In a bid to keep their businesses afloat, large suburban homebuilders have shrunk the size of the houses they're building and limited the number of custom options.

Their penny-pinching now extends to a budget line item that was previously taboo to tinker with in the Chicago market — labor costs.

The largest publicly held builders, such as PulteGroup Inc., K. Hovnanian Companies LLC's Town & Country Homes and D.R. Horton Inc.'s Cambridge Homes, are putting aside longstanding relationships with union contractors and asking nonunion shops to bid on projects this spring. If they direct more work to the so-called merit shops, it could forever change the construction labor market dynamic in metropolitan Chicago, considered along with St. Louis to be one of the last bastions of union construction might.

"This is where Chicago is going in the residential suburban market," said Ron Martin, Chicago-area president of Columbus, Ohio-based M/I Homes Inc., which already has a 50-50 split between union and nonunion crews, and he expects the balance to shift more to merit shops. "The companies that try to hold onto the union are likely to go commercial, break union rules or be out of business."   ..............read more