Home building is supported by one of the largest, most diverse collection of businesses in the country. The NAHB categorizes the two-thirds of its members who supply builders as “associates.” But without these businesses, without their products, services, and people, no homes would be built. And, like home builders, the companies that comprise the supply chain range from large national giants to small local businesses.
Traditionally, home building has been a major contributor to recovery employment and a significant share of the boost comes from associates. The NAHB estimates that for every 1,000 single-family homes built, 3,000 jobs are created. Half of those jobs and 43 percent of the income generated are on-site construction jobs such as framers, electricians, plumbers, sheet rock installers, and the many other subcontractors that are needed to complete a home. Nearly half of the NAHB associate members are subcontractors or specialty trades. Subcontractor and specialty trade companies are small with a median payroll of seven and annual gross receipts in 2010 of $720,000.
Top subcontracting specialties in the NAHB associate membership include plumbing and heating and air conditioning, electrical, carpentry, and masonry and plastering. One-third of hard construction costs are framing and trusses, excavation and foundation, plumbing, HVAC, and electrical wiring.
The other half of jobs generated by home building are off site and include retail, wholesale, manufacturing, and professional services. Retail and wholesale companies account for 16 percent of associate members and provide builders and their subcontractors with their appliances, flooring, wall coverings, cabinetry, and building materials. The retail and wholesale job impact accounts for 14 percent of the job creation, or over 400 jobs for every 1,000 homes built. The retail and wholesale businesses tend to be some of the larger companies within the NAHB. Median payroll size is 14 and annual gross receipts are $2 million.
Manufacturing the items placed in a new home accounts for nearly 500 jobs for every 1,000 homes built and 16 percent of the total income generated in building a home. Manufacturers represent a relatively small portion of associate members but that may be because they depend upon the wholesaler and retailer outlets to represent them at the local level and because single companies represent large amounts of output. The vast majority of exhibitors at the International Builders’ Show are manufacturers.
Professional services members, including financial and insurance companies, comprise one-fifth of the associate members and the same share of jobs created from building homes. Collectively, the professional, financial, and insurance industries account for a quarter of the total income generated by home building because many of these services require experience, education, and involve accepting risks. Professional services companies are similar in size to subcontractors with a median payroll of seven and annual gross revenue of $770,000 while financial and insurance companies are larger with a median payroll size of 12 and annual gross revenue over $5 million.
Typical retail, wholesale, and financial service associate members have been members for as long as the typical builder member (10 years) but subcontractors and professional service companies have shorter tenures (six and seven years respectively). Home building firms are predominantly male-headed with only 7 percent headed by a female. Associate members are more diverse stretching from over one-quarter female-headed professional and financial businesses to 16 percent of the wholesale/retail companies to 12 percent of the subcontractors headed by a female.
While the stylized model of the home building industry may be the small local firm building a couple dozen homes a year, the force behind that business is a massive collection of strong, competitive, and diverse businesses supplying and supporting an industry integral to the U.S. economy and home buyer.