The United States is grappling with a significant housing crisis, marked by a shortage of approximately 4 million homes, as reported mid-2023 by the National Association of Realtors. The demand for affordable housing has reached an all-time high, especially for first-time homebuyers who now, on average, are entering the market at the age of 38. This demographic shift underscores the pressing need for action, and measures have been proposed to alleviate the affordability struggle. However, evaluating the proposals from the Trump administration requires a nuanced understanding of their potential impacts on the housing market.
During a recent press conference, President-elect Donald Trump expressed his commitment to resolving the housing affordability issue by promoting the construction of new homes. He indicated a willingness to open federal land for residential development, reflecting a belief that increasing supply will directly tackle housing costs. Jim Tobin, president and CEO of the National Association of Home Builders, emphasized the necessity of building more homes, underscoring that merely increasing the supply could address the severe housing deficit.
Despite a modest increase in new construction starts, with September figures indicating 1,027,000 single-family housing starts—a rise of 2.7% from August—experts caution that these efforts still fall far short of meeting demand. While expanding housing supply seems to be a straightforward solution, other administrative actions could create obstacles that ultimately hinder affordability.
One critical area of concern relates to Trump’s stance on immigration. His prior discussions about mass deportation could have unintended consequences for the construction industry, which heavily relies on immigrant labor. Jacob Channel, a senior economist at LendingTree, notes that while Trump’s immigration policies aim to address social and economic issues, they could lead to increased construction costs. With roughly 31% of construction workers in the U.S. comprised of immigrants, disrupting this labor pool could exacerbate the housing shortage due to a decreased workforce.
Furthermore, the construction industry is already facing a challenge in attracting native-born workers. A survey by the National Association of Home Builders revealed that only a meager 3% of young Americans expressed interest in construction trades, amplifying concerns over a potential labor shortage. If immigrant workers are forced out of the labor market, the subsequent rise in wages could be passed onto consumers, consequently leading to increased home prices.
To combat rising housing costs, Trump has proposed slashing regulations and permit requirements that add to the expenses of homebuyers. As he stated during a speech at the Economic Club of New York, the objective is to significantly reduce the costs associated with new home construction. Regulatory costs currently account for about 24% of single-family home prices and 41% of multifamily unit prices, according to Tobin. Enhancing efficiency in the regulatory process could be a viable path to lowering housing costs. However, the real challenge lies in ensuring that such deregulation does not compromise safety, environmental standards, or community integrity.
Moreover, while Trump’s executive order aimed at eliminating regulatory barriers may provide a framework for change, it raises questions about its practical implementation and effectiveness. The complexities of navigating the regulatory environment necessitate a balanced approach that ideally streamlines development while maintaining necessary protections.
Another dimension of Trump’s economic policies pertains to tariffs, particularly on imported building materials. His proposed blanket tariffs ranging from 10% to 20% could exacerbate the existing issues of affordability by inflating construction costs. Experts argue that any increase in material prices naturally flows through the supply chain, resulting in higher home prices. The ramifications of these tariffs could further complicate the already difficult landscape for builders and buyers alike.
For instance, current data indicates that the average cost of constructing single-family homes is approximately $392,241. If tariffs escalate these costs, the implications for housing affordability could be alarming, creating additional barriers for potential homeowners.
Future Outlook for Housing Affordability
As the housing landscape evolves, predictions suggest that builders may construct around 1.2 million new single-family homes and approximately 300,000 multifamily units in the coming year. While this projection represents an increase in construction activity, it remains insufficient in addressing the housing crisis.
Ultimately, time will reveal whether the Trump administration prioritizes housing affordability with the same vigor as alternative administrations might. The proposed measures, such as utilizing federal lands for housing development, seem beneficial. Yet, the concentration of federal land in rural areas raises concerns about its efficacy for urban centers where the need for affordable housing is desperate.
Addressing the housing affordability crisis in the U.S. requires comprehensive strategies that transcend mere construction and delve into labor dynamics, regulatory systems, and economic policies. With careful planning and an inclusive approach, the nation can strive toward creating a sustainable housing market that serves all Americans.