Nathan VanderKlippe
Northern News Services

Yellowknife (Jan 18/02) - With tumbling profit margins and a shrinking labour market, very few contractors are left building houses in Yellowknife.

Even though a number of new apartment buildings are on the horizon, that's one of the reasons more houses aren't going up, despite the present acute housing shortage.

Over the past three years the cost of building a house has increased by 30 per cent, while the cost of a house has gone up 15 per cent. That means profit margins have plummeted for local contractors.

"That's why no one's building," said Gerald Borschneck, owner of Premium Homes. "We're building two now, but the demand is a lot higher. There's no money in housing. If there was, there would be tons of people building."

"It's not the builder out there making the money," said Eric Sputek, owner of Hovat Construction. "We do some residential construction and we don't find (it) a real lucrative market."

The end result is that despite the possibility of hundreds of lots being made available for houses in Niven Lake in the near future, only four houses are currently being built -- three by contractors and one by a citizen.

The mines and commercial construction projects like the new jail are paying labourers $25-an-hour and up, while residential contractors are having difficulty paying $20-an-hour. That makes it difficult to hire and retain a workforce.

"You pay a carpenter $20, he'll laugh at you," said Borschneck. "I brought a guy up from Calgary last week. He worked six hours, then walked across the street (and got another job for) $5-an-hour more."

In-town skilled labour is also getting more expensive. Drywallers and plumbers, who do work for the commercial companies that can afford to pay high rates, are raising their prices. Borschneck said the cost of plumbing a house has doubled in the last few years.

Bill Aho, owner of Central Mechanical Systems Ltd., said plumbing labour costs have increased 75 to 100 per cent in the past few years. But, he said, overall mechanical costs for a house have only increased by about 20 per cent.

"If you were looking at a house that used to cost $25,000 to do it, now it costs $30,000," he said.

Those costs increases, if not accompanied by increases in the price of houses, lead Borschneck to predict that "there won't be a big building boom here."

That is, unless contractors can begin to make enough to build.

"Now we have to pay big bucks to get good men. I think I'm going to raise my prices," said Mike Berube, the owner of Berube Construction, which is the only other contractor in town building houses.

Currently, house construction prices range between $100-125 per square foot. Those need to increase another $10-$15 for contractors to begin making a profit, said Berube.

That is not something the city will get involved in, said Mayor Gord Van Tighem.

"Prices are driven by the market," he said.

But the city has been doing work on other levels, to reduce the up-front cost of purchasing a lot.

"We've been working with developers to reduce the entry level into the lots to the lowest that we can. We've done that by offering (lots) for sale as raw land. We've made it apparent to the industry that we're willing to talk about the levels of developments that need to happen. All of those discussions are leading toward ways that make it more accessible to create more affordable housing."

In many sectors of the construction world, business is booming no matter what the city does.

For Aho, business is good, and has been for the last 12 to 18 months.

"Business is what it should be. People who are in business should make money. It's what makes the world go around," he said.