United States, August 28, 2025
News Summary
The residential construction sector is seeing a surge in independent contractors, with nearly 80% operating as self-employed entities. Recent data indicates that independent contractors play a vital role in managing and executing construction projects, significantly impacting the workforce and financial landscape of the industry. Despite their prevalence, many face challenges in terms of profitability and revenue generation. Understanding the dynamics of this shift can inform better support strategies for these small businesses in the construction sector.
Independent Contractors Dominate Residential Construction Industry Despite Low Self-Employment Rates
In the residential construction sector, independent contractors are a significant force, contributing to almost 80% of home builders and specialty trade contractor firms. This insight comes from a recent analysis of the 2022 Economic Census and Nonemployer Statistics data provided by the National Association of Home Builders (NAHB).
A closer examination reveals that 63% of home builders, along with two out of three specialty trade contractors, generate less than $1 million in total business receipts. Impressively, there are over 813,000 nonemployer firms operating in the residential building construction (RBC) space, which comprise nearly 80% of all establishments in this category.
Focusing on land subdivision, just over 9,000 independent contractors make up 68% of all land subdivision firms. Additionally, the realm of specialty trade contractors features more than 1.9 million independent contractors, comprising a robust 79% of all specialty trade contractor establishments.
It is noteworthy that nonemployer firms account for almost half of the full-time employees (FTE) in residential building construction. Specifically, they make up 26% of workers in land subdivision and 28% in specialty trade contractors. However, the financial realities faced by these contractors can be tough, with annual receipts for self-employed independent contractors in residential building construction averaging under $103,000. For specialty trade contractors, the average annual receipts dip even lower, at under $70,000. Surprisingly, independent contractors in land subdivision report higher average annual business receipts of around $288,000.
Despite their large numbers, nonemployer firms contribute only 12% of total sales and receipts from the combined sectors of residential building construction and land subdivision. They account for merely 9% of specialty trade contractors’ total revenue.
Among residential construction businesses with paid employees, a substantial portion operates under the $1 million mark. Approximately 75% of remodeling establishments, along with 63% of land developers and 59% of specialty trade contractors, report revenues below $1 million. Conversely, about 45% of home builders boast annual sales exceeding $1 million. Multifamily general contractors show a more substantial revenue stream, with 10% reporting annual sales between $10 million and $25 million, while another 11% earned somewhere between $25 million and $100 million in 2022.
Most businesses in the residential construction field qualify as small enterprises, adhering to the standards set by the U.S. Small Business Administration (SBA). Current SBA size limits allow for $45 million for builders, $34 million for land subdivision, and $19 million for specialty trade contractors. Nearly all remodelers and single-family contractors meet the criteria for small businesses, and at least 98% of land developers and 96% of specialty trade contractors qualify as small businesses as well.
Key Insights
| Category | Statistics |
|---|---|
| Independent Contractors in Home Building | 80% |
| Average Annual Receipts (Residential Contractors) | $103,000 |
| Average Annual Receipts (Specialty Trade Contractors) | $70,000 |
| Independent Contractors in Land Subdivision | 68% |
| Average Annual Receipts (Land Subdivision) | $288,000 |
| Nonemployer Firm Contribution to Total Revenue | 12% |
| Residential Firms with < $1 million in Receipts | 75% |
FAQ
What percentage of home builders are independent contractors?
Nearly 80% of home builders and specialty trade contractor firms are self-employed independent contractors.
What is the average annual revenue of specialty trade contractors?
Specialty trade contractors generate annual receipts averaging under $70,000.
How many nonemployer firms are in residential construction?
There are over 813,000 nonemployer firms in residential building construction, making up close to 80% of all establishments in this field.
Deeper Dive: News & Info About This Topic
Additional Resources
- LBM Journal: Most Home Builders Are Small Businesses per NAHB
- Christian Science Monitor: Modular Construction and Housing Shortage
- Los Angeles Times: Tech Billionaire’s Affordable Housing Initiative
- AZ Central: Phoenix Construction Company’s Nonprofit Projects
- Encyclopedia Britannica: Construction