The Future of Deconstruction as Lumber Prices Soar

The Future of Deconstruction as Lumber Prices Soar

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EPISODE SUMMARY

With historical high lumber prices, the deconstruction industry is proving itself to be a creative and environmentally friendly alternative to new wood. We explore why the prices are soaring, what deconstruction is, and the role it fills.

EPISODE NOTES

With historical high lumber prices, the deconstruction industry is proving itself to be a creative and environmentally friendly alternative to new wood. We explore why the prices are soaring, what deconstruction is, and the role it fills.  

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Disclaimer: These interviews have been edited for length and clarity.

Jackie: My name is Jackie Lamport. Today is Wednesday, May 5th. Welcome to the Capital Daily podcast. As lumber prices across the continent soar and new industries being propelled forward, we learn about what's causing the price jump in lumber and how deconstruction has benefited.

Jackie: In the past six months, the price of lumber has increased by about 170%. The price increase has directly impacted a budding industry; deconstruction. Deconstruction has taken root in the Pacific Northwest specifically, and Victoria is one of the cities at the forefront. It is the practice of taking apart and reusing the material from old buildings, as opposed to blanket demolition and sending potentially valuable resources to landfills. To explain how lumber prices are impacting that industry, we first need to understand why prices are soaring. Gary Bull is a forestry professor at the UBC Department of Forest Resource Management. His research focuses on business management, economics, international trade, and modelling. He told me the prices we're seeing today are historic highs.

Gary Bull (audio clip): The cost for a single-family home, let’s say, let me give you prices. So maybe it was around $400 per 1000 board feet. That's the way it's sold in the marketplace. Let's say a house; the lumber might be, I'm guessing here for a single-family home. I’ve seen prices around as low as $20,000 and less. Right now, you're seeing a price of an additional $36,000 to build a home over and above that. So that's a significant jump in price.

Jackie: According to a report from the Canadian Real Estate Association, this has meant the benchmark home prices rose 3.1% in March from the previous month. Gary told me multiple factors have led to the prices, one of which is the housing market.

Gary Bull (audio clip): Lumber prices typically are highly correlated with housing starts. Whenever we've seen a boom, like lowering interest rates and people wanting to build a lot of single-family homes, that would lead to a jump in price. So it’s a very competitive market. For an economist, one of the most classic examples of a purely competitive market is lumber.

Jackie: He also explained some other reasons for the price jump.

Gary Bull (audio clip): The growth in the housing market and lockdowns have a lot to do with the enthusiasm to do a lot more remodelling and renovation. That's the second component. The third component that's really important is the constraints on the industry because we don't have enough trees to manufacture and produce products, and the current market where more and more constrained, particularly in British Columbia.

Jackie: On Gary's points about remodelling, according to a TD Bank real estate survey, 37% of Canadians surveyed said that they had done renovations in the last year. The demand isn't just high in Canada, though. I asked Gary if importing foreign lumber could help lower prices. This is what he told me.

Gary Bull (audio clip): The challenge is that Europe is already using up all of their wood. So there's no forecast of an increase of flooding of the North American markets, for example, from Europe, because their forest economy is expanding, not contracting. As we all move to what we call the bio-economy, and we're trying to replace fossil fuels with biological materials, we're going to see more use of wood, not less. Most of what's happening in Russia would be trade with China, and China has a very large appetite for wood, including wood from us. So we don't see a net export back of wood to make products from China. They might come back with finished products, like furniture, but not from their forests, for example. This is worldwide, and there's no big wood basket out there, outside of our own, so we need to learn how to manage it."

Jackie: He also went on to explain that the supply in America is also seeing significant difficulties similar to ours.

Gary Bull (audio clip): They're also in a conundrum on public lands because most of their wood comes off private land. In the southeastern US, Oregon, Washington and California, a lot of the public lands have been shut down from any kind of harvesting for decades. That's not been a good ecological strategy because they're getting a lot more fire insect disease problems like we have. Many states are going back and trying to find ways to treat these forests and maybe get some products out. However, this is going to take a long time to get back into producing trees that we can use to make wooden homes.

