What's driving today's high cost of construction? labor shortages, fuel prices, limited materials and insurance costs all bump up the price of that new home or commercial building.

• Author: Coppola, Doreen R.
• Position: Building Alaska

Homeowners are basking in the glow of rising property values. But for those trying to purchase an existing home or build new, it's more difficult. Construction costs are skyrocketing, affecting everyone from the homebuilder to the general contractor.

Where did these high costs come from? Perhaps it began with an increase in the cost for construction materials. Or maybe it was the high price of gasoline that spurred controversy across the nation. Or, perhaps too many insurance companies went bankrupt and had to raise workers' compensation premiums. Despite who or what is to blame, construction costs have continued to climb over the past year or two and are not expected to let up anytime soon.

LABOR WOES

There are many factors contributing to the rising cost of residential and commercial construction. One factor that directly affects contractors in Alaska is the availability of manpower. According to Michael Fall, vice president of Unit Company in Anchorage, there's always been a lack of manpower in the construction field. "There are only so many construction workers in the state," he said. "We typically get an influx of people in the summer, but there's just more work going on than people." Because of this lack of available help, fewer people are working longer hours and more days, which drives up the cost. Construction workers are a scarce number and often require high rates for their long hours and skilled work.

In addition, many construction workers would rather work for the city, state or federal government because of their attractive wages and benefits packages. With plenty of military work available, as well as an abundance of federal money in the state, contractors must compete with this market. To find decent labor, contractors are forced to pay a higher wage.

HIGH FUEL COSTS

Another contributing factor is the cost to bring materials to the work site. Fuel prices have been steadily on the rise and the fact that Alaska is remote just adds to this increased use of fuel. Raw materials must arrive by steamship, barge, air or highway, with limited access to rural areas that have a lack of infrastructure. Gasoline prices typically fluctuate, but have been recently staying around $2 per gallon, and diesel--a necessary element in the cold winter months--costs even more.

In addition to freight, fuel is also necessary to heat the area surrounding the construction site in the winter because of the extreme outdoor temperatures. According to...