Trump’s Executive Orders Challenge Home Builders Amid Tariffs and Immigration Policies

Trump's executive orders on immigration and tariffs threaten to exacerbate the housing crisis by increasing construction costs and labor shortages for homebuilders.

As the housing market continues to evolve, construction professionals are keeping a keen eye on new tariffs, immigration policies, and the ongoing demand for affordable housing.

THE IMPACT OF TRUMP’S EXECUTIVE ORDERS ON THE HOME BUILDING SECTOR

Shortly after being inaugurated for a second term, President Donald Trump wasted no time in advancing his administration’s agenda.

He signed more than 200 executive actions, including a mix of orders, memorandums, and proclamations.

These measures touched on a wide range of topics, from distancing the U.S. from the World Health Organization to delaying a ban on TikTok.

Among these executive actions, many have important implications for the homebuilding sector.

Trump’s initiatives look to tighten immigration controls and impose hefty tariffs on materials imported from Canada and Mexico.

Notably, one of these orders specifically targets the housing industry.

The National Association of Home Builders (NAHB) welcomed this order, appreciating Trump’s recognition of the urgent need to address the housing supply crisis.

They emphasized that reducing unnecessary regulations is vital for facilitating the construction of affordable housing and combating rising prices.

Despite the acknowledgment of these issues, the full impact of the executive actions remains unclear, with some proposals potentially conflicting with each other.

Nevertheless, immediate obstacles from these orders are evident.

According to Lisa Sturtevant, Chief Economist at Bright MLS, the current environment of high interest rates complicates matters.

This scenario leads to heightened costs for borrowing, labor, and material sourcing, ultimately pushing up expenses associated with new home construction and rendering housing less affordable.

UNCLEAR DIRECTION IN TRUMP’S HOUSING STRATEGY

While it is positive to see Trump recognize the shortfall in housing supply as a contributing factor to escalating prices, the specifics of his executive order leave much to be desired.

Much of the order critiques the previous administration’s policies, which Trump described as “oppressive.” The main takeaway seems to be his intent to reduce the regulatory hurdles that hinder homebuilding.

However, local zoning laws, which are often significant roadblocks to housing development, fall under local control rather than federal guidelines.

Although federal policies may incentivize local changes by linking them to federal funding, many municipalities may choose to uphold their zoning practices.

Trump has tasked federal agency heads with investigating possible interventions, but the effectiveness of such measures appears limited.

Analysts suggest that any real influence his administration wields will come from encouraging local governments to implement more favorable regulations that streamline housing construction.

IMMIGRATION POLICIES AND THEIR INDIRECT IMPACT ON THE CONSTRUCTION INDUSTRY

The bulk of Trump’s latest immigration executive orders predominantly focus on border security, including modifications to asylum standards and funding for a border wall.

While these measures may not have an immediate effect on homebuilders, they highlight the administration’s focus on stricter immigration enforcement.

Should Trump pursue mass deportations of immigrants already in the U.S., the construction labor market could find itself in choppy waters.

A significant portion of the workforce—32.5%—comprises immigrants, with even higher percentages in specialized trades like roofing, drywall installation, and painting, where they represent over half of the labor pool.

Sturtevant pointed out that a lack of immigration policy openness for workers in construction trades may pose long-term recruitment challenges, potentially impacting both the overall economy and the housing market.

Variations in the impact of immigration enforcement across different regions will likely be pronounced.

For instance, areas with a strong sanctuary city presence, such as New York or San Diego, typically see slower housing development than southern states.

If enforcement activities concentrate in these regions, builders in areas with robust construction, like Los Angeles, may not face as severe labor shortages, even as they contend with other housing-related challenges stemming from recent wildfires.

During Trump’s previous campaign, his administration argued that mass deportations could alleviate housing market pressures by diminishing demand.

However, many economists question the validity of this claim.

Moreover, immigrants play an essential role in the remodeling sector, meaning any adverse effects from stricter policies could ripple through the industry.

While builders might experience a short-term gain, the long-term consequences of tighter immigration laws could hamper labor availability.

Trump’s ongoing rhetoric around tariffs—especially concerning imports from Canada, Mexico, and China—has created a climate of uncertainty.

Economists widely agree that these tariffs are poised to increase housing prices.

A 2018 study from the NAHB estimated that tariffs on Canadian lumber added roughly $9,000 to the cost of building a single-family home.

As Trump proposed a 25% tariff on imports from Canada and Mexico with a target date of February 1, it’s possible this figure serves as a negotiation strategy rather than an established policy.

Following a more tempered approach than his campaign promises regarding immediate tariffs on China, the new administration has opted to gather further information on trade relations instead.

Unlike immigration reforms, tariffs on building materials can trigger more immediate repercussions; approximately 30% of the soft lumber utilized in U.S. construction comes from Canada, along with a significant share of steel imports.

China is also a crucial supplier of electronics used in home appliances, and recent supply chain disruptions highlighted during the pandemic have underscored this reality.

Over time, these tariffs might encourage domestic production of essential materials, but the outcomes—particularly regarding electronics—remain uncertain.

Homebuilders often can’t swiftly adjust their supply chains, making these tariffs a potential source of short-term havoc for the industry.

Source: Housingwire