How Trump's Tariffs and Immigration Policies Could Make Housing Even More Expensive
Out-of-control housing costs helped Trump win the 2024 election. Is he about to make the problem worse?
President Donald Trump owes his second electoral victory, in no small part, to voter frustration over the rising cost of living. Over the course of Joe Biden's presidency, the price of a typical American house increased by nearly 40 percent, and rents followed a similar trajectory. As of 2024, approximately 771,480 Americans lack reliable shelter—at once a new high and a new low.
All of these issues are most acute in states governed by Biden's fellow Democrats. In California, the median home price is now more than 10 times the median household income. Economists generally view three to five as a healthy ratio.
Polling data suggest that many key voting blocs in the 2024 presidential election were primarily motivated by the rising cost of living and by out-of-control housing costs in particular. For all the network news preoccupation with transgender athletes and campus protests, it was mortgages and rents—the single largest line items in a typical household's budget—that moved voters to toss out incumbents.
On April 2, after months of empty threats and false starts, the administration finally launched its global trade war, including a 25 percent tariff on various goods from Canada and Mexico. But Canadian softwood lumber and Mexican gypsum used for drywall—the (literal) pillars of a typical American single-family home—would be exempt.
The National Association of Home Builders (NAHB) was quick to celebrate it as a win: Canada accounts for 85 percent of all U.S. lumber imports. If the tariffs had taken effect as planned, the per-unit cost of a home might have increased by as much as $29,000. In a sector characterized by thin margins, that would have meant a lot of idle construction sites.
And yet the partial rollback will offer only a temporary reprieve. Tariffs already in effect will increase the cost of a new home by $10,900 on average, according to an April 2025 estimate by the NAHB—an increase of $1,700 over its March estimate. This is on top of a 41.6 percent increase in building materials since 2020, brought on by pandemic-related supply chain disruptions.
Those cost increases could hit renters hardest. After a decade of underbuilding in the wake of the 2008 financial crisis, America is short roughly 5 million homes—most of them apartments. Perhaps the most robust finding in urban economics is that when vacancy rates increase, rents fall. But driving up vacancy rates requires cities to build more housing.
Thanks to the YIMBY ("yes in my backyard") movement, a handful of cities—including Austin and Minneapolis—have recently had building booms that have brought prices back down. But those cities have been the exception.
Meanwhile, a new wave of tariffs is about to make it a lot more expensive to build.
On February 11, the administration imposed a 25 percent tariff on steel and aluminum—much of it imported from allies such as Brazil and Germany. On February 25, the administration announced an investigation into copper imports, presumably with future tariffs in the works. Depending on their country of origin, other key inputs like iron and cement are also now subject to steep tariffs.
Even if you can get new housing built, the appliances needed to make all these new homes livable could soon cost hundreds of dollars more. Not only are microwaves, refrigerators, and air conditioners now more expensive to import, but tariffs on key inputs mean they are also more expensive to produce domestically.
Uncertainty around tariffs has put many construction projects on pause, sending homebuilder stocks plummeting. Many small, local developers are exiting the market altogether. Following in the mold of autarkic Cuba—where international trade is strictly limited and medical doctors drive taxis for a living—your next Uber driver could very well be an out-of-work former developer. Never mind that the typical American city desperately needs them to build.
If tariffs weren't bad enough, the administration's program of mass deportations could kick the housing crisis into overdrive. As things stand, the construction industry is already short 250,000 workers. This is partly a legacy of Trump's first term, in which an immigration clampdown suppressed what might have been an overdue housing construction boom.
Even today, approximately 30 percent of construction workers are immigrants, many of them undocumented. In California, which is already a basket case on housing affordability, immigrants make up 41 percent of all construction labor. In Texas—one of the few bright spots for housing affordability in recent years, thanks to an ongoing construction boom—nearly 60 percent of all immigrant construction workers are undocumented.
If 2024 was any indication, expecting voters to put up with all this in 2026 is a risky gamble.
On some level, the Trump administration must appreciate that this is an existential threat. And yet its current proposals are out of sync with the scale of the housing crisis: Releasing more federally owned lands for housing development remains the only proposal the administration has seriously offered up to address the housing shortage. It's a fine enough idea if properly designed. But it would, at best, provide only modest relief to a handful of Western cities.
Worse yet, the administration seems to have regressed to the implicitly regulatory "protect the suburbs" rhetoric that so failed Trump in the 2020 election.
In February, Department of Housing and Urban Development (HUD) chief Scott Turner announced that he would be scrapping the Affirmatively Furthering Fair Housing (AFFH) rule in order to "cut red tape" and "advance market-driven development." Except the rule was essentially just a reporting exercise that required local governments to disclose—and ideally remove—local red tape standing in the way of housing.
In 2018, then–HUD Secretary Ben Carson embraced the AFFH rule as a way of nudging cities to remove regulatory barriers to housing production, as part of his brief flirtation with YIMBYism. In a move that would make Orwell blush, Carson joined Trump in a Wall Street Journal op-ed two years later announcing that they would "protect America's suburbs" and scrap the rule if reelected. Trump lost that election.
It's all a very strange state of affairs—a developer in chief with evidently little interest in getting America building again. It didn't need to be this way. Over the course of the first Trump administration, housing production recovered at a steady clip, with a muted increase in housing costs as a result. The administration's deregulating zeal could have been focused on unnecessary federal mandates that increase costs.
Instead, the United States is poised to experience a run-up in housing prices through 2028 that could make the pandemic-era increases like a minor blip.
So what could the federal government do? From a constitutional perspective, not much. The bulk of the blame for America's housing crisis lies with local governments that maintain onerous zoning regulations and unpredictable permitting processes—and the state governments that control them. The federal government has little role to play in zoning, even if it once did a lot of the heavy lifting to promote it.
But that isn't to imply there is nothing the federal government could do. In recent years, the idea of tying federal dollars to local deregulation has gained acceptance within the Beltway. Bills with unsubtle names like the "Build More Housing Near Transit Act" or the "Yes In My Backyard Act" would variously condition money for transit or other public facilities on local jurisdictions cutting back on red tape.
At the same time, the federal government could turn up the tax pressure. If homeowners in cities with high costs and low production were suddenly ineligible for benefits like the mortgage interest deduction or the state and local tax credit, it would transform the local politics of housing. Homeowners who might otherwise be fully bought into government constraints on housing production could flip their script.
More likely, however, the onus will fall on state and local legislators to pull out all the stops on housing production. State and local elected officials can't control tariffs or immigration policy. But they can control "make or break" factors such as zoning regulations, permitting timelines, and impact fees. According to a recent RAND study, variations in these policies explain why it's nearly twice as expensive to build housing in California as in Texas.
At least some state legislators are rising to the occasion. In recent months, states as diverse as Republican-supermajority Montana and Democratic-supermajority Washington have moved forward legislation restricting the right of local governments to block housing. Even California is starting to see the light. All these bills will help to get more housing built, no matter what's happening at the federal level.
The Trump administration had better hope those state-level efforts are successful—and scrap the trade and immigration policies that could plunge America into another housing crisis.
This article originally appeared in print under the headline "The Coming Housing Crisis."
