Independent contractors dominate the residential construction landscape.
United States, August 28, 2025
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.
The residential construction industry is dominated by independent contractors, with nearly 80% of home builders and specialty trade contractor firms operating as self-employed entities, according to recent data. This trend, highlighted by information from the 2022 Economic Census and Nonemployer Statistics from the National Association of Home Builders (NAHB), indicates a significant shift in how construction projects are managed and executed.
In total, there are over 813,000 nonemployer firms in residential building construction, which represent close to 80% of all establishments within this sector. Notably, 63% of home builders and two out of three specialty trade contractors reported generating less than one million dollars in total business receipts annually. This figure underscores the financial challenges many independent contractors face.
Independent contractors earn varying annual receipts based on their specific areas of construction; residential builders average around $103,000, while specialty trade contractors make less than $70,000 per year. The land subdivision sector shows a more encouraging picture, with independent contractors averaging business receipts of approximately $288,000.
Independent contractors play a crucial role in land subdivision, where more than 9,000 such professionals represent 68% of all firms in this space. Among specialty trade contractors, over 1.9 million independent contractors constitute 79% of the total establishments.
Nonemployer firms are significant contributors to the workforce in residential construction, accounting for almost half of full-time employees in this area. They make up 26% of the workforce in land subdivision and 28% in specialty trades. Despite their large presence, nonemployer firms generate only 12% of the overall sales and receipts from residential construction and land subdivision combined.
Most businesses in residential construction fit the definition of small businesses according to U.S. Small Business Administration (SBA) standards. Currently, SBA size limits are set at $45 million for builders, $34 million for land subdivision, and $19 million for specialty trade contractors. Almost all remodelers and single-family builders qualify under these definitions, along with at least 98% of land developers and 96% of specialty trade contractors.
Although approximately 45% of home builders report annual sales exceeding $1 million, many small businesses struggle to reach profitability. 75% of remodeling establishments, 63% of land developers, and 59% of specialty trade contractor companies earn less than $1 million in receipts. In contrast, multifamily general contractors often report significantly higher revenues, with 10% indicating annual sales between $10 million and $25 million, and an additional 11% earning between $25 million and $100 million in 2022.
The landscape of the residential construction sector is largely shaped by independent contractors, who despite their prevalence, often face financial limitations. Understanding the dynamics of this sector can provide valuable insights for policymakers and stakeholders looking to support these small businesses.
Nearly 80% of home builders and specialty trade contractors operate as self-employed independent contractors.
Independent contractors in residential building construction have average annual receipts of around $103,000, while specialty trade contractors earn under $70,000.
Nonemployer firms account for nearly half of full-time employees in residential building construction, 26% in land subdivision, and 28% in specialty trades.
| Feature | Statistics |
|---|---|
| Percentage of Contractors as Independent | 80% |
| Average Earnings of Builders | $103,000 |
| Average Earnings of Specialty Trade Contractors | $70,000 |
| Independent Contractors in Land Subdivision | 9,000 (68%) |
| Small Business Qualification | Majority |
| Contractors Reporting Over $1 Million | 45% |
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