• Subcontracting: Three-Fourths of Construction Cost in the Typical Home

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    Have you ever wondered what goes into a new or remodeled home? Subcontracting has long been a fact of life in the residential construction industry. Yet sometimes the role of subcontracting, so well-known inside the industry, seems misunderstood or conveniently overlooked outside it. In its preliminary analysis of a proposed regulation, for example, the Department of Labor ignored all costs of subcontractors to home builders when calculating what increased labor costs mean to home builders’ bottom lines. 

    To show the bigger picture, NAHB conducted a study in 2015 to show how much home building relies on subs. Traditionally, NAHB has collected this type of information through surveys of its builder members. The survey showed that use of subcontractors remains as strong as ever, with builders often employing 20 or more different subcontractors on a single-family project and subcontracting out over 75 percent of their construction costs.

    Data for the study came from a set of special questions added to the April 2015 survey for the NAHB/Wells Fargo Housing Market Index.

    The questions covered how often builders subcontract 23 specific jobs.  In every case, the job was always subcontracted by at least two-thirds of the builders.  At the low end of the scale, “only” 68 percent of builders said they always subcontract finished carpentry.  At the other extreme, subcontracting is nearly ubiquitous for some jobs.  Over 90 percent of builders said they always subcontracted concrete flatwork, masonry, drywall, foundations fireplaces, technology, plumbing, electrical wiring, HVAC, carpeting and security systems.

    Even when builders don’t always subcontract these jobs all they time, it’s common to subcontract them out at least part of the time.

    About two-thirds of the builders in the survey reported subcontracting out 75 percent of the construction cost in the average single-family home they build.  The average share of construction costs subcontracted was 77 percent.

    For more detail, including a history of NAHB subcontracting survey results going back to 1977 and a breakdown of subcontractor use by size of builder, please consult the full study

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