The U.S. housing market faces a dual challenge: rising construction material costs and labor shortages. Policies involving tariffs on key imports and stricter immigration enforcement are exacerbating these issues, leading to higher expenses for homebuilders and reduced affordability for buyers.
- Tariffs and Material Costs
2.1 Lumber and Wood Products
Tariffs on Canadian lumber increase framing and finishing costs.
Builders face limited alternatives due to supply chain dependencies.
2.2 Steel, Aluminum, and Drywall
Tariffs of up to 50% affect steel, aluminum, and gypsum (drywall).
Roofing, structural beams, and interior finishing materials are becoming significantly more expensive.
2.3 Appliances and Fixtures
Broader tariffs extend to appliances and raw materials, increasing costs for both new construction and renovations.
Estimated Impact: The National Association of Home Builders (NAHB) projects tariffs are adding over $10,000 to the cost of an average new home.
- Immigration Policies and Labor Supply
3.1 Workforce Dependence
Approximately 23% of U.S. construction workers are undocumented.
Mass deportation or stricter enforcement reduces the available labor force.
3.2 Project Delays
Builders report slower project timelines due to shortages of skilled and unskilled labor.
Immigration raids and stricter verification measures intensify industry uncertainty.
3.3 Rising Labor Costs
With fewer workers, demand for remaining labor drives wages upward, adding further cost pressure.
- Housing Market Implications
4.1 Increased Home Prices
Builders pass higher material and labor costs to buyers.
Affordability weakens, particularly for first-time buyers.
4.2 Supply Constraints
Elevated costs and labor shortages discourage new housing starts.
Housing shortages deepen in already tight markets.
4.3 Economic Ripple Effect
Reduced housing supply impacts rental markets and slows real estate turnover.
Broader economic sectors—appliances, furniture, and real estate services—also face indirect effects.
- Summary Table
Policy Factor Direct Effect Market Outcome
Tariffs on lumber, steel, drywall Increased material costs per home (~$10K+) Higher home prices
Immigration enforcement Labor shortages in construction sector Delays, higher wages, costlier projects
Builder uncertainty Fewer housing starts Tighter supply and affordability crisis
- Conclusion
The combination of tariffs on key construction materials and restrictive immigration policies is making it significantly more expensive to build homes in the U.S. This not only raises costs for builders but also worsens the affordability crisis by limiting housing supply. Without policy adjustments, the long-term effect could be deeper market imbalances and sustained pressure on prospective homeowners.