They prefer bank dens if the stream bank is suitable for construction. Starting below the water level, they dig into a stream bank, often where it's steep and held together by tree roots. Angling upward, they keep digging until this tunnel clears the water level by a foot or two. Here the beavers hollow out a chamber large enough for them to sleep and move around. One or more den entrances are eventually added to the first, fanning out in different directions in front of the den.
Shredded wood is placed on the floor of the chamber to help keep it dry.
Minor cave-ins that happen when part of the bank collapses are repaired by piling sticks and mud on top of the hole. Beavers build lodges in marshes and other areas where the banks are too flat to dig bank dens. In these locations, beavers pile up sticks and mud until they have a dome-shaped structure that rises well above the water level. They then tunnel into it starting below the water level. Groups of beavers that live together are called colonies.