were heightened and that slowed down construction; we had fewer land developers coming out of the recession, so we had fewer parcels of land being improved and made ready for construction or that builders had developed, so that’s slowed the process down. Obviously, in the last few years, supply-chain disruption has played into the ability to pull permits and keep a pace of construction where it needs to be. And another issue is construction litigation. We saw going into the recession, pre-2007, condominiums, multi-family for-sale, made up 20 percent to 25 percent of the marketplace. Post-recession, because of some legislation that passed and how easy it became to sue, multi-family construction went down to 2 percent of the marketplace. So think about that.
A great way to add a lot of units into the marketplace is to build much greater density, condominium-type product, and that became nearly non-existent in the marketplace. We got a little bit of relief with some legislation in 2017. We saw that number (of multi-family construction) tick up to about 12 percent of the marketplace. And then here comes the pandemic. There’s a greater demand to now go live out in the suburbs and have a little more space both in the interior and a little more space on your property.
In some areas you’ve got a huge sentiment of limited growth. We’ve got local governments trying to act as HOAs with really cumbersome design guidelines, saying they want a certain siding or they only want brick or whatever, just really getting in the way of the marketplace being able to respond to the demand that is there.
I’ve got developers who have taken seven years to get a project entitled — to get it through all the local government approvals before they can actually start horizontal infrastructure development – curbs and gutters and roads and utility infrastructure to start building the homes. There’s a lot of NIMBY-ism out there. You’ve got local government officials, especially those who are elected, saying on one hand I’ve got this very loud constituency over here saying don’t approve this project, but I also know I’ve got police, firefighters and teachers who are serving my community that can no longer live in my community, because we don’t have enough housing supply. And that’s at the base of what we’re talking about: We have dearth of supply and we’ve got a lot of demand.
CB: Is there a timetable for when housing supply might catch up to demand?
TL: I can tell you the U.S. Census Bureau showed Colorado has about 2.46 million homes, single-family and multi-family. Taking that report and looking at an analysis Freddie Mac did on Colorado’s housing shortage and working with our national association economists, we were able to arrive at a figure of about 135,500 homes short of demand right now. In 2020, we had about 40,469 total building permits. So according to those numbers, even if we doubled the number of permits we had in 2020, it would take three or more years to meet current demand, and that doesn’t take into account economic growth and additional population growth we might get. And for the reasons I just talked about – labor, land, supply-chain – we don’t have the capacity to double permits. We could do more than we’re doing, probably, if some of those factors start to work in our favor, but doubling the permits is probably not going to happen.
CB: Speaking of the labor shortage, are there misconceptions about the building trades or careers in construction that have caused talent to forego opportunities in the building industry in favor of often-costly four-year degrees?
TL: I think there are probably misconceptions that have led to the decline in Colorado’s construction workforce. A little statistical background: In the next decade, it’s estimated Colorado’s construction industry will grow by about 15 percent; 175,000 individuals currently are a part of Colorado’s construction workforce. So by 2027, the workforce needs will grow to about 220,000 workers.
Proactively, we’ve created Careers in Construction Colorado, partnering with the Associated General Contractors of Colorado. It really started in Colorado Springs and now we’re moving up to the metro (Denver) area and we’re trying to make this a statewide endeavor. We also have builders, like Oakwood Homes, that have the Homebuilders Academy, which are training programs to help ensure a better pipeline of talent into our industry. Careers in Construction Colorado works with school districts across the state to provide educational courses focused on the construction industry. Since 2015, 3,670 students have taken those courses, and 1,775 students have earned “pre-apprenticeship” certificates.
We’ve invested a little over $3 million to purchase curriculum, train classroom instructors and provide materials and support students. In its most simplistic form, we’re bringing shop class back to high school, if you will. But it’s more than just “build a birdhouse.” It’s, “Let’s go build a tiny home. Let’s actually learn how to frame a house, learn how to make the right cuts, learn how many nails and screws need to be there to make something structurally sound. Let’s bring in the electric: How do we put that throughout the house? Where does the plumbing go? How do you integrate that into the home?” It is truly remarkable what some of the students are doing. That’s what we’re trying to do from an active standpoint to build the next generation of domestic labor.
CB: Regarding lumber and other materials, is there any telling when and if the prices will come down?
TL: Our national economist thinks we may have some relief coming toward the end of 2022. What often gets lost: Lumber got a lot of the attention last year, but all the top 10 materials inputs in a home — from steel to copper wiring, doors and windows and appliances, and all that — everything was up about 30 percent. So all those inputs contributed to a higher cost of doing business. And ultimately a higher cost of housing.