The Vertical | Issue No. 3 | May 14, 2025

Builder 100 Debrief: 5 Moves to Survive a Changing Market

Author

Jake Heller
May 14, 2025

EXECUTIVE SUMMARY

Builder 100 2025 wasn’t just talk, it was a blueprint for surviving 2025 and beyond. With interest rates above 6%, tariffs back in play, and demand softening, the biggest names in housing are repositioning fast. Here's what they’re doing and what you should be watching:

  • Costs are spiking. Budget for 10%+ escalation or bleed margin.

  • Land banking + BTR (Build to Rent) are risk shields. Control pipeline, cut exposure.

  • AI + design optimization are survival tactics. Shrink overhead, shrink footprints, deliver faster.

1. COSTS ARE BACK TO KILL MARGINS

The Problem
Tariffs on materials could add 9–10% to costs, with Canadian lumber possibly facing 30% duties. NAHB data shows the U.S. used 48B board feet last year but only produced 35B. Inflation’s killing remodels, and builders are already cutting specs and delaying starts.

Why It Matters
If you're still running prior year budgets, you're underwater. Sitework and MEP bids are coming in 10-20% over pro forma in key markets. The squeeze is real.

What to Do

  • Top Priority: Reprice lumber, HVAC, and electrical now. Waiting could cost 5–10% of gross.

  • Lock in supplier rates by Q3 before tariffs widen.

  • Bake 10–15% contingency into both horizontal and vertical costs.

  • For smaller builders: lean hard on regional vendors before public contracts eat the inventory.

2. LAND BANKING IS YOUR NEW DEFAULT

The Shift
Land banks are now involved in 58% of builder M&A deals, up from just 14% pre-COVID. Publics like Lennar and DR Horton want lot control but they don’t want land risk. They want final maps, phased takedowns, and no carry.

Why It Matters
If you’re holding raw dirt and expecting a clean exit, think again. Builders want flexibility, not friction. The path to liquidity runs through entitlement.

What to Do

  • Top Priority: Entitle now, sell later. Structure phased takedowns with ROFR (right of first refusal) or milestone-based closings.

  • Create takedown schedules that let builders scale in, not all-in.

  • Pair up with capital that understands the land-to-lot arc.

  • Local investors? Position your dirt as a shovel-ready plug-in for publics looking to expand.

3. BTR IS STEALING THE SHOW

The Win
Build-to-rent is now absorbing inventory where for-sale demand is stalling. Horton sold nearly 4,000 rental homes for $1.2B in 2024. Rent premiums are real, and builders are designing specifically for renters.

Why It Matters
With 6.8% mortgage rates, many buyers are priced out. BTR is the buffer and in many submarkets, the highest and best use.

What to Do

  • Top Priority: Re-underwrite for hold, not exit. Cap rate spread is your friend.

  • Focus on product: 2-car garages, small private yards, 1,200–1,400 SF 3-bed layouts.

  • Target submarkets with strong rent growth and weak resale comps.

  • If you're in entitlement: zone flexibility matters. Fight for small lot or detached

4. AI IS REPLACING CUSTOMER SERVICE TEAMS

The Reality
Hovnanian and others are rolling out AI to handle warranty requests, schedule service calls, and respond to homeowners. What used to take three coordinators now takes one system, and the bots don’t sleep.

Why It Matters
Warranty work is a margin drag. AI isn’t about innovation points, it’s about protecting your SG&A. The publics are already trimming headcount. This is how.

What to Do

  • Top Priority: Set up chat-based intake for warranty issues. No more call queues or overflowing inboxes.

  • Use AI to triage requests: plumbing, electrical, structural, then route to subs with a timestamp.

  • Track time-to-resolution and automate follow-up. Homeowners notice. So do balance sheets.

  • If you’re still managing warranty with spreadsheets and email chains, you’re wasting hours and dollars.

5. DESIGN SMARTER, NOT BIGGER

The Trend
Builders are shrinking footprints but preserving utility. 1,200–1,400 SF 3-bed layouts are now the sweet spot. Garage sizes are shrinking. Multigenerational and flexible living layouts are in.

Why It Matters
Affordability is a design problem now. Public builders are building smaller, denser, and faster, and buyers aren’t complaining. Cities need to catch up.

What to Do

  • Top Priority: Plan 3-bed, 1,200 SF homes with flexible space (office/den/guest).

  • Fight for zoning that supports small lots, duplexes, and ADUs by-right.

  • Use pre-approved plan sets where possible to speed up permitting.

  • Embrace modular/efficiency-driven construction. Not for the headline, but for the margin.

FOR CITIES: DO YOUR JOB

You say you want housing? Then act like it.

Stop hiding behind process. Stop slow-walking approvals. And stop taxing small builders like they’re Lennar.

Here’s the baseline, not the wishlist:

  • 90-day cap on approvals for infill under 50 units. No hearings. No extensions.

  • Eliminate impact fees for ADUs and projects under 10 units. Period.

  • Legalize density in existing neighborhoods: duplexes, fourplexes, townhomes by-right.

  • CEQA exemptions for small-scale infill and workforce housing. No loopholes. No appeals.

If you’re still defending 12-month timelines and $100K in fees for a duplex, you're not solving the crisis - you are the crisis.

FINAL THOUGHT

This market is filtering, not forgiving.

The operators who adapt (cut faster, entitle smarter, structure better) will grow. Everyone else is roadkill.

Tariffs will hit. Capital will tighten. Cities won’t fix themselves. You either build around the constraints or get boxed in by them.

Still running 2023 models? You’re not late.
You’re irrelevant.

The market’s moving fast. Either you keep up or you get priced out.

Permitting delays are the risk you can actually fix.

JDJ helps developers navigate zoning, CEQA, entitlement, and permit clearances—fast. From duplexes to 200+ unit sites, we get projects unstuck and across the finish line.