Independent Contractors Lead in Residential Construction

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 Steal the Spotlight in Residential Construction

The residential construction industry is increasingly dominated by independent contractors, with nearly 80% of home builders and specialty trade contractor firms operating as self-employed entities. This new data, sourced from the 2022 Economic Census and Nonemployer Statistics collected by the National Association of Home Builders, reveals significant insights concerning the state of construction in the United States.

Despite their overwhelming presence, these independent contractors often operate on modest revenues. The statistics show that around 63% of home builders, along with two out of three specialty trade contractors, generate less than $1 million in total business receipts annually. This trend underscores the challenges faced by small firms in navigating the competitive construction landscape.

Significance of Nonemployer Firms

In the segment of residential building construction (RBC), there are now over 813,000 nonemployer firms, highlighting their crucial role in the industry. These nonemployer firms make up close to 80% of all establishments in the RBC sector and also comprise a substantial share of full-time employees (FTE). In fact, nonemployer firms account for nearly 50% of FTEs in residential building construction, 26% in land subdivision, and 28% in specialty trade contracting.

While independent contractors are plentiful, the average annual receipts tell a different story. In RBC, self-employed independent contractors average under $103,000 in annual receipts, while specialty trade contractors are even lower, averaging under $70,000. On the other hand, independent contractors engaged in land subdivision report a considerably higher average, at approximately $288,000.

Revenue Distribution in the Sector

Despite their numbers, nonemployer firms account for only 12% of all sales and receipts from residential building construction and land subdivision combined. They also contribute to around 9% of specialty trade contractors’ revenue. This suggests that while independent contractors represent the vast majority of firms, they are not necessarily the major players when it comes to generating income in the industry.

Among residential construction businesses that have paid employees, a significant portion remains below the million-dollar benchmark in terms of income. Reports indicate that 75% of remodeling companies, 63% of land developers, and 59% of specialty trade contracting firms all generate less than $1 million in annual receipts.

Small Businesses Shine

Most players in the residential construction scene qualify as small businesses according to the U.S. Small Business Administration (SBA) size standards. These standards currently allow for $45 million in revenue for builders, $34 million for land subdivision, and $19 million for specialty trade contractors. The majority of remodelers and single-family contractors, alongside 98% of land developers and 96% of specialty trade contractors, fall under these classifications.

Interestingly, not all contractors see the same level of success; multifamily general contractors generally enjoy larger revenue streams. Roughly 10% of multifamily contractors reported annual sales in the range of $10 million to $25 million, while 11% reported earnings between $25 million and $100 million in 2022.

The residential construction industry is evolving, presenting both challenges and opportunities for independent contractors. Although they might represent the vast majority of firms, the earnings highlight the ongoing struggles many face in a competitive and dynamic market.

FAQ Section

Key Features of the Article

Feature	Detail
Percentage of Independent Contractors	80% of home builders and specialty trade contractors
Average Annual Revenue for RBC Contractors	Under $103,000
Number of Nonemployer Firms	Over 813,000
Small Business Qualification	Most contractors qualify as small businesses
Revenue for Multifamily Contractors	10% earn $10M – $25M; 11% earn $25M – $100M

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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