Quantifying homebuilding’s labor capacity constraints isn’t the hard part — responding to this predicament is where the difficulties lie. 

The Home Builders Institute’s Fall 2025 Construction Labor Market report, released in October, reports that the industry’s labor shortage costs homebuilders billions of dollars annually. There’s no quick or easy fix to this structural issue, especially as stricter immigration policies threaten to exacerbate it. 

Branka Minic is the CEO of Building Talent Foundation. This organization partners with many of the top homebuilders in the shared goal of recruiting and retaining more workers in residential construction. She recently spoke with The Builder’s Daily about this critical issue, and her message was clear. 

Residential construction is in a down cycle, a period when the industry traditionally scales back investments in its workforce to cut down on costs. However, Minic cautioned that this isn’t the time to scale down investments in labor and workforce development. 

If we look and learn from the past, only about 40% of people who leave the industry in down cycles actually come back. So this is the time when we are actually destroying the workforce. We're not investing appropriately in down cycles,” she said. “The industry is cyclical, but the workforce issues are structural.”

Key Findings from HBI’s Labor Market Report

HBI’s report estimates that the skilled labor shortage in residential construction costs the industry $10.8 billion—$8.1 billion from lost construction (about 19,000 homes) and $2.7 billion from construction delays.

Here are some other key highlights:

• About 723,000 construction workers need to be hired each year to make up for this gap. But…
• Hiring is negative. Homebuilders and remodelers lost 26,100 construction jobs year-over-year amid a slowdown in building. As of August, residential construction’s six-month average job losses were 4,783 a month. Despite this…
• Employers can’t fill open positions. Open construction jobs, while down from 2023, increased year over year as of the end of July, from 229,000 to 306,000. 

A separate survey conducted by the Associated General Contractors of America over the summer found that 92% of contractors reported difficulty filling open positions. 

The Hiring Dilemma: Construction Has a Perception Problem

The residential construction labor shortage is a “compounded, complex challenge” that falls into three areas, Minic says. 

1. There aren’t enough people entering the residential construction workforce. 
2. Residential construction employers can have trouble identifying sources of talent. 
3. Many workers leave very early in their careers. 

Minic largely attributes the first issue to a lingering perception problem impacting the residential construction industry — that the jobs are dirty, dangerous, challenging, and a dead-end. 

The biggest problem is that construction jobs are more difficult and more demanding than maybe some other jobs,” Minic said. “But these jobs are less dangerous than many other jobs that are out there, and they are definitely less dirty than they used to be, with all the new equipment and technology.”

There’s definitely a narrative shift. More people are talking about the trades as young adults look for alternative paths that don’t require suffocating levels of student debt. 

The influence of AI on the workforce is also drawing increasing concern. A November 6 report from Challenger, Gray, & Christmas found that employers announced 153,074 job cuts in October, up 175% year-over-year, and up 183% from the month prior. 

This was the highest layoff number in October in 22 years, and the highest single-month total in the fourth quarter since 2008, when the nation was in the midst of the Great Recession. Most notably, large corporations like Amazon, UPS, Salesforce, and Target each recently announced thousands of layoffs, many of which were a result of job automation via AI. 

This presents an opportunity for the construction industry. In an uncertain job market, young people entering the workforce want certainty, an AI-resistant career path, and avenues for advancement. However, there’s still a widespread perception that construction is a dead-end career path, Minic explained. 

“The dead-end perception is the most damaging, because people today really are looking for more of that betterment and development. [They say], ‘I am okay with starting in an entry-level position, but what do I do next?’ And this industry is well-suited to that. You can start your own company very quickly, but that's not the kind of awareness that exists out there. The narrative is changing, but not fast enough, not well enough, not deep enough.”

Building Talent Foundation is working to change this perception and also works to connect incoming talent with employers. 

“That's why we exist. The big builders created our organization as a nonprofit so that we can help employers get talent, and we also help candidates who are seeking jobs to get into those positions,” Minic explained.

Investing in Workers Amid a Down Cycle

Minic said that about half of construction workers leave the industry early in their careers. Building Talent Foundation’s research has concluded that a lack of advancement opportunities is primarily to blame. 

“The big revelation was that it's not about wages and benefits. It's actually about access to career pathways and upskilling. Why people love or leave specific companies and jobs is more about whether they have access to enrich their skills and career progression,” she said. 

The construction industry isn’t making the necessary investments in workforce development and training, partly because it is highly fragmented. According to the Building Talent Foundation, more than three-fourths of trade firms earn less than a million dollars annually and lack the capacity to invest in talent management or build strong ties with training institutions. Construction is also in a down cycle with net negative hiring. The industry may be tempted to cut investments in workforce development to save costs, but Minic warned that this is a mistake. The data shows that once workers leave the industry, most don’t return. 

Immigration: An Issue That’s Impossible to Ignore

The HBI Labor Market Report found that immigrants account for 25.5% of the construction workforce, a new high. In construction trades, immigrants make up about 33% workers. 

The Trump administration’s immigration policies, while viewed as necessary by some, also worry many industry leaders. Pew Research found that the nation’s foreign-born population declined by more than 1 million people between January and June, the most significant drop since the 1960s. Additional deportations and further restrictions on legal immigration have continued to shrink the pool of immigrant labor in the months since. 

The impacts of these policies will be regional, as the immigrant share of the construction labor force varies widely across states. California (41%), New Jersey (40%), Texas (38%), Florida (38%), and New York (37%) have the highest share of immigrant workers. Meanwhile, immigrants make up 3% or less of the construction workforce in Montana, North Dakota, South Dakota, Vermont, Maine, and West Virginia. 

Moody’s Analytics Deputy Chief Economist Cristian deRtitis, during a presentation at the Focus on Excellence summit, said that the Trump administration’s immigration policies could exacerbate the construction labor shortage and push wages higher. While this would benefit workers, it could further compress homebuilders’ already shrinking margins. 

Key Takeaways

Residential construction is in a down cycle, but the industry would benefit from further investments in training, workforce development, and internships. 

These investments, paired with a positive work culture and clearer advancement paths, could help the industry attract more young workers and retain talent for longer. Focusing on these investments is crucial, as the pool of immigrant labor declines —at least in the near term —threatening to exacerbate the existing labor shortage. 

Many homebuilders are turning to accelerated cycle times and reduced construction costs to offset shrinking margins. This strategy could become more difficult if the labor shortage worsens in the coming quarters and years. Creating genuine, ongoing relationships with vendors and labor crews can ensure builders have the necessary labor at a reasonable cost to build efficiently and quickly.