Jackie: The bugs he mentioned are a huge part of the issue. In British Columbia, specifically, the beetles in question destroyed 730 million cubic meters of pine between 2000 and 2015. The bugs are only thriving in warmer average temperatures. I asked Gary if this was a climate change issue.

Gary Bull (audio clip): Generally speaking, you need several weeks of a -40°C temperature in the winter to kill off some of these insects like the mountain pine beetle. Because the climate has been warming, we go through successive warmer winters, which led to the population explosion. At the time, when we discovered it, at Tweedsmuir Park, the insects started to break out and were a problem. The government wasn't in a position to actually respond. So they try to contain it. It’s a bit like a pandemic. If you tried to contain it early and isolate it, that would have meant cutting trees and burning them in parks, but that was, at the time, against policy. Therefore, it probably still is, in many cases. This is a problem that we have to contend with because climate change means that these problems will increase and grow quickly. We need to have more management tools that work inside and outside parks.

Jackie: Since we've mentioned climate change, it's a good time to explain the more environmentally friendly practices of deconstruction. Adam Cornell is the CEO of Unbuilders, a Vancouver-based deconstruction company. I first had him explain what exactly deconstruction is. And how it differs from demolition.

Adam Cornell (audio clip): Demolition is removing a building essentially as fast and as cheap as possible. For the purposes of redevelopment, where the materials go doesn't matter. So they typically go to the landfill. In mixed loads, deconstruction is systematically taking the building part separating the materials to maximize the salvage and minimize the waste.

Jackie: So it takes a bit longer, but in the end, you're getting resources out of it. So it makes that part worth it.

Adam Cornell (audio clip): Yeah, that's right. That’s what we call urban harvesting. You're harvesting materials from the urban environment, or the rural environment, for that matter. The overall goal is to minimize the waste and to get the most materials back into the supply chain. It takes a little longer, and it costs a little more, but we're evolving quickly to reduce that speed, and our cost structure is a creative way to combat the financial difference.

Jackie: Adam explained why deconstruction was so attractive environmentally.

Adam Cornell (audio clip): We divert over 95% of the buildings we deconstruct typically. So you have a massive diversion of waste, which means we're reducing what's going to the landfill and what's decomposing into methane. It's a huge greenhouse gas reduction. On top of that, our landfills are overflowing. So in Vancouver, Victoria, where we operate, the landfills are scheduled to be closing 12 years ahead of schedule because they're literally full. To continue with our waste consumption from primarily the construction demolition sector, we would have to clear-cut land in Victoria. In Vancouver, we'd have to take up ALR (Agricultural Land Reserve) or valuable land to keep expanding our landfills. It doesn't make a lot of sense, and on top of that, the greenhouse gas reduction is huge. There are about 4 million tons of waste annually from the construction demolition sector in Canada, and it's the number one contributor to solid waste in the country. It's arguably the biggest polluter in the country of any industry. The irony is of those 4 million tonnes, which translates into about 20 million tons of co2 that's produced, 99% of it is avoidable, we can divert it all. We hit about 95% because we can't take any more time, but we have achieved over 99% diversion. It's a huge environmental benefit.

Jackie: Adam also said that his company specifically, Unbuilders, exists in a model where they also give back socially.

Adam Cornell (audio clip): You have the social benefit from our partnership with Habitat for Humanity. When they sell the goods that we donate, they use the proceeds to build affordable housing. In hiring deconstruction, you're contributing to the construction of affordable housing. On top of that, there's other social benefits. We're very friendly to the neighbourhoods. Demolition, especially on an older home or building of any character, is typically quite a negative response from the community, which we completely understand. We're definitely not out here promoting tearing down heritage buildings, but when those buildings are already slated to come down, that's where we step in to say, “Hey, there's a better way to take it down.” At the very least, we can recover those valuable resources. So, we turn a negative community event typically into quite a positive one. We usually have a lot of community members coming by daily, seeing how much we're salvaging, and they get really excited.

