Housing affordability in the United States has reached a critical juncture, with a staggering shortage of approximately 4 million homes reported as of mid-2023. This crisis has caught the attention of political figures, including President-elect Donald Trump. His commitment to address this issue by promoting new housing construction has sparked a debate on the effectiveness and feasibility of such an approach. While creating new housing is a vital component of tackling the affordability crisis, the broader implications of Trump’s proposed policies must also be carefully examined to understand their potential impact on the housing market.
During a press conference, Trump highlighted the need for additional housing, asserting that “we desperately need housing for people who can’t afford what’s going on now.” Indeed, as home prices surge and inventory dwindles, the urgency for constructing new properties becomes even more pressing. National Association of Realtors President Jim Tobin confirmed this need, emphasizing that more home construction is essential for addressing the ongoing housing shortage.
The data illustrates a modest increase in new housing starts, with 1,027,000 single-family home constructions reported in September, marking a 2.7% uptick from August. Despite this growth, experts stress that it remains insufficient to meet the overwhelming market demand. As various obstacles hinder the pace of construction, the persistent gap between supply and demand continues to challenge home affordability.
While Trump’s vision of expanding housing supply seems straightforward, his administration’s immigration policies could complicate these efforts significantly. Notably, Trump’s calls for mass deportation raise concerns about disruptions in the construction labor force. Estimates indicate that roughly 31% of construction workers in the U.S. are immigrants, and the withdrawal of this workforce could lead to labor shortages, subsequently inflating construction costs.
Jacob Channel, a senior economist at LendingTree, indicates that removing over a substantial segment of the workforce may lead to increased wages, which would transmit directly to consumers in the form of higher home prices. The construction industry historically struggles to attract native-born workers, as revealed by a NAHB survey indicating that merely 3% of young adults are interested in pursuing careers in construction. This exacerbates the potential fallout from any immigrant labor loss, placing further strain on housing supply and affordability.
Regulatory costs represent another vital factor that influences home prices. Trump has proposed slashing regulations and permitting requirements, asserting that such moves could drastically reduce housing costs. According to Tobin, regulatory costs account for approximately 24% of the price of single-family homes and 41% of multifamily home costs. Nevertheless, while reducing these regulatory burdens has the potential to streamline home construction, it risks weakening protections for the environment and public safety if not handled judiciously.
As Trump aims to downsize these regulatory frameworks, the housing market must grapple with the potential trade-offs involved. Eliminating certain checks and balances might expedite construction but could result in long-term consequences for livability and sustainability in residential developments.
Economic Policies and Their Implications
Trump’s economic policies, particularly his proposed tariffs, also merit scrutiny. A blanket tariff model ranging from 10% to 20% on building materials could spurn an increase in construction costs, thereby making housing even less affordable. With average construction costs for single-family homes estimated at around $392,241, the introduction of tariffs on essential materials may exert upward pressure on these prices, further complicating the landscape for prospective homebuyers.
Daryl Fairweather, chief economist at Redfin, notes that the specific impacts of the tariffs will depend on their structure and implementation. This uncertainty underscores the necessity for a strategic approach to policy formation that adequately considers the complex interactions within the housing market.
As the housing market grapples with multifaceted challenges, it is evident that while Trump’s intentions to boost construction are commendable, the path to achieving affordable housing requires more than mere promises. Housing affordability reflects a multifactorial landscape where labor supply, regulations, and economic policies converge.
Innovative solutions must prioritize not only quantity in housing supply but also quality and accessibility in urban areas, where dense populations struggle most with affordability. The complexities of this crisis call for a balanced and holistic approach that encompasses diverse factors, ensuring that all Americans can attain decent and affordable housing in a rapidly evolving market. Recognizing these intricacies is essential for any future administration aiming to make real progress in tackling America’s housing affordability crisis.