Homebuilders Feel the Squeeze of Labor Shortages

The construction industry has long grappled with a significant challenge: finding and retaining skilled labor. This issue impacts everything from project timelines to overall costs, affecting both large-scale homebuilders and independent contractors. To understand how this pressure is evolving, Principia has been closely monitoring the sentiment of these two key groups over the past year.

Our ongoing survey asks: Do you agree or disagree with the statement, “Our company struggles to find or retain skilled workers?”

The responses reveal a notable divergence between homebuilders and contractors.

A Growing Challenge for Homebuilders

For homebuilders, the difficulty in sourcing and keeping skilled workers has intensified throughout the year. In Q1 2025, only 17% of homebuilders mentioned their company struggled to find and retain skilled workers. However, as 2025 progressed, builder agreement with this sentiment shifted dramatically, surging to 45% in Q3. This substantial leap in just six months indicates labor shortages are becoming a problem for more homebuilders.

Contractors Face a Consistent Struggle

In contrast to the fluctuating sentiment among homebuilders, contractors report a consistent level of agreement. Throughout the same tracking period, the percentage of contractors who agree they struggle to find or retain skilled workers has remained relatively stable (between 41% and 43%).

What’s Next for the Industry?

The growing concern among homebuilders signals a potential bottleneck for the broader housing market. If nearly half of homebuilders are struggling to find skilled workers, it could lead to project delays, increased construction costs, and ultimately, an impact on housing supply and affordability.

For contractors, their consistent agreement reinforces the need for long-term solutions that address the root causes of the labor shortage, such as an aging workforce and a lack of new talent entering the trades. As both homebuilders and contractors navigate these labor challenges, their ability to adapt and innovate will be crucial for sustained success.

Overall, a shrinking average home size reflects a market that is adapting to new economic realities and evolving consumer demands. Possibly signaling a move toward more practical, efficient, and attainable housing for a new generation of homeowners.