Jackie: I just want to clarify, so when companies come to you, or just clients come to you to deconstruction, as opposed to demolition, there's a charitable tax receipt that they can use because of the way you just set up your business?

Adam Cornell (audio clip): Yes, if we do it through the donation model. When a customer calls us to quote a job, we provide free estimates, and you get a free initial appraisal, so you know what the cost of service is going to be and what your tax receipt roughly is going to be. It's a range of figures, but within that range, that's what your tax receipts are going to be. So you can compare those costs to your traditional demolition cost if you're still trying to compare the two different services. Then there's the economic impact, so it creates a ton of jobs. You create five extra jobs for every demolition job out there. We've calculated roughly 45,000 new jobs in southern BC from the shift from demolition to deconstruction and over a quarter-million jobs nationally, and that's just on the service. When you expand to transportation, material, resales, wood shops, the job numbers get exponentially bigger. It's really good for the economy. It's about a $19 billion a year industry and just the service and the reclaimed wood in Canada, on top of the existing demolition factors. It's great for the economy, it's great for the community, and it's great for the environment.

Jackie: I asked Adam how the increase in lumber prices was impacting his business right now.

Adam Cornell (audio clip): We're definitely selling more lumber out of Heritage Lumber,  our secondary company. The lumber is split in two different ways. There's another misconception that reclaimed wood is cheap. Certain lumber in the reclaimed industry is less expensive, and we price out sort of our post-1950 material 10% under the market value of new lumber. So that product, in particular, is what we're selling a lot of it, which was typically the harder material to sell. Then the older bigger materials like posts and beams or floor joists from big old buildings or even homes are more expensive than new lumber. That's a combination of the fact that it's old-growth Douglas fir, it's so it's better wood, it's aged. Then, the labour to get it de-nailed off-site and back onto a shelf for sale makes that price jump up. The premium reclaimed wood is more expensive, but, in general, the lumber prices have definitely helped. Because of the premium reclaimed wood, the price point hasn't moved in the last 12 months. The cheaper stock that we sell just under the price of new stock has gone way up. We're still cheaper than new, so we're able to sell a good quantity of it.

Jackie: As the industry moves forward with more demand and less supply. Do you foresee a pivot toward your product instead of new?

Adam Cornell (audio clip): There's always going to be demand for new lumber, and we need our forestry sector. Not only do we need it for our economy in BC, in particular, and Quebec, but there's always a need for new lumber. So, no, reclaimed wood is not going to replace the new lumber industry dramatically, but it will start to make a dent. The interesting thing is, I read a great article about why our lumber prices are rising and what the next ten years in BC looks like for lumber. We're going into a period of a shortage of lumber. We’ve logged so much for the last 50 years that, according to this article, at least the next ten years, we don't have enough trees to match the demand for the construction industry. We need more resources of lumber, and we have it; it’s in our old buildings that are coming down inevitably to make way for developments, which is driving the need for more lumber. It's just such an obvious supply chain that it sort of boggles my mind that it's taken this long. There's been some great champions before us that we're following in suit, who have been at this for 30 years and finally, they're starting to see the light. There's always a need for our forestry sector and our new lumber. The demand for reclaimed wood is going to grow, and we're evolving our business not just to sell raw lumber. We're getting a warehouse in the next few weeks, and we just put an offer on one to start manufacturing products. We’re looking at flooring, casings, baseboards, stairs counters, a variety of things, wherever you have wood in a building, you could have it as reclaimed wood, so then you have a lighter, a lighter footprint. Reclaimed wood is twelve times less embodied carbon than new lumber. It's the greenest building material on the market. So if you want to make your project more sustainable, then shift your wood demand to reclaimed wood.

Jackie: Do you think the competition is going to pick up?

