The Essential Subcontractor

Subcontractors are an often over looked but essential part of the home building industry. Many outside the industry do not understand how large a part subcontractors have in the construction of a home. Home builders, as well as remodelers, typically subcontract a large portion of their construction work out to trade contractors who can more efficiently deliver individual pieces of the construction process. Specialized subcontractors perform much or even all of the actual labor.

On average, 25 subcontractors were used to build a single-family detached house in 2012 (according to the NAHB/Wells Fargo Housing Market Index July 2012 special questions). Larger builders are more dependent on subcontractors to build their homes. On average, builders who built more than 25 units used 32 subcontractors during 2012, compared to 23 for builders who built less than 25 units .

About 71 percent of those employed in the home building industry are subcontractors. Monthly employment data for January 2014 (the employment count data from the BLS establishment survey) indicate that total employment in home building stands at 2.231 million, broken down as 647,000 builders and 1.584 million residential specialty trade contractors. A full breakdown of subcontractors can be found in the following table:

                  Quarterly Census of Employment and Wages
           Residential Specialty Trade Contractors Employment

*Preliminary June 2013

During the past 40 years, the use of subcontractors significantly accelerated. In 2012, sixty-eight percent of home builders subcontracted 75 percent or more of the construction costs, whereas in 1959 less than half as many– 31 percent– subcontracted that percentage. A major reason for this trend is due in part to the increasing complexity, features, and amenities supplied with new homes.

Some jobs are more likely to be subcontracted out than other. More than 90 percent of builders always subcontract for security systems, HVAC, technology (structured wiring, home theater, etc), carpeting, electrical wiring, plumbing, masonry work, and fireplaces. Between 80 to 90 percent of builders reported they always subcontracted for drywall, foundations, concrete flatwork, kitchen countertops, roofing, ceramic tiles, wood flooring, and painting. For a full list of subcontractors see the following graph:

            Frequency Single-Family Builders Subcontracted Jobs
                          (On a scale of 1 to 5, 1=Never; 5=Always)

Home remodelers also heavily rely on the labor of subcontractors.  According to special questions on NAHB’s Remodeling Market Index, a third of remodelers subcontracted out 75 percent or more of their work and, on average, used 18 subcontractors annually.