Not a worm this time: a virus and the wood sector
A taste of the housing crisis in 2021 in Budapest:
“The rental price of a 2-bedroom apartment in Budapest is currently around 200 thousand forints (570 Euro) in the city center, which is higher than the minimum wage. This is not affordable for teachers, whose salaries are among the lowest in the country. Budapest is overcrowded, and income inequality is very high. In 2019, I could still rent a room in the city center for 90 thousand forints (256 Euro). I was sharing the house with 5 people. There was significant demand for students and expats. With the lockdown, students could not come. Most expats moved to places outside the city because they started working from home. So, the rental prices were lower. But the income of the people is meagre. Most people cannot afford to live in a house alone. Hungarian students and young people live with their families. Even newlyweds have to stay with their families.” Interview with a Turkish expat, living and working in Budapest, 01.09.2021
The housing crisis in Hungary is widespread, and it affects lower and middle class households. The pressure on the housing market is even sharper in regards to social housing. It requires courage, skill, resourcefulness and know-how to build an extraordinary and innovative social housing project such as the E-Co-Housing project. As if the challenge of the housing crisis was not big enough yet, it has exponentially grown with the rapidly changing context of a pandemic, and the economic impact that follows from it. This extra condition has had an impact on social housing in multiple, and at times unexpected ways. The pandemic has taught us how important it is to create better health-oriented housing. It also made us experience the dynamics and vulnerabilities in the construction sector, and in particular with regard to wood supplies. These key considerations had to be taken into account to move forward with the E-Co-Housing project but have equally been key for other building projects in Budapest.
Corona reminds us to design healthy homes
In the wake of the COVID-19 pandemic, homes have been transformed into work- and (pre-) schooling places, making it difficult to establish the boundary between professional, social and private life. In the strictest lockdown, people were obliged to combine all activities in one space. Home became the place to live, to work, to cook, to teach, to stay connected or to shop via online tools to try to relax, and for many also a place to deal with sickness or loss. Being at home all the time made the shortcomings of the house and its immediate surroundings much more obvious. The lack of green spaces and outdoor access, of ventilation, of soundproof constructions were experienced much more directly. Also the lack of flexibility, silence or privacy, and the sheer impossibility to separate activities from different spheres of life, has been a challenge to many families: for instance, children needed to be able to do home-schooling while parents are working basically in the same space. If you were lucky, you could use private outdoor spaces.
Corona effects the wood market: did I hear this right?
The lockdown not only influenced perspectives on the design and use of individual housing. It also affected the housing market and the construction sector. The wood supply is an intriguing example of a global shift that is indirectly related to the pandemic.
Wood is a lumpy, heavy product to transport: since proximity matters, regional differentiation in prices is no exception. The price of wood products fluctuates more than most other materials: the supply is locally determined by the number of sawmills, the capacity of which cannot be changed rapidly as demand for housing projects rises or falls. Smaller materials, and for instance technical equipment for a house can be imported much easier. Even before the pandemic, the number of production plants was reduced, whereas the demand during the pandemic has jumped. The price changes for different kinds of wood indicate an increase of prices of 74% up to 100% in 2020 in Hungary. In January 2021, the cubic meter price was still around 100-110 thousand forints (300 euro), which is now around 210 thousand forints (598 euro). The sharp increase can be related to a range of rather different aspects in the global market. One such element is that European loggers and processors have recently been overwhelmed by American buyers who purchase both home-grown and imported timber at large quantities and prices in response to an outflow from urban conurbations: home-office has led to a massive reappreciation of suburban homes in a green environment. The Covid 19 pandemic has had another side effect: unable to take a vacation, a large number of homeowners were stuck at home. It wasn't long before they found themselves at their local building supply store, where they purchased materials to build decks, more rooms and even garden sheds or playhouses.
Even though new housing and home repairs or renovation are the two most common uses of wood, it is also used for other purposes, including non-residential constructions, crates, pallets or packaging. Changes in these domains have indirectly had an effect on wood prices: the increase of online shopping, and therefore a massive increase of cardboard packaging has raised the demand of wood products. Supplies of wood as a raw material have been redirected towards other production flows than the construction sector. Second order effects have further increased the shortages: publishers considered buying large stocks of paper to guarantee a constant production level of books. And we have observed speculators who bought up large quantities of timber to push prices up even further. Supply chains were also interrupted due to the pandemic, and experience delays: for instance when containers were not sufficiently available or because container ships were stranded when the crew on the boats or in the harbours were affected by covid. We find ourselves close to the point where Europe runs out of marketable timber, and timber producers seem to be able to sell at any price they want. Thus, in the end, the wood will be more expensive for everyone whether it is a private or a public construction site or involves a different use of wood. From the end of 2020 to May 2021, the price of wood for construction changed by 98%, and the cost of skilled workers has also increased by 14%. Even if you have the budget, finding the materials and the labour is not guaranteed, says a new homeowner:
“We have recently bought a house with a garden in the village in the city of Gyöngyös. The house is very old and requires a high degree of renovation, but since the cost of this renovation will be as much as the price of the house, we decided to demolish the house. We will rebuild the house by putting a prefabricated wooden structure inside because we would not cope with labour shortage and renovation costs. At the moment, metal and wood prices have skyrocketed, and we may even have trouble finding the material we want, as there are problems in production and logistics due to covid.” Interview with a middle-class homeowner at 80 km distance from Budapest, 01/09/2021.
Given the global demand for wood, transport and shipping costs are proportionally a smaller share of the price, and export becomes more attractive. This is why the Hungarian government is considering imposing an export ban from 1 October 2021. One can only hope that prices will stabilize again, and perhaps even return to more normal levels: neither contractors, builders nor authorities who publish public procurement tender appreciate working on the basis of 'daily prices'. Whereas health issues are an important challenge in residential design, the uncertainty over prices and availability of materials is a new and difficult condition for implementation, also for the E-Co-Housing project. Local projects unexpectedly suffer from many different global shifts.