Tariff Impacts on Housing Affordability and Construction. - Borderline Economics 11/24/2025
Housing prices have all time highs since the pandemic driven by supply imbalances and declining new home construction. Although the Trump Administration has expressed the priority of the housing crises on policy decisions and a potential national housing emergency, new tariff policies on Canadian lumber, cabinets, and upholstered furniture enacted on October 14 will significantly increase material costs for the construction of new homes and continue to drive housing unaffordability for Americans.
Housing Prices are at Record Highs:
In the last five years the cost of buying a new home reached new highs, going from an average of $317,000 in 2020 to $514,000 in the most recent quarter of 2025. With the income needed to buy a single-family home almost doubling over the period, around a third of American households now spend more than 30 percent of their income on housing.
The steep rise in housing prices has destroyed housing possibilities for the average American worker. Only about 1 in 5 listed homes in March 2025 were affordable for households with $75,000 in annual income, according to a NAR analysis. Today, a household with annual income of $50,000, $5,000 above the median personal income in the US, can only afford 8.7% of listings, down from 9.4% a year ago.
NAR deputy chief economist Jessica Lautz puts it best: "The lack of homes, especially at affordable price points where they would be entering the market, has been plaguing first-time homebuyers for the last several years,"
America’s housing crisis can be attributed to the imbalance of housing supply to demand with reports highlighting a shortage of over 4.7 million homes. The shortage has been driven in part by a decline in new home construction caused by labor shortages and a rising cost of materials (up 41.6% since the COVID-19 pandemic). Resultantly, new home construction has become expensive and unavailable to most American families.
Yet, despite the persistent housing crisis and high material costs for residential construction the Trump administration implemented significant tariffs on crucial construction materials such as Canadian softwood lumber and wooden upholstery in October, reflecting a contradiction between housing promises and economic policy.
The Trump Administration is Contradicting Housing Goals With Lumber Tariff Policy
This year, the Trump Administration has clearly identified the housing affordability crisis as a top priority: a month ago Treasury Secretary Scott Bessent said the Trump administration may declare a national housing emergency, and Trump highlighted the importance of the housing crisis during his 2024 campaign, making promises for housing ownership and emphasizing that that the party would “promote homeownership through tax incentives that support first-time homebuyers.”
Yet, despite acknowledgements of supply imbalances driving the housing crisis, the administration has enacted high tariffs on crucial materials for new-home construction. August 1st saw a 50% tariff on copper immensely raising the costs of copper piping essential to home construction. Additionally, a series of tariffs implemented on October 14th have driven an 45% effective tariff on Canadian softwood lumber, which comprises 25% of the US’ construction lumber imports and is crucial for dimensional framing in new-home construction.
The new tariffs also included 25% upholstered wooden products and kitchen/bathroom cabinets and vanities. Those duties will climb further in 2026, rising to 50% on cabinets and vanities and 30% on upholstered furniture.
Material Tariffs Will Drive Housing Prices Up, Affecting Homebuyers and Small Construction Businesses
The October 14th tariffs are estimated to add an average $10,900 to the cost of constructing a new single-family home, and tariffs implemented in October may add $50k–$100k to new home costs in some regions. Overall project costs have risen 15-25%, causing profit margins to shrink by 5-10% for many construction firms. The NAHB notes that a typical commercial construction project that previously budgeted $1 million for materials might now require $1.2 million.
The administration’s recent tariff policy will drive tens of thousands of dollars in rising house prices for homebuyers, driving already unaffordable housing further out of reach. The policy will also contribute to the continual decline of new-home construction, furthering the supply imbalance driving America’s housing crisis.
In addition, small construction businesses, which comprise 80% of the industry, could be hit hardest by the tariffs. The CEO of the Hispanic Construction Council stated “With slimmer profit margins, these firms struggle to absorb rising costs,” he explained. “New home construction, already challenged by labor shortages and disrupted supply chains, faces added strain from tariff-induced hikes.”
The Bottom Line:
Although the Trump administration has promised to address the housing crisis, recently enacted tariffs on Canadian lumber and wooden upholstery will significantly raise the construction costs of new homes, perpetuating the decline of new-home construction and worsening the already unaffordable housing market. Rather than punitive tariff measures that negatively affect key construction materials, the administration needs to address fundamental economic supply issues within the housing market and use policy to support new-home construction. Recent tariff measures only serve to raise trade barriers and drive housing unaffordability across America, worsening home-ownership conditions for average American workers and disproportionately harming small construction businesses.
If you’re interested in learning more about how tariffs have affected consumer conditions, read our other posts about how tariffs are destroying American farmers here