Housing experts anticipate the impacts of the changing federal administration. (Photo by Justin … [+] Sullivan/Getty Images)
Stakeholders in the housing industry watched the election with a mix of anxiety, caution, and a bit of self vindication as housing was passionately discussed in the presidential campaigns, delivering promises to alleviate some of the industry’s biggest challenges.
Now, after the election, the anxiety heightens as there is a watch and wait to see what becomes of the promises. Several experts weigh in on the topics that are in the balance.
Immigration
The home building and home improvement industries depend on migrant labor, with some estimates stating that more than 30% of construction workers are immigrants.
“If Trump tries to go ahead and deport migrants, I’m sure [industry]
will use quiet diplomacy at the start, but will we reach the point where they’ll have to visibly oppose Trump because their operations are being hollowed out?” asked industry consultant Craig Webb, who serves as president at Webb Analytics LLC.
With an already tight labor market, losing a third of the workforce would most certainly be followed by higher prices for the cost of construction, which would ultimately raise the already record high costs of housing.
Housing Policy And Regulation
Peggy Bailey, executive vice president for policy and program development at the Center on Budget and Policy Priorities is preparing for President-elect Trump’s new administration by reviewing what happened during his previous term.
The Center’s biggest concerns are how to protect people’s fair access to housing, and how to protect the treatment of homeless from the quickly popularizing local laws that make it illegal to sleep outside.
Bailey also anticipates changes to the Department of Housing and Urban Development based on proposals that would block grants and even proposals to defund the department all together.
“We’re deeply concerned with any policies that threaten family’s incomes and that don’t do anything to supplement the gap between incomes and housing costs,” she said. “Too often, people with low incomes are demonized, when they are actually working very hard but cannot make the income required to have decent housing.”
While Bailey is tackling some of these federal-level issues, a lot of home building policy happens and is executed at the local level, where the presidency will not have a big impact.
“The one exception might be if Trump does succeed in handing over federal lands, but there are questions as to how much of that land is desirable for home builders,” Webb said.
Plus, most green building codes, regulations, and policies are developed and enforced at the municipality and state levels to allow for the right approach for the environmental, economic, and social needs that the region requires, points out Sara Gutterman, the CEO at Green Builder Media.
“This localized control empowers municipalities to respond to local climate challenges, such as water scarcity or extreme temperatures, and to drive innovation in sustainable building practices,” she wrote. “Climate commitments will continue to be driven forward as aggressively as ever by progressive mayors, governors, and individuals who understand the economic, environmental, and social benefits of climate action—as well as the grave risks of inaction.”
Many mayors are stepping forward with aggressive emission reduction targets and large investments in sustainability in the hopes of combatting the impacts of climate disasters.
“Local leaders recognize that inaction is not an option, as the costs of climate inaction—disrupted economies, public health crises, and damaged ecosystems—far outweigh the investments needed to combat climate change,” Gutterman added.
Interest Rates
While the President doesn’t have control over interest rates, Zillow’s senior economist, Kara Ng, wrote that rate fluctuations will be more unpredictable than they already are and that the Fed will start delivering predictions as policies are actually drafted.
“The recent spike in mortgage rates is a headwind for housing activity,” Ng added. “Of course, the future of mortgage rates is uncertain, and it is far from a guarantee that we will see lower rates in the spring.”
Materials And Tariffs
Building materials are often purchased at a local level, but the construction industry will still be … [+] impacted by new tariff policies.
President-elect Trump has been passionate about onshoring manufacturing and is positioning policies such as tariffs to drive that forward. Yet, it may not have a big impact on home building.
“Most construction products are made in North America, so tariffs aren’t as much an issue as other industries,” Webb said. “That said, tariffs would have an impact on basic products, like fasteners, as well as all the white goods that go into homes: stoves, refrigerators, washing machines, etc. Most economists believe those tariffs would make housing even more expensive.”
Historically, construction materials have been bought and sold at a local level because the products are large and heavy. Plus, the vast majority of construction projects are quoted job by job. So, Webb predicts that the building products retail business will continue to be strong, and also predicts more consolidation in the space unrelated to the election.
Tackling Housing Affordability
CoreLogic chief economist Selma Hepp anticipates a deregulatory environment for housing that doesn’t hold a lot of promise to combat the current housing crisis and the related lack of affordability.
Looking back to Trump’s first term, Hepp believes there may be changes to the financial services regulation landscape that would impact first time and low income home buyers, and at this point, cannot say if it will actually result in more affordable mortgages.
She also says that we can expect more mortgage rate volatility because of bond rate volatility. Plus, there may be an increase in single family investor activity.
Hepp recalls Trump starting a council on eliminating regulatory barriers to affordable housing that never came to fruition, but is hopeful that might bear some fruit.
The deregulation could saddle homeowners and industry stakeholders with costs that are unmanageable in the face of climate threats.
“I’m trying to figure out things that are hiding in the bushes,” she said. “I certainly worry about insurance costs and don’t see it falling under the national insurance flood program since that program has been on the chopping block.”
More On Sustainability
The new administration could mean changes to the recent focus on decarbonizing the built … [+] environment.
President Biden’s administration worked to put many policies in place that would manage and reduce carbon in the built environment, so those investing in green building practices anticipate a pull back with the party change.
However, as Gutterman points out in her writing, there are many positive economic impacts from green building that cannot be ignored. For example, renewable energy is able to deliver electricity at lower cost and operations than coal or natural gas plants.
Plus, the corporate world is leveraging sustainability as a strategic advantage and investing in clean technologies to future-proof, drive brand loyalty, enhance reputation, and attract top talent.
With regard to both sustainability and affordability, Guttterman says that production builders are starting to realize the savings of energy efficient homes. What those big builders practice will trickle down through regional and local builders, and that demand is coming from homeowners who are realizing the savings at a time it is critically needed.
The future remains uncertain for housing and there could be some unique benefits to welcoming a new administration that favors deregulation. So, wait and see.
