In the weeks leading up to the inauguration of the 47th president, Julio López Varona saw fear and uncertainty ripple through the immigrant communities he works with. It was similar to eight years ago—though this time mixed with a sense of weariness. As the 2025 inauguration approached, López Varona, co-chair of campaigns at the Center for Popular Democracy (CPD), a national network of progressive civil rights organizations, says the “chilling effect” of the returning president’s oft-repeated mass deportation threats was palpable among his friends and constituents.
“People don’t want to talk to each other—people want to, to a certain extent, hide,” he says. “People feel cornered, because in many cases, the people that are living in the U.S. are trying to find a way to become citizens or residents and haven’t been able to do that for a long time, are in this weird limbo.”
In fact, much of the nation was in a “weird limbo” as President Donald Trump’s second term approached. He repeatedly promised (threatened?) day-one policy changes so dramatic “your head will spin,” including astronomical tariffs on imported goods and mass deportations. And he didn’t appear to be bluffing: On his inauguration day, Trump signed dozens of executive orders, among other things mounting what’s been called a shock-and-awe campaign on border security and immigration. While he did not announce any tariffs immediately, he did sign an executive order creating an “External Revenue Service” and said that he was still looking at imposing a 25 percent tariff on Canada and Mexico by Feb. 1. He had earlier denied reports that he’d accept a “pared back” tariff schedule.
While Trump’s threats and initial actions have created uncertainty within several U.S. industries, the construction industry—which relies heavily on both immigrant labor and imported materials—could be doubly hard-hit. Several industry outlets in the weeks following the election have reported that developers are bracing for a “one-two punch” to their bottom line if Trump follows through with his most extreme deportation and tariff threats.
Not everyone is worried. National Association of Home Builders (NAHB) President and CEO James W. Tobin says his organization’s members are feeling “cautious optimism” that Trump’s background as a builder and a landlord means the new administration will follow through on its deregulation and other developer-friendly policy promises. “Our members remember the economic environment and the building environment in President Trump’s first term, and they see that same economic activity in [a] low regulatory environment as positives in the second term,” Tobin says. “I think they’re anticipating an uptick in economic activity and therefore home building.”
Trump’s grab bag executive order on the cost of living instructed all agency heads to take action to reduce regulation that drives up the cost of housing.
But where Tobin’s market-rate developer constituents anticipate economic opportunity, affordable housing developers fear a catastrophe is coming. Noel Andrés Poyo, executive vice president of Housing Partnership Network (HPN), a nonprofit network of housing and community development organizations, is more focused on the dangers of cