Dive Brief:

• Builders use an average of 22 subcontractors to construct a home, the National Association of Home Builders September 2015 Special Study in Housing Economics found from data collected in its NAHB/Wells Fargo Housing Market Index.
• The report noted the most common jobs that builders sub out include work on security systems, carpeting, HVAC, electrical wiring and plumbing. The least common jobs delegated to subcontractors include work on finished carpentry, interior doors, exterior siding, framing and exterior doors/windows.
• About two-thirds of survey respondents said they subcontract out an average of 75% of total construction costs for work on a typical single-family house.

Dive Insight:

Prior association surveys found the share of subcontracting work has slowly increased over the past 30-40 years. During the 1970s and 1980s, the share of subcontractor costs held steady around 70%, but then rose to 75% in 1993 and 77% in 2003. 

The share of subcontracted construction costs peaked at 84% in 2005 during the housing boom, but fell back to 77% in the years since then. 

Although it might be assumed that smaller construction firms sub out more work due to a lack of specialized employees in-house, the NAHB reports that large builders actually use more subcontractors than smaller ones. Builders with more than an average of 25 annual starts reported subcontracting out 87% of the total work, while builders who had between five and 24 starts subbed out 81%, and those with less than five starts used only 77% sub work.

"So the conventional thinking on subcontracting is that it's a function not of a fragmented industry with many small companies, but of the varied and complex nature of the amenities that go into a new home," NAHB economist Paul Emrath said. "Construction workers therefore need extensive expertise and great sophistication on a large number of very specialized techniques."

Finding specialized laborers, however, has been an ongoing frustration for builders facing an ongoing labor shortage.

The use of subcontractors in the construction industry has garnered more attention recently, as the recent NLRB ruling — which stated that, in some cases, subcontractors can be considered "joint employees" of their employers — could have major consequences for builders who rely heavily on sub work.