Impact of Trump's Executive Orders on Homebuilders

After taking office, President Donald Trump quickly began to put his policies into action. On the first day of his presidency, he signed over 200 executive orders, along with various proclamations and memorandums, which included decisions about notable issues such as withdrawing from the World Health Organization and extending the timeline for a TikTok ban.

Many of these actions have implications for homebuilders across the United States. Among his various initiatives, Trump has made commitments to address immigration and has hinted at imposing significant tariffs on timber sourced from Canada and Mexico. Notably, one of his executive orders focuses directly on housing.

The National Association of Homebuilders (NAHB) expressed approval of Trump's housing-related measures. They commented, "NAHB commends President Trump for acting on day one to make housing a national priority by issuing an executive order that seeks to lower the cost and increase the supply of housing. President Trump understands that America is facing a housing affordability crisis, and the only way out of this crisis is to remove barriers like unnecessary and costly regulations that are raising housing costs and preventing builders from building more attainable, affordable housing."

Despite the positive reception from homebuilders, the exact effects of these executive orders are not entirely clear, and in some instances, they may even contradict one another. Nonetheless, it is evident that many of these initiatives could present short-term challenges for those in the homebuilding industry.

“It’s not just tariffs,” explained Bright MLS Chief Economist Lisa Sturtevant. “Homebuilders are facing a relatively high interest rate environment, which makes borrowing more expensive, finding labor harder, and sourcing materials pricier. This ultimately leads to higher costs for putting a house on the lot, which means higher prices for homebuyers.”

Unclear Guidance in Trump's Housing Executive Order

While homebuilders appreciate that Trump recognizes low housing supply is contributing to rising home prices, the specific strategies to rectify the situation in his executive order remain vague.

The majority of the order includes his criticisms of the preceding Biden administration, calling its policies “oppressive.” What can be understood is that Trump seeks to loosen housing regulations. However, many regulations that restrict homebuilding—such as zoning laws—are governed at the local level, making them largely outside presidential control. Changes to local zoning must be incentivized at the federal level, often by linking federal funding to commitments to alter local zoning practices.

Some local authorities, however, may opt to forgo federal funds to maintain existing zoning rules. “He is directing federal executive departments to look into these issues, but the actual impact may be limited to persuading local governments to ease regulations,” remarked Chen Zhao, the head of economics research at Redfin.

Immigration Changes and Their Impacts

Most of Trump's immigration executive order focuses on the southern border and includes adjustments to asylum policies along with allocating funds for the border wall's construction. While these changes may not provide immediate effects for builders, they signal Trump's commitment to stricter immigration policies.

Should Trump enact his pledge for mass deportations of immigrants, the construction workforce could significantly decrease. The NAHB reports that immigrants constitute approximately 32.5% of all construction personnel. This percentage rises considerably for specific trades, such as plasterers, drywall installers, roofers, and painters, where immigrants represent more than half of the labor force.

Sturtevant described the ongoing challenges in recruiting enough construction workers and warned that the lasting effects of a restricted immigration policy could adversely influence both the economy and the housing sector.

The consequences of immigration enforcement activities on homebuilders will vary depending on their location. Although raids were planned, such as one targeting Chicago, they have faced delays that leave their future uncertain. If these enforcement actions are concentrated in urban areas with less home construction, like New York or San Diego, the immediate impact on builders may not be as severe. However, places like the Los Angeles area that experience ongoing construction may see increased demand due to recent wildfires.

During the campaign, the Trump team argued that mass deportations would lead to increased housing availability and lower home prices; however, experts found little evidence to support these claims. Immigrants also contribute significantly to remodeling services, meaning businesses in those areas could face labor shortages as well.

Tariff Threats and Their Potential Effects

The potential imposition of tariffs remains a concern for homebuilders, particularly in light of Trump's attention on Canada, Mexico, and China as key targets. Economists watch these situations closely, as tariffs generally tend to drive up home prices. In a 2018 study by the NAHB, it was estimated that lumber tariffs imposed during Trump's first term raised the cost of building a single-family home by about $9,000.

“Raising the costs of materials that builders require to construct homes will inevitably apply pressure, making it harder and more costly for people to purchase homes,” Sturtevant noted.

For homebuilders who oppose such tariffs, there was a glimmer of hope on Trump’s first day. He proposed a 25% tariff on both Canadian and Mexican imports but set a future effective date of February 1, hinting that the 25% could simply be a negotiating tactic rather than a definitive rate. While he had called for significant tariffs on China, he shifted focus to a more careful examination of trade with the country instead.

Unlike issues around immigration, tariffs would have an immediate and direct effect on the costs associated with construction materials. A substantial portion of the soft lumber used in U.S. construction is imported from Canada, as well as significant amounts of steel. Additionally, China plays a crucial role as a supplier of electronics for home appliances, a relationship that was exposed to risks during the pandemic.

In time, tariffs could stimulate the domestic market for lumber, steel, and electronics, but the actual benefits of this shift are uncertain. Builders cannot easily adjust their supply chains, meaning they may experience immediate hardships because of these tariffs.

Trump, Housing, Homebuilders