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 at the Forefront of Residential Construction

Independent contractors play a major role in the residential construction industry, making up nearly 80% of home builders and specialty trade contractor firms. According to an analysis based on the 2022 Economic Census and Nonemployer Statistics data, the landscape of residential building construction (RBC) reveals a significant reliance on these self-employed individuals.

In looking at operational scale, it appears that a significant number of independent contractors are generating less than one million dollars in total business receipts. Specifically, 63% of homebuilders and two out of three specialty trade contractors fall into this income bracket. There are currently over 813,000 nonemployer firms in the RBC sector, which represents almost 80% of all establishments within this field.

Specialization and Income Levels

When breaking down the statistics even further, the analysis shows that in the land subdivision area, more than 9,000 independent contractors account for 68% of firms in that segment. Meanwhile, specialty trade independent contractors are particularly numerous, with over 1.9 million making up 79% of all specialty trade contractor (STC) establishments.

The economic contribution of these independent contractors is noteworthy. In terms of revenue, self-employed individuals in residential building construction report average annual receipts below $103,000. In contrast, specialty trade contractors fare even lower, with average receipts at under $70,000. Land subdivision contractors, however, report higher averages, approximately $288,000 annually.

Distribution of Revenue and Sales

While independent contractors dominate the establishment count, their overall contribution to sales is relatively modest. Nonemployer firms constitute only 12% of total sales and receipts from residential building construction and land subdivision combined. They also represent 9% of revenues generated by specialty trade contractors.

Examining establishments with paid employees shows that a substantial number fall below the million-dollar threshold. About 75% of remodeling establishments, 63% of land developers, and 59% of STC companies report earnings under $1 million.

Size Standards and Market Status

Despite the prevalence of independent contractors, most residential construction firms can be classified as small businesses according to U.S. Small Business Administration (SBA) size standards. Currently, the SBA size limits stand at $45 million for builders, $34 million for land subdivision, and $19 million for specialty trade contractors. Most remodelers and single-family contractors qualify as small businesses, alongside at least 98% of land developers and 96% of specialty trade contractors.

Interestingly, there is a small percentage of multifamily contractors who report much higher earnings. Approximately 10% of multifamily contractors indicate annual sales ranging from $10 million to $25 million. Even larger revenues are reported amongst 11% of multifamily contractors, who earn between $25 million and $100 million in 2022.

Conclusion

The data presents a nuanced picture of the residential construction industry. While independent contractors are essential players, generating a large number of establishments and jobs, their contribution to overall revenue is limited, especially compared to firms with paid employees. Understanding this dynamic is crucial for stakeholders in the industry, as it reflects ongoing trends in small business performance, economic contributions, and the overall health of the residential construction market.

FAQ

Key Features of the Independent Contractor Landscape in Residential Construction

Feature	Statistic
Independent Contractors as Home Builders	80%
Nonemployer Firms in RBC	Over 813,000
Average Earnings of Residential Contractors	Under $103,000
Small Business Qualification	Most Firms
Revenue Generation from Multifamily Contractors	10% report $10 million to $25 million

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