The Number of Residential Construction Firms Owned by Minorities is on the Rise

The total number of residential construction firms in the country (single-family builders, multifamily builders, and residential remodelers) dropped to around 689,000 in 2012, 12% lower than in 2007, according to the U.S. Census Bureau’s Survey of Business Owners (collected only in years ending in ‘2’ and ‘7’). While the industry as a whole contracted during those five years, the share of these businesses owned by minorities rose from 14% to 23%.

The contraction during this period was rather uneven between firms with paid employees and those without them (i.e. sole proprietorships and 1-person independent contractors), however. The former group saw its ranks shrink by 22% (down to 152,000 firms), while the latter fell by only 8% (down to 537,000 firms) (Figure 1).

But who owned these firms? In 2007, 14% of the roughly 780,000 residential construction firms that existed were owned by minorities, while 84% were owned by non-minorities. By 2012, the industry had changed: of the 689,000 firms still standing, the share owned by minorities had risen to 23% while the share owned by non-minorities had fallen to 76% (Figure 2).

How much did the absolute number of minority-owned residential construction firms grow in order to go from representing 14% of the industry in 2007 to 23% in 2012? The answer is 44%, going from roughly 109,000 firms to 157,000. In contrast, as Figure 3 shows, the number of firms owned by non-minorities declined 19% during this 5-year period, falling from 645,000 to 525,000.

It is important to take note, however, of the dramatically different results by type of firm. Whereas the actual number of minority-owned firms with paid employees was up only a slight 5%, the number of minority-owned firms without payroll increased an impressive 49%. Meanwhile, the number of non-minority owned firms with and without paid employees both declined during this period, by 20% and 18%, respectively.

In summary, data from the U.S. Census Bureau’s Survey of Business Owners comparing the demographic composition of business owners in the residential construction building industry show that in 2012 a larger share of owners in this industry were minorities than in 2007. Further analysis showed that the above trend was concentrated in firms without paid employees, while those with paid employees did not experience a comparable shift in their demographic composition.

A complete report on our findings, including the growth and number of firms owned by Hispanics and women, can be found here.