How Trump’s executive orders impact homebuilders

President Donald Trump wasted no time implementing his agenda after taking the oath of office on Monday. He signed more than 200 executive orders, memorandums and proclamations on the first day of his second term, touching on everything from withdrawing from the World Health Organization to delaying the TikTok ban.

And many of them have direct implications for homebuilders. His promises to crack down on immigration and threats of massive tariffs on Canada and Mexico have begun to take shape, and one executive order specifically addresses housing.

The National Association of Homebuilders (NAHB) released a statement in support of the latter.

“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,” the statement reads. “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.”

The impact of each of these executive orders on homebuilders is uncertain, and in some cases they are contradictory. But it’s safe to say that many of Trump’s proposals and executive orders could cause short-term issues for homebuilders.

“It’s not just tariffs,” said Bright MLS Chief Economist Lisa Sturtevant. “Homebuilders are facing this relatively high interest rate environment, too, so it’s it’s more expensive to borrow, it’s more expensive to find workers, it’s more expensive to source materials, and all of that means that it’s going to be more expensive to put a house on a lot, which means it’s going to be more expensive for homebuyers.”

Trump’s housing executive order doesn’t say much

Homebuilders are pleased that Trump recognizes that low supply is driving up home prices, but the prescription for addressing it in his executive order is unclear.

Most of the order’s text are his familiar shots at the Biden administration, describing his policies as “oppressive.” To the extent anything can be gleaned from it, Trump wants to loosen regulations around homebuilding.

However, regulations around housing that stifle building are zoning requirements that are administered at the local level, meaning they are outside the authority of the presidency. At the federal level, policy options for changing local zoning are limited to incentivizing change.

This is done by placing conditions on federal transportation funding and Community Development Block Grants to include changes to local zoning. However, some localities are happy to forego that funding to keep zoning the same.

“He is ordering the head of the executive departments and agencies at the federal level to look into this, but I’m not sure what kind of an impact they can have other than lean on local governments and try to incentivize them to streamline regulation and make it easier to construct housing,” Chen Zhao, the head of economics research at Redfin, said.

Immigration order doesn’t directly affect builders

Most of Trump’s executive order on immigration targets the southern border with changes to asylum policy and unlocking federal funds for the construction of a border wall. While this probably won’t have an immediate direct impact on builders, it’s a sign that Trump is serious about an immigration crackdown.

Now if Trump follows through on his promise of mass deportations of immigrants already in the United States, that could zap the amount of construction labor available to builders. According to NAHB, 32.5% of construction workers are immigrants.

The number is higher depending on the specialty of the worker. Immigrants make up more than half of the work force among plasterers (61%), drywall and ceiling installers (61%), roofers (52%) and painters (51%).

“There’s a challenge on the supply side when it comes to recruiting enough workers in the construction sector,” Sturtevant said. “I think longer term, this environment of an unwillingness to open immigration to folks who would come to our country and serve in the construction trades has the potential to have longer-term impacts on the economy and on the housing market.”

The degree to which raids in immigrant communities would impact the bottom lines of homebuilders — if it does at all — likely depends on where those raids take place. The administration planned a raid on Chicago, but it leaked prior to Trump taking office and is now in limbo. 

In the past Trump has targeted “sanctuary cities” for these raids, meaning cities like New York, San Diego, Denver and Los Angeles. Urban cities like Chicago and New York have significantly less home construction than in the south and southwest, so if raids are limited to those types of cities, builders may not feel the pain of a labor shortage as much.

However, it’s worth noting that the Los Angeles metropolitan area still sees a good amount of housing construction, and the wildfires that have ravaged parts of LA will increase the demand for housing construction in the short term. LA housing already faces numerous headwinds as a result of the fires that could make housing more expensive.

During the campaign, the Trump camp argued that mass deportations would free up housing and thus put downward pressure on home prices and rents, but economists say there is little evidence to support that claim.

Immigrants also make up a large share of workers who do remodeling, so companies offering those services might feel the pinch as well. And while builders may get a break in the short term, a crackdown at the border could limit future labor supply as well.

Tariffs on Canada, Mexico and China loom large

Trump’s continued threat of tariffs is hard to game out because the numbers have changed regularly dating back to the campaign, with Canada, Mexico and China being the most frequent targets.

Economists have been consistent in their view that these tariffs will negatively impact home prices. In 2018, an NAHB study estimated Trump’s first-term tariffs on Canadian lumber added $9,000 to the cost of building a single-family house.

“I think it’s pretty well understood that raising the cost of materials that home builders are using to build homes is going to end up making it harder to build homes and make it more expensive for people to be able to buy those homes,” said Sturtevant.

But for homebuilders opposed to these tariffs, Trump’s first day is positive news. In the hours since assuming office, he’s proposed a 25% tariff on both Canada and Mexico, but with an effective date of Feb. 1. That could be interpreted as a sign that the 25% number is merely a negotiation tactic.

While he campaigned on harsh Day 1 tariffs on China, on Inauguration Day he passed on that idea and instead called for a “study” on the dynamics around trade with China.

Unlike immigration, tariffs would have an immediate and direct impact on the cost of building materials. According to NC State’s College of Natural Resources, roughly 30% of the soft lumber used in U.S. construction comes from Canada, and our neighbor to the north supplies a substantial amount of steel.

China is a leading supplier of the electronics that go into home appliances, and the consequences of disruption to that supply line was laid bare during the pandemic.

Over the long run, tariffs could boost domestic consumption of lumber, steel and electronics, but the extent to which that’s true — particularly on electronics — is murky. Homebuilders also can’t reroute their supply lines on a dime, so it’s likely the tariffs would cause pain at least in the short term.