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 Make Up Nearly 80% of Residential Construction Firms

The residential construction industry is dominated by self-employed independent contractors, who make up almost four out of every five firms. The newest analysis of 2022 business data shows that close to 80% of home builders and specialty trade contractor establishments operate as nonemployer, self-employed businesses. That large share contrasts with their modest share of overall industry receipts and underlines a sector made up mostly of small, often one-person operations.

Top facts at a glance

There are more than 813,000 nonemployer firms in residential building construction, which equals roughly 80% of all establishments in that segment. In specialty trades, over 1.9 million independent contractors account for about 79% of establishments. In land subdivision, more than 9,000 independent contractors represent about 68% of firms.

Revenue and receipts: small size, small share

Despite their large numbers, nonemployer firms take in a relatively small portion of the industry’s money. Nonemployer firms account for just 12% of combined sales and receipts for residential building construction and land subdivision, and only about 9% of specialty trade contractor revenue.

Average yearly receipts for self-employed contractors vary by type of work. Independent contractors in residential building construction report average annual receipts of under $103,000. For specialty trade contractors, the average is under $70,000. By contrast, independent contractors in land subdivision show higher average receipts, around $288,000.

Business scale and payroll

Nonemployer firms employ a significant share of full-time equivalents (FTEs) in the sector: almost 50% of FTEs in residential building construction come from nonemployer firms, while they represent 26% of FTEs in land subdivision and 28% of FTEs in specialty trade contractors.

Most establishments with paid employees are also small. Among businesses that have payroll, 75% of remodeling firms, 63% of land developers, and 59% of specialty trade companies reported under $1 million in receipts in 2022. About 45% of home builders reported annual sales over $1 million, while multifamily general contractors tend to earn more, with some reporting sales well into the multi-million range.

Large contractors and distribution of income

While the independent contractor model is widespread, larger firms still account for a sizable portion of industry revenue. Ten percent of multifamily contractors reported annual sales between $10 million and $25 million, and another 11% reported sales between $25 million and $100 million in 2022. This uneven distribution means many small firms coexist with a smaller number of much larger firms that capture a big share of total receipts.

Small business status and government size limits

Under current U.S. Small Business Administration size thresholds, most residential construction companies qualify as small businesses. Size limits set by the SBA allow up to $45 million for some builders, $34 million for land subdivision, and $19 million for specialty trade contractors. Based on these limits, almost all remodelers and single-family contractors qualify as small businesses, as do at least 98% of land developers and 96% of specialty trade contractors.

Why these numbers matter

The strong presence of independent contractors affects how the industry responds to labor shortages, material price swings, and regulation. A workforce made up largely of small operators can offer flexibility and local knowledge but may struggle with access to capital, insurance, and benefits. The relatively low share of receipts collected by nonemployer firms suggests limited scale and bargaining power, which can influence pricing, project choices, and investment in training.

Data and scope

The figures come from an analysis of the 2022 Economic Census and related nonemployer statistics compiled for residential construction sectors. The numbers cover residential building construction, land subdivision, and specialty trade contractors and distinguish firms with and without paid employees.

Bottom line

The residential construction sector is a landscape of many small players: self-employed independent contractors dominate in number but account for a modest share of total industry revenues. That mix shapes risks, opportunities, and policy considerations for housing supply, labor markets, and small business support.

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FAQ

Key features table

Feature	Statistic	Notes
Share of independent contractors	~80%	Home builders and specialty trade contractors largely nonemployer firms
Number of nonemployer firms (RBC)	813,000+	Represents close to 80% of residential building construction establishments
Specialty trade independent contractors	1.9 million+	About 79% of specialty trade contractor establishments
Average receipts — residential building	Under $103,000	Typical annual business receipts for self-employed builders
Average receipts — specialty trade	Under $70,000	Lower average receipts among trade contractors
Average receipts — land subdivision	~$288,000	Higher average receipts among independent contractors in land subdivision
Share of industry receipts from nonemployer firms	12% (RBC & land subdivision), 9% (STC)	Nonemployer firms account for a modest share of total revenue
Full-time equivalent share (nonemployer)	~50% RBC, 26% land, 28% STC	Nonemployer firms contribute a notable share of FTEs
SBA size limits	$45M builders; $34M land; $19M STC	Most firms fall under these small-business thresholds

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