Skilled Labor Shortage Is Costing U.S. Homebuilders Billions Annually

A new report from the Home Builders Institute (HBI), in partnership with the National Association of Home Builders (NAHB), highlights just how costly the ongoing shortage of skilled construction labor has become for the U.S. housing market. The report estimates that this workforce shortfall is contributing to delays, rising costs, and a sharp decline in the number of new homes being built costing the industry over $10 billion each year.

The findings, which include research conducted by the University of Denver and economic analysis by NAHB, paint a clear picture: without enough trained workers, homebuilders face longer construction timelines and higher overhead, which slows production and worsens the country’s already tight housing supply.

The Financial Toll of Labor Shortages

The research quantifies the effects of these workforce gaps in stark terms:

• Annual Cost Impact: Extended build times due to a lack of skilled labor are costing homebuilders $10.8 billion every year.
• Direct Carrying Costs: Builders are paying an additional $2.66 billion annually in overhead as homes take longer to complete.
• Lost Inventory: Approximately 19,000 new single-family homes went unbuilt in 2024 due to the shortage representing an estimated $8.14 billion in lost economic output.
• Construction Delays: On average, projects are taking nearly two months longer to finish, with smaller builders experiencing the longest setbacks.

These delays mean fewer homes hitting the market, which contributes to housing affordability issues and puts further pressure on buyers.

Impact on Housing Affordability and Market Health

As the demand for new homes continues to rise, labor shortages are now a primary bottleneck affecting the pace of construction and the overall cost of housing. Fewer homes and higher costs mean buyers are paying more, and some are being priced out entirely.

“This labor gap has a ripple effect throughout the housing ecosystem,” said Dr. Robert Dietz, Chief Economist at NAHB. “It doesn’t just hurt builders it impacts affordability, economic growth, and our ability to meet the housing needs of the American public.”

Labor Costs Surge, Especially for Small Builders

According to the report, labor wages have surged in recent years:

• Small & Mid-Size Builders: Reported wage hikes between 40–50% in trades such as framing, electrical, and plumbing.
• Large Builders: Facing increases in the range of 20–30%.

These cost increases aren’t expected to go away anytime soon. Experts suggest they may represent a “new normal” as demand for construction labor continues to outpace supply.

Builders Call for Long-Term Workforce Development

To address the problem, HBI President and CEO Ed Brady emphasized the importance of vocational training and education. “We’re proud to be part of the solution. Through hands-on training and nationally recognized certifications, we’re preparing the next generation of construction professionals to step into the field.”

The report included builder responses to several key questions about how labor shortages are affecting their businesses. Key takeaways include:

• Affordability: Builders say higher labor costs are directly increasing home prices.
• Project Cycle Times: Longer build times make it harder to manage workloads and meet deadlines.
• Client Communication: Builders are spending more time explaining rising costs and delays to customers.
• Mitigation Strategies: Some are investing in apprenticeships, streamlining workflows, and adopting construction technology.
• Future Outlook: Without a stronger pipeline of skilled workers, many fear the problem will only get worse.

A Call for Industry-Wide Collaboration

Dr. Eric Holt from the University of Denver, who helped lead the research, stressed the importance of a coordinated response. “This is not a challenge one organization or builder can solve alone. The entire industry needs to invest in workforce development and collaborate on scalable solutions.”

From high schools and trade schools to policymakers and private sector employers, there’s growing recognition that skilled labor training must be a national priority. With housing supply shortages and affordability challenges already at the forefront of the public debate, solving the labor crisis is now essential to rebuilding the American housing market. For more information about finance visit Nadlan Capital Group.