Adam Cornell (audio clip): We're definitely going to see competition, and we hope to see it because it means our leadership is starting to make a dent and the demand is there. We are trying to stay ahead of the competition, and we want to be that recognized name. When you think of deconstruction, you think of Unbuilders, but we certainly welcome the competition. We see demolition companies do one-off deconstructions or partials, and you see an absolute monster of greenwashing in the industry. Demolition companies say they're deconstructing because they might recycle some material, but they don't salvage; we're still the only company completely dismantling buildings in the manner that we are in the country. There are companies in the US doing it in certain jurisdictions because there's more strict deconstruction bylaws and like San Mateo and Portland, and soon to come to several other regions. However, we are looking at the entire service and industry through a different lens. We're looking at it as a large-scale business. We want to scale and build. There’s too many cities across North America, and we want to show that this is good business and big business. I think deconstruction to date has been driven primarily from nonprofits and charities. As great as those organizations are, I also think it almost invalidates the industry. It's sort of this charity feelgood, whereas we're trying to show this big business is good business. It's the for-profit sector that's going to drive deconstruction into the future.

Jackie: When we look at Victoria specifically, there are plenty of opportunities to use unbuilding over demolition. I'll highlight Adam's point about conserving elements of heritage buildings where demolition is often a point of contention. Gary also makes a point about the increase in value in the current market for material Victoria is rich with.

Gary Bull (audio clip): There's an increase in value, particularly if you look at the story, historic buildings with the large beams and so on, that we have in Vancouver, for example, perhaps in Victoria as well. There's these old warehouses and so on built with wood for factories, you know, they're incredibly valuable. Fortunately, we have architects and engineers who try and take care of it to build it back into any kind of renovation project. Then, for older single-family houses, I have a house a block away from me, which has been transformed into a Passive House, a passive duplex. They've kept all the original wood structure, which was sub-par and would never be approved by a building code by today’s standards. They have kept that wood and then added to it, and they worked with a local company called Unbuilders to remove some of the materials like the roofing, the old roofing, and so on, that could not be reused. So you’re seeing this move by developers to find a way to reuse that wood, and there's now a price signal to encourage you to do that.

Jackie: Gary also mentioned that even the wood that cannot be reused has found a purpose.

Gary Bull (audio clip): Now we have a company I worked with maybe 10 or 15 years ago now called Urban Wood Waste. A lot of that would be converted into energy if you can't make a new product from it. We have biomass power plants at UBC campus, North Vancouver, and downtown Vancouver also has a biomass power plant. The idea so far could be put in. I've worked a lot with the biomass energy industry, and they’re trying to find substitutions for fossil fuel-based products like natural gas or oil. Wood energies is a very big topic. So when you have material and can't use it for anything else, the cleanest thing we can do for the planet is to burn it.

Jackie: As lumber prices increase and the demand for resources continues to skyrocket, companies like Adam’s are in a good position. Unbuilders have been continuing to grow their presence in Victoria, and they found strong advocates on their side. An estimated 8000 tons of construction and demolition materials from the city of Victoria alone end up in the Hartland Landfill every year. With the city focusing on a shift to zero waste, this becomes an obvious target. In an article on the topic in February, Victoria Mayor Lisa Helps told Capital Daily that she thinks we can do better than throwing out old buildings into the landfill. Rory Tooke wrote his PhD dissertation on predicting building energy consumption at a city scale. He's a city of Victoria official in charge of figuring out what a bylaw to restrict waste of old-growth lumber might look like. He's been advocating for deconstruction across North America and is working to have a proposal to the city of Victoria by the end of the month. We'll follow the story for developments.

Jackie: If you want to learn more about deconstruction in Victoria, you can find an article by Jimmy Thomson in the business section at capitaldaily.ca. Thank you again for joining the podcast today. If you enjoyed the show, please share so that other people can also enjoy the show. Also, leave a rating and review, and subscribe so that you don't miss any episodes going forward. We post new shows every Monday to Friday. My name is Jackie Lamport. This is the Capital Daily podcast. We'll talk to you tomorrow.