New research from the Home Builders Institute (HBI), the NAHB, and the University of Denver puts a dollar estimate on the labor shortage’s impact in the residential construction industry.
According to the study, there is an estimated economic impact of $10.806 billion per year due to longer construction times associated with the skilled labor shortage. The total impact is the combined value of higher carrying costs and lost production.
The study finds the direct cost impact of extended construction times amounts to $2.663 billion annually and the shortage has led to a reduction of approximately 19,000 single-family homes not built annually, an economic loss of $8.143 billion.
“This study underscores the urgent need for strategic interventions to address the skilled labor shortage,” says NAHB chief economist Robert Dietz. “The economic implications are vast, affecting not only the home building industry but also the broader economy.”
Further, the study indicates the average increase in construction for single-family building directly attributed to a lack of skilled labor is 1.98 months. The impact is more pronounced for smaller builders (firms building fewer than 100 homes annually) at 2.36 months.
“Our research provides a clear picture of the challenges faced by home builders due to labor shortages,” says Dr. Eric Holt of the University of Denver. “It’s imperative that we work together to find solutions that will enhance workforce development and support the construction industry.”
In addition to challenges finding and retaining workers, the study suggests labor costs have risen between 20 and 50% for builders. The changes appear to be a “persistent feature rather than a temporary spike,” suggesting builders will face a steeper economic challenge related to labor in an uncertain material cost environment.
Industry efforts—including workforce development and training program investments, new construction technologies, and innovative pricing strategies—are being implemented to mitigate the challenges of longer cycle times, more costly labor, and material price variability.
“The findings underscore the critical importance of adapting business models, pricing strategies, and operational approaches to maintain viability while addressing ongoing challenges in housing affordability,” the executive summary of the report concludes.
For its part, the HBI is committed to promoting collaborative programs, education initiatives, and advocacy efforts to boost skilled labor workforce participation and mitigate the adverse economic effects outlined by the study.
“Through hands-on training programs and industry-recognized certifications, HBI is equipping the next generation of construction professionals with the skills needed to meet growing demand,” HBI president and CEO Ed Brady says. “As our graduates enter the workforce, they help fill critical labor gaps—strengthening the residential construction industry and contributing to lower housing costs across the country.”
