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War on New Housing
September 14, 2020

The Trump Administration’s War on New Housing

As the nationwide housing affordability crisis deepens, the Trump administration is moving to adopt steel and aluminum tariffs that will make it worse, particularly in dense urban cities. This move follows new tariffs on Canadian lumber late last year and harsher enforcement on the migrant workers from Mexico and Central America who are essential to the industry. The combined effect could mean higher rents and more expensive housing in the years to come.

Earlier this month, the administration signaled it would increase steel tariffs to 25 percent and aluminum tariffs to 10 percent. While the goal is to inject some life into the U.S.’s steel industry—which employs just 143,000 workers, many clustered in the politically important Midwest—the Wall Street Journal and others have pointed out that the tariffs could ultimately hurt employees in much larger steel-consuming industries. President Trump has exempted Mexico and Canada from these tariffs, but these countries only make up 25.61 percent of U.S. steel imports. One industry that will be hit hardest by these tariffs is the construction industry, which could be bad news for renters and prospective homeowners. As new supply continues to fall short of rising demand, this could lead to more pressure on rents and housing prices.

Nearly half of all U.S. steel imports go into construction, with a large share of that steel going into multifamily housing. While wood frame construction is increasingly common for apartment buildings up to five stories, the taller structures that are needed in white-hot housing markets such as San Francisco, New York, and Austin depend entirely on access to steel. According to a study released by the Trade Partnership earlier this month, the proposed steel tariffs could lead to 28,000 lost jobs in the construction industry. That’s a lot of housing that won’t be built, and affordable projects that already operate on tight margins will be the first to be cut. While exemptions from the tariffs might offer hope, the price volatility in the near term could still scuttle many large projects, where price certainty is crucial for investors.

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