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The lack of skilled construction labor is costing contractors in the U.S. homebuilding industry a lot of time and money, according to a landmark report released by the Home Builders Institute (HBI) in collaboration with the National Association of Home Builders (NAHB).

After crunching the figures, researchers estimate that the aggregate economic loss associated with the labor shortage due to longer construction times and higher carrying costs is $10.806 billion per year while resulting in 19,000 fewer single-family homes being built.

The report extrapolates that the average increase in construction time for a single-family home is two months at an average additional cost of $2,639 per home, with smaller builders who construct fewer than 100 homes annually experiencing delays estimated at 2.36 months.

Robert Dietz, NAHB chief economist, said the study underscores the urgent need for strategic interventions to address the skilled labor shortage.

“The economic implications are vast, affecting not only the home building industry but also the broader economy,” he said.

The information was compiled by researchers at the University of Denver. The NAHB did an analysis to provide a comprehensive view of the far-reaching implications of the dire shortage.

Eric Holt, an associate professor at the university, who compiled results of the study with research assistant Bill Ray, said the findings highlight the critical importance of devising solutions.

“Our research provides a clear picture of the challenges faced by homebuilders due to labor shortages. It’s imperative that we work together to find solutions that will enhance workforce development and support the construction industry.”

The research is based on interviews with 30 homebuilders spanning different sizes and geographic regions. Findings indicate that the impact of the skilled labor shortage on the industry is a multibillion-dollar challenge that is responsible for substantial lost production.

“The skilled labor shortage in the homebuilding sector presents a profound challenge that significantly impacts the production of new homes,” the NAHB says in a statement. “As homebuilders face higher construction costs and prolonged building times, the supply of new homes dwindles, exacerbating the housing affordability crisis and hindering economic growth.”

Researchers found that project timelines were significantly affected by the labor shortages, and the extended timelines create additional financial burdens through more overhead expenses.

The report notes that competition for labor resources presents a particular challenge for small builders, especially when competing against large-scale government projects. Big public projects often have the resources to offer higher wages, effectively drawing skilled workers away from smaller residential projects, a dynamic that exacerbates the problem for small builders.

Labor costs have risen dramatically across builder segments, the report states, with wages nearly doubling in some trades. Small and medium builders report skilled trade wages increasing 40 to 50 per cent, while large builders face 20-to-30-per-cent increases.

“These elevated labor costs appear to be a persistent feature rather than a temporary spike, creating what many describe as a new normal in construction labor markets,” say the report authors.

The sustained increases in labor, timeline extensions, and elevated material costs have fundamentally altered the industry’s cost structure, the report states, and the new environment requires builders to adapt their business models, pricing strategies, and operational approaches to maintain viability while addressing ongoing challenges in housing affordability.

“The data suggests these changes represent a structural shift rather than a cyclical adjustment, indicating the need for long-term strategic responses from industry participants.”

The aggregate economic loss of nearly $11 billion per year is substantial, according to the report, as the size of the single-family residential construction market in the U.S. is $422.8 billion.

Both the NAHB and HBI say they are committed to addressing the situation through collaborative programs, education initiatives and advocacy efforts to boost the supply of skilled construction labor. The organizations aim to boost the skilled labor workforce and mitigate the adverse economic effects highlighted in the study.

HBI president and CEO Ed Brady says the organization is proud to be part of the solution to the nation’s skilled labor shortage.

“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. 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.”

Daisy Saulls, founder of the first-ever U.S. National Workforce Development Day which will be held Sept. 17, says the need for collaborative workforce development has never been more urgent.

Seventy-five per cent of U.S. employers already face talent shortages, the highest level in 17 years, and that gap is projected to widen, according to ManPower Group. Meanwhile, the U.S. Census Bureau projects that by 2030, one in five Americans will be of retirement age, thereby shrinking the working-age population and accelerating the loss of institutional knowledge.

“Industries like manufacturing, construction, digital infrastructure, and the skilled trades have a high demand for talent,” says Saulls, PATHIRED president, a non-profit workforce development organization. “That gap hurts employers, workers, and communities alike.”