Assessing the Impacts of Trump’s Tariffs on Affordable Housing

President Trump’s second term has accounted for some of the largest trade tax increases in U.S. history. While his first term was heavier on bluster and measured trade action, Trump’s current trade initiatives are wide-ranging and swiftly developing.

His expansive tariffs, which were imposed earlier this year and impact nearly all foreign imports, have been relatively controversial, notably generating pushback from groups of consumers, economists and homebuilders, among others.

Though a year has passed since Trump began pursuing his current trade initiatives in earnest, members of the affordable housing industry are still left wondering just how these tariffs will affect bottom lines and the ability of deals to pencil. For example, a looming threat of substantial tariff hikes for wooden goods recently subsided after the White House announced that those tariffs would be delayed by one year. Further, the current tariff landscape may indeed be completely upended this coming Friday, when the Supreme Court is expected to rule on the legality of President Trump’s current tariffs.

Still, those in the industry remain wary of the challenges that both cost increases and general uncertainty will continue to impose on the delivery of affordable housing units.

Trump’s Unprecedented Tariff Strategy
Tariffs are taxes on imported foreign goods, often designed to advantage domestically manufactured goods over foreign competitors. While tariffs are not new in the United States, with laws dating back to the late 1700s, President Trump’s most recent round of tariffs are largely unprecedented and have increased tariffs to the highest level since the 1930 Smoot-Hawley Tariff.

Throughout his 2024 presidential campaign, Trump promised larger tariffs than his first term. In his inaugural address, he pledged: “I will immediately begin the overhaul of our trade system to protect American workers and families. Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.”

Trump’s tariff rollout began in February, beginning with ten percent tariffs on China and 25 percent tariffs on Canada and Mexico (which were subsequently paused for 30 days). In the intervening months, the unpredictability of actual enacted tariffs have seemingly been the only consistency, with the levies subject to frequent pauses and adjustments from trade deals.

By April, the uncertainty only increased when “reciprocal” tariffs were imposed on more than 80 countries, only to be paused a week later. By year’s end, the tariff landscape was a patchwork of enacted, paused and proposed duties, with some of the heaviest imposed on Asian countries such as India, China and Myanmar.

The above country-by-country tariff tracker, published and updated by the Urban-Brookings Tax Policy Center, is embedded with permission. Please visit their full tariff tracker for more in depth data.

How is the Affordable Housing Industry Being Affected?
Trump’s tariffs have had varying levels of impact within the affordable housing industry. With uniquely aggressive taxes on materials like metal and lumber products, some residential builders fear that rising costs will sideline deals. Others have not yet experienced any tangible impact.

“Across the nation, we’ve seen less than five change orders as it relates to tariffs. With the ever-changing cost landscape, there’s been no definitive percentage of increase across the board,” says Sean Hart, eastern regional manager of Moran Consultants, a national construction and risk assessment firm specializing in upfront plan and cost reports as well as progress reporting. “What we are seeing is an increase in specific Contract Language gearing up for anticipated cost increases.”

“We haven’t had enough time to actually see the impacts on the industry,” adds Andrew Tam, Moran’s western regional manager. “After consistent tariffs are in place for six months to a year, then you start to see some budgetary movement with it, but it just hasn’t been that time frame yet due to pausing and revisions in percentage basis.”

The Trump administration has argued that new and elevated tariffs seek to reinvigorate U.S. manufacturing infrastructure, address trade imbalances between the U.S. and foreign nations and protect national security. Mason Claverie, Moran’s central regional manager, wonders about the feasibility of such goals, noting that domestic manufacturers and producers alone are still not equipped to satisfy demand.

“We don’t yet have the mills or the machinery. We don’t have everything up and running yet to be fully sustainable and made in the USA again,” Claverie says. “We’re starting to see that, though. Timber mills coming back to the U.S., coming down from Canada and building throughout the Gulf Coast. We’ve seen quite a few over the past three years. It’s slowly getting there. Timber is probably going to be one of the first ones you see becoming a more widely domestic product. But for the most part, trying to have something 100 percent made in the USA — we’re still years off from that.”

For others in affordable housing development, tariffs have been a significant stressor in an industry already strained by a national housing crisis, in which there is a shortage of over 7 million affordable homes available to low-income renters.

Kenneth F. Wille is president and CEO of KOW Building Consultants, a New York-based consulting firm specializing in cost review and construction monitoring services for lenders and developers. Wille, who has been closely tracking tariff rates and material costs since January 2025, says that prices remained relatively consistent throughout the first half of 2025 before slowly increasing beginning in April, and then spiking in summer and fall.

“What we found happened in the spring was that a lot of companies did not want to pass along the tariff increase. They ate that additional cost.” said Wille. “Eventually, the companies said, ‘okay, this is no longer a short-term increase. I have to pass it along.’ And if they have to pass it along, the competitor has to pass it along.” Thus, by the second half of the year, Wille says material costs went up across the building industry.

In some instances, builders have been able to turn to domestic producers as an alternative cost-efficient source, but with a manufacturing industry that has been steadily declining for nearly 50 years, the U.S. generally lacks the infrastructure to keep up with consumer demand. Additionally, Wille noted that many domestic manufacturers have begun to raise their prices in order to match the costs of taxed foreign imports.

“Something we’ve definitely seen: Even if you didn’t have foreign supplied material, you could raise your prices because everyone else has to. The American produced goods have made up that difference because the market will allow them to do that without losing share,” Wille says.

The unpredictability of tariffs has forced compromise. Michael Kucera, president of full-service construction company DSS Builders, says that fluctuating costs have some developers and contractors operating at a reduced capacity and profit margin.

“Especially in the affordable housing industry, we’re always trying to budget a project that’s going to occur sometime in the future — a year, a year and a half from now — and because the development cycles are so long, we either lower our margins or accept less overhead and profit,” Kucera says. However, “at some point, developers just can’t afford any more cost. There’s no more subsidy available. With tariffs and increased costs, everybody’s affected. The developers are looking at reducing their developer fees and contractors are looking at reducing their fees just to make the deals work.”

It is unclear who exactly has already borne, and who will continue to bear, the greatest burden of these rising prices. In July, Yale Budget Lab estimated that, once tariffs took full effect, consumers would face an average tariff rate of 19.7 percent, the highest since 1933. While this number has not fully realized, consumers are still facing higher prices; as of November, retail prices have increased by nearly 5 percent, according to Harvard Business School’s Pricing Lab.

These softened consumer-level affects may stem from businesses’ decisions to absorb tariff burdens themselves: According to a new working paper from economists at Harvard and the University of Chicago, American importers were paying an estimated 94 percent of tariff costs (up from about 80 percent in 2018-19 during President Trump’s first major tariff push).

Construction being a more nuanced field that is less consumer-facing and more reliant on larger business-to-business purchases, Wille explains that costs overall have been split between importers, developers, contractors and subcontractors.

“It’s a shared pain. I think where it was for most of this year was that the subcontractor was making a little less profit, the contractor was making a little less profit, and then a little bit of the cost was being passed on to the developer or the borrower,” Wille says. He predicts that, should tariffs remain “here to stay,” then both subcontractors and contractors will “recover back to normal profit margins, and it will be more expensive to build as costs will be passed along to the developer exclusively.”

Risk Mitigation Strategies
With the threat of tariffs still looming going into the new year, both Wille and Tam have advice for mitigating the potential risks of trade taxes.

All of these strategies, of course, would be “outside of normal construction protocol,” Tam notes, but may help build in crucial predictability that can help a deal ultimately pencil and deliver units to residents.

For example, Tam says that owners should take care during the buyout phase of a project, during which subcontractors and materials are procured. There are various strategies to navigating the buyout, from negotiating fixed prices for materials and labor to including reimbursable expenses in less certain environments. Tariff uncertainty can bring in some risk to the buyout phase, pressuring contractors and subcontractors to either build in higher materials margins should prices rise or offer lower prices and remain exposed to market volatility.

“Contractual language, before the loan closes, can mitigate” some of the tariff risks, Tam says. “Our clients are banks and lenders, so if there’s a project contingency amount, we ask: do we need to increase this contingency in case there’s all these tariffs coming through next year? Do we need to make certain items in the schedule values be an allowance because we’re not sure of that price? So there’s ways to mitigate on the front end.”

One unique contractual approach for risk mitigation is to include an “escalation contingency,” Wille says, in which any material cost overruns can be reimbursed (plus some overhead and profit), giving all parties peace of mind that potential tariff-induced cost increases can be covered. “It’s usually 5 percent, and it is specific to price increases that we don’t see today,” Wille says. “I really like that solution. It’s a way that we’re all working together. We’re all saying, look, you’ve got your cost penciled out. We know what we think it’s going to cost. But if some curveball comes that nobody saw, nobody expected, let’s all be together on this. And I think that that’s something you’re going to see continue into next year.”