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Most Homebuilders are Small Businesses

A recent study released by the National Association of Home Builders (NAHB) shows that residential construction nationwide remains the industry of independent entrepreneurs

A recent study released by the National Association of Home Builders (NAHB) shows that residential construction nationwide remains the industry of independent entrepreneurs with 81 percent of homebuilders and specialty trade contractors being self-employed independent contractors. Even among establishments with paid employees, the industry is dominated by small businesses, with two-thirds of homebuilders and three out of four specialty trade contractors generating less than 1 million dollars in total business receipts.

 

   Under the most recent US Small Business Administration (SBA) size standards, the vast majority of residential construction companies qualify as a small business. The most recent small business size limits for all types of builders is $36.5 million, for land subdivision $27.5 million, and $15 million for specialty trade contractors. By these standards, almost all remodelers and at least 96 percent of homebuilders, 94 percent of land developers, and 97 percent of specialty trade contractors easily qualify as a small business.

 

   In the case of single–family general contractors and speculative builders, subcontractors account for more than a third (36 percent) of the total construction revenue. For multifamily general contractors, 63 percent of the annual construction receipts are generated by subcontractors. Specialty trade contractors who, by definition, specialize in specific activities (e.g., pouring concrete, site preparation, plumbing, painting, and electrical work) subcontract out only 10 percent of the work.

 

   Because residential construction establishments are highly specialized and subcontract out a significant portion of construction work to others, they maintain relatively few construction workers on their payrolls. Single-family general contractors on average have four employees on their payroll, with only three directly engaged in homebuilding. Non-construction workers include supervisory employees above the working foreman level, in addition to executive, accounting and other professional employees in routine office functions.

 

   The small, family-owned business is the heartbeat of our economy, in Chattanooga and throughout the United States. The next time you drive by an area where a new home is being constructed, take a second and tip your cap to the men and women who wake up every day with the common goal of providing safe, efficient and affordable housing for our community.