The Typical Builder Starts Five Homes a Year. Housing Policy Should Take That Seriously.

By: Chris Allen

A number in the National Association of Home Builders’ latest member census jumped out at me.

The typical NAHB builder member started five housing units in 2025.

Not 50. Not 500. FIVE. 

The typical builder member also had six employees. And the five-home number isn’t some strange artifact of a bad year. The median has bounced between five and six starts annually since 2013.

That is a useful thing to keep in mind when we talk about solving the housing shortage.

Most of our housing conversations eventually turn toward big numbers. We need hundreds of thousands of additional homes nationally. Fast-growing regions may need tens of thousands. Individual cities can be short thousands of units.

When the problem is that large, it’s natural to start looking for large solutions.

But housing ultimately gets built one project at a time, and an enormous amount of the productive capacity in this industry sits inside relatively small businesses.

There is another side to this. The largest national builders really are large, and they control a substantial portion of the for-sale single-family market. The ten largest builders accounted for 43.6% of new single-family home closings in 2025.

Both things can be true.

We have a housing industry with some enormous producers at the top and a very large number of small producers underneath them. The problem is that we have spent decades making development progressively more complicated, expensive and specialized. The bigger the company, the easier it is to absorb that complexity.

That should matter a lot more to housing policy than it does.

Complexity has a scale

Imagine a six-person development or building company.

There isn’t a land acquisition team. There isn’t an in-house zoning attorney, permitting specialist, capital acquisition team, or a governmental affairs staff.

The person trying to figure out why the city rejected the site plan may also be the person talking to the bank, negotiating with the electrician, checking on another construction site and figuring out whether the next project pencils all before getting everyone in the car for soccer practice. 

Now add six months to an approval. Require another site plan review. Change the parking calculation. Ask for ANOTHER traffic study. Require a rezoning with an uncertain outcome. Increase the amount of equity the bank wants because of rates. Have the appraisal come in below construction cost.

None of those things necessarily kills a 300-unit project, most of them have it built into the pro forma. A large developer will have people on their team whose entire job is navigating these issues on every deal. 

On a four-unit or eight-unit deal, the kind of infill projects our communities need, each one of these very real scenarios could be the thing that makes the project disappear.

This is one reason I think we need to get much better at distinguishing between the cost of a development requirement and the way that cost behaves at different scales and across teams with very different capacities. 

A $40,000 predevelopment expense spread across 200 apartments is $200 per unit. Spread it across four homes and it is $10,000 per unit before anyone has poured a foundation.

The requirement didn’t change. The economics did. Time works the same way. So does professional expertise. So does uncertainty.

And financing is the clearest example.

Missing middle projects regularly fall into an awkward gap in the lending system. They can be too complicated for conventional residential financing while being too small for the financing structures used on larger multifamily projects. NAHB recently highlighted exactly this problem in a financing guide for missing middle housing, pointing to higher equity requirements, limited financing options and underwriting practices that don’t fit projects at this scale.

Credit for acquisition, development and construction has also been tightening. As of the second quarter of 2026, builders and developers responding to NAHB’s financing survey had reported tighter credit conditions for 18 consecutive quarters. Among respondents experiencing tighter conditions, 53% said lenders were requiring personal guarantees or collateral outside the project itself.

Again, think about who experiences that risk most acutely.

A national corporation, or a large, well-capitalized developer, can spread risk across markets and projects. For a small local developer, the bank may effectively be asking them to put their house, business or other assets behind one eight-unit deal.

That changes who is willing and able to build. It is a stop order without the city every even knowing they’ve lost another project. 

We should care about the number of producers

A lot of housing policy focuses, understandably, on the number of units a community needs.

I think we should pay much more attention to another number:

How many people in this community are actually capable of producing them?

Imagine two cities that each need 2,000 additional homes.

One has a handful of large developers waiting for sites big enough to support their business model, or extractive concessions that will hamstring the community for decades after they have already sold and moved on. 

The other has those developers too, but it also has 30 or 40 local builders and developers capable of producing two homes here, six there, twelve on a vacant parcel, a row of townhouses on an underused site, an ADU behind an existing house, or a small mixed-use building downtown.

Those are very different housing markets.

The second city has more ways to respond.

It has more people looking for opportunities. More people who understand individual neighborhoods. More chances to turn strange parcels, small infill sites and overlooked buildings into housing. More projects that can happen without assembling 20 acres. More businesses learning how to do the next project after finishing the first one. Those developers keep their money and their focus in that community. 

And importantly, those projects can accumulate.

Ten developers producing ten homes each have produced 100 homes.

If they stay in business, become better at what they do and grow from ten homes to fifteen, the community hasn’t just added units. It has increased its ability to produce units next year.

That is housing production capacity.

We talk constantly about the housing supply. We should be talking more about the supply of housing producers.

Legalizing housing is only one part of building that capacity

This is where the current wave of zoning reform matters, but also where we need to be careful about expecting too much from it.

Cities across the country are making duplexes, fourplexes, cottage courts, ADUs and small apartment buildings legal in places where they weren’t allowed before. That is necessary work.

But permission to build doesn’t create a developer.

Somebody still has to recognize the opportunity, control the site, design the building, run the numbers, find equity, get a construction loan, make it through permitting, hire a contractor and actually build the thing.

If a city legalizes a fourplex but the only companies able to navigate its development process need a 100-unit project to make their business model work, the zoning change won’t produce everything the city hoped it would.

That doesn’t mean the zoning reform failed. It means there is another part of the housing system that needs attention.

This is a big part of the work we do at the Incremental Development Alliance. We spend a lot of time teaching people how small-scale real estate development actually works because the supply of capable developers is not fixed.

People can learn this. We see it happen in cities across the country every day. 

A contractor can become a developer. A property owner can learn how to add another unit. An architect can learn the financial side of a project. Someone working in real estate or local government can learn how to identify a viable infill opportunity and eventually build one.

But training alone isn’t enough either.

Those developers need local lenders willing to understand smaller projects. They need appraisers with comparable projects to work from. They need architects and contractors who know the building types. They need buildable small parcels. They need city processes that are predictable enough that a small company can navigate them without maintaining a department devoted to navigating city hall.

Pre-approved plans can help. By-right approvals can help. Clear permitting timelines can help. Small acquisition and predevelopment loan programs can help. Local banks that understand these products can help. Getting city staff, lenders, builders, developers and technical professionals in the same room can help.

No single one of those things is the answer.

The point is to look at them as pieces of the same production system. And these pieces together solve a complex problem we’ve been making worse for decades. 

Design the system for the people who actually have to use it

In many places, large-scale development is fine. We need it. A city with a serious housing shortage would be foolish to turn away a company capable of delivering hundreds of homes.

But we shouldn’t build a housing strategy that only works when someone can arrive with a large balance sheet, assemble a large site, and spread years of process across hundreds of units.

The latest NAHB numbers are a useful reminder of what much of this industry actually looks like on the ground.

Five homes.

Six employees.

That is not a marginal part of the housing conversation. Those small businesses are part of the productive infrastructure of American communities.

If we want more housing, one of the most practical things cities, states, lenders and housing organizations can do is make it possible for more of those businesses to survive, do another project and gradually get better at building.

A healthy housing market needs more than land where housing is legal.

It needs a deep bench of people who know how to turn that permission into actual homes.