The Missing Middle: Why Mid-Size Regional Builders Hold the Key to Housing Affordability
How innovation could unlock America’s best-positioned—and most overlooked—solution to the housing crisis
We talk endlessly about the housing affordability crisis. The statistics are grim: median home prices have risen 47% since 2019, while wages have grown just 23%. First-time homebuyers now need a six-figure household income in most markets. Young families are priced out. The American Dream feels increasingly like a lottery ticket.
When we discuss solutions, the conversation typically orbits two poles: massive national builders with their efficiency and scale, or small custom builders with their craftsmanship and flexibility. But we’re missing the most promising answer hiding in plain sight—mid-size regional home builders.
These are the companies building 1,000 to 4,500 homes per year in defined geographic markets. They’re substantial businesses with real scale, yet they remain deeply embedded in their local communities. And right now, they’re trapped in a structural paradox that prevents them from being the affordability solution they could be.
The Innovation Gap Nobody’s Talking About
Here’s the uncomfortable truth: the housing industry is decades behind other sectors in productivity gains. While manufacturing, logistics, and even agriculture have transformed through technology and supply chain innovation, homebuilding productivity has been essentially flat since the 1970s.
The reasons are clear when you look at the industry structure:
National builders (the D.R. Hortons and Lennars of the world) have innovated. They’ve built integrated supply chains, invested in prefabrication, and leveraged their massive scale to drive down costs. But their business model depends on large master-planned communities and standardized products. They’re not building the diverse, regionally-appropriate housing that communities actually need across different markets.
Small custom builders are nimble and relationship-driven, but they lack the capital, scale, and bandwidth to invest in innovation. They’re too busy building homes to transform how homes get built.
This leaves mid-size regional builders in the Middle Market Innovation Paradox: they’re too large to operate with small builder flexibility, but too small to command the market power and capital needed for the kind of vertical integration and supply chain innovation that drives affordability.
Why the Middle Tier Matters More Than You Think
Mid-size regional builders represent roughly 35-40% of single-family home construction in America. They’re the backbone of housing production in second-tier cities and suburban markets—exactly where housing affordability matters most.
These builders have something unique:
Real scale (1,000+ homes annually) that can support meaningful innovation
Regional focus that allows for supply chain optimization within specific markets
Long-term relationships with trade partners and suppliers
Market knowledge that comes from deep local roots
Flexibility to serve diverse housing types and price points
They’re building the entry-level homes, the townhomes, the move-up housing that working families actually need. Unlike national builders focused on higher-margin products, mid-size regionals have to serve the attainable housing market—that’s their competitive position.
But here’s their problem: they’re stuck.
The Structural Barriers Holding Them Back
Mid-size builders face a capital catch-22. To innovate their supply chains—invest in better trade partners, adopt new building systems, integrate technology—they need capital. But they can’t access efficient capital because their supply chains are fragmented and inefficient.
They also face a scale mismatch problem. They’re too small to justify the fixed costs of vertical integration individually, but collectively, they represent enormous volume. A builder doing 2,000 homes per year can’t support their own framing company or window plant. But ten such builders in a region, collectively doing 20,000 homes? Now we’re talking about real scale.
The result? These builders are trapped in a high-cost, fragmented supply chain they didn’t create but can’t escape from. They buy materials through distributors adding 20-30% markups. They work with trade partners who lack capital to invest in equipment or training. They can’t de-risk innovation in building systems.
And so housing costs stay high, while the builders best-positioned to deliver affordability remain constrained.
The Innovation Unlock: Platform-Based Solutions
Here’s where it gets interesting. What if mid-size builders didn’t have to innovate alone?
Imagine a platform approach—think of it as shared infrastructure for housing production beyond Group Purchasing Organizations. Multiple mid-size builders in a region collectively investing in their supply chain through structured vehicles. Not vertical integration (buying their suppliers), but strategic partnership and investment that aligns incentives.
This could mean:
Aggregated demand giving mid-size builders the purchasing power they lack individually. Ten builders collectively doing 25,000 homes in Texas suddenly have the volume to negotiate like a national builder.
Shared risk in adopting new building systems or technologies. No single builder has to bet their business on prefabrication or panelized construction, but collectively they can de-risk pilot programs.
Capital deployment into trade partners who are currently starved for investment. The framing contractors, HVAC installers, and other trades that serve these builders could upgrade equipment, improve processes, and ultimately deliver better value.
Regional optimization that leverages geographic clustering. When you have multiple builders in the same market sharing optimized supply chains, you create a competitive regional ecosystem that benefits everyone—including homebuyers.
The beauty of this approach? It doesn’t require builders to consolidate, lose their independence, or abandon their local market focus. It gives them the scale benefits of national builders while preserving the regional knowledge and flexibility that makes them effective.
What This Means for Housing Affordability
Let’s talk numbers. Industry estimates suggest supply chain inefficiency and fragmentation add 10-15% to home construction costs. On a $350,000 home, that’s $35,000-$50,000.
Mid-size regional builders collectively produce roughly 400,000-500,000 homes annually in the U.S. If platform-based innovation could reduce their costs by even 7-10%, we’re talking about:
$20,000-$35,000 per home in savings
$8-18 billion in annual affordability improvements
Meaningful downward pressure on prices in critical markets
But the real impact goes beyond direct cost savings. When mid-size builders become more efficient, they can:
Build more homes with the same capital
Take on projects at lower price points
Compete more effectively, putting pressure on pricing industry-wide
Free up capital for land acquisition and expansion
Reduce cycle times, getting families into homes faster
This isn’t theoretical. We’ve seen platform effects transform other industries. Manufacturing, logistics, even agriculture have used shared infrastructure and aggregated capital to drive productivity gains that seemed impossible when every player operated alone.
The Path Forward
The housing affordability crisis won’t be solved by any single innovation or policy change. We need more land, better zoning, cheaper materials, faster approvals, and yes, more construction productivity.
But we’re overlooking a massive opportunity: enabling the builders who are already best-positioned to deliver affordability to actually do so.
Mid-size regional builders aren’t the problem. They’re not the reason housing is expensive. They’re actually the victims of structural market failures that trap them in high-cost, fragmented supply chains.
Give them the tools—through platform-based innovation, strategic capital deployment, and supply chain integration—and they become a powerful part of the solution.
The question isn’t whether mid-size regional builders plus innovation could help solve housing affordability. The question is: why haven’t we already unlocked this obvious opportunity?
The builders are there. The volume is there. The motivation is there. What’s missing is the infrastructure—financial, strategic, and operational—to help them break out of the middle market paradox.
Building that infrastructure might just be the highest-leverage intervention we can make in the housing affordability crisis.
What do you think? Are mid-size regional builders the overlooked key to housing affordability? What barriers do you see to platform-based innovation in homebuilding?
I liked the information provided. Though I am highly skeptical builders will pass down the savings. Developers are in a better position to benefit from this than an average individual buyer as developers also share a level of risk. For short term relief - regulatory changes will be more impactful whereas robust predictable supply chain will play a role in controlling the price increase.