How New Regulations are Impacting Builders Nationwide

The housing and construction industries are facing significant changes in 2025. New regulations, labor shortages, and evolving tax policies are all affecting the way builders operate. These trends are creating both challenges and opportunities for high-end homebuilders. Here’s a breakdown of the key issues and what they mean for your business.

Evolving Energy Codes and Compliance Pressures

New energy regulations remain a pressing issue in the housing industry. Federally, all new HUD- and USDA-backed homes must now comply with the 2021 International Energy Conservation Code (IECC). While these updates aim to boost long-term energy efficiency, they are triggering legal and financial concerns. Builders estimate the stricter requirements could increase the cost of a new home by as much as $31,000—exacerbating affordability challenges at a time when demand remains high.

Meanwhile, several states are charting their own course. Across key regions like Texas, Florida, Alabama, Virginia, and Iowa, energy codes are evolving—but not uniformly. Some states are adopting more moderate updates to balance efficiency with affordability, while others are resisting aggressive mandates in favor of builder flexibility and local market control.

This creates a fragmented regulatory landscape:

• Texas and Florida: Adapting energy codes gradually, emphasizing cost control and builder input.
• Alabama and Iowa: Taking a slower approach to code adoption, focusing on practical implementation.
• Virginia: More aligned with updated standards but continues to allow both gas and electric options.

For builders operating across state lines or near state borders, this patchwork of regulations adds complexity. It also increases the burden on compliance teams and design professionals, especially as construction costs and labor shortages persist. Strategic planning and code familiarity are now essential tools for staying competitive in regulated environments.

Bridging the Labor Gap in Residential Construction

The housing sector is also grappling with a severe labor shortage. With thousands of new hires needed each year to meet construction demand, the industry is struggling to fill open positions. By 2031, nearly 41% of the current construction workforce is expected to retire, leaving a significant gap that younger generations are not eager to fill.

The labor shortage is already impacting timelines and costs, with many builders raising wages, offering benefits, and investing heavily in training. For example, in 2023, the industry invested $1.6 billion in workforce development programs, training over 1.3 million workers.

To address this gap, here are some strategies that homebuilders can implement:

• Expand recruitment efforts through trade schools, community programs, and apprenticeships.
• Offer competitive pay and benefits to attract and retain skilled workers.
• Adopt new technologies like modular construction and automation to boost productivity and reduce the need for labor.
• Focus on diversity by recruiting from nontraditional labor pools, such as women, veterans, and career changers.

By combining these strategies, builders can start to address the labor shortage and improve productivity. However, experts warn that long-term solutions will require continued investment and innovation.

Tax Policy: What You Need to Know

Tax policies in 2025 are also causing uncertainty for homebuilders. Key changes are being discussed that could impact project costs and financing. For example, the Inflation Reduction Act (IRA) provides tax credits for energy-efficient construction, such as solar panels and heat pumps. However, there are concerns that some of these benefits may be scaled back, making energy-efficient upgrades more expensive.

On the other hand, proposals to extend parts of the Tax Cuts and Jobs Act could benefit homebuilders:

• Bonus depreciation: A proposal could allow for 100% depreciation on qualified equipment purchases, improving cash flow for construction firms.
• Passthrough business income deductions: The 20% deduction for owner-operated businesses could increase to 23%, which would reduce taxes on homebuilders structured as partnerships or S-corporations.

These changes could provide tax relief for builders, especially in high-tax regions, but the uncertainty surrounding them means builders need to be prepared for different scenarios. Some states are also stepping in with local incentives to encourage new construction. For instance, Pennsylvania offers property tax abatements for developments that reserve units for low-income renters, while other states provide tax credits or fee waivers to make housing projects more financially viable.

Strategic Takeaways for Builders

Navigating these trends requires adaptability and foresight. To stay ahead, here are some practical strategies for homebuilders:

• Monitor changes in energy codes and adjust building practices to comply while managing costs. Consider incorporating energy-efficient technologies early to lock in tax benefits.
• Invest in workforce development to bridge the labor gap. Focus on recruiting from nontraditional pools and use technology to boost productivity.
• Stay informed on tax policies and plan your projects accordingly. Work with tax advisors to take advantage of available credits and deductions.
• Utilize state and local incentives to offset rising costs, especially in regions offering property tax abatements or other housing incentives.

The builders who thrive in 2025 will be those who act—not react. As energy codes, labor shortages, and tax rules evolve, the need for clear operational strategy is more urgent than ever.

The Business Plan of Actions (BPA) from Small Business Growth Partners offers that clarity—delivering a customized, contractor-specific plan designed to help navigate shifting policy landscapes with confidence.

Whether you build high-end spec homes or manage complex custom projects, the BPA reveals blind spots, outlines key compliance strategies, and connects you with the tools to optimize costs while elevating your brand.

Even more importantly, your subcontractors and trade partners benefit too. A stronger, more strategic subcontractor base leads to more reliable jobsite performance, fewer change orders, and faster project closeouts. Encourage your core teams—framers, HVAC, finish carpenters, and others—to get their own BPA. It improves their business, which improves yours.
Turn Policy Shifts Into Strategic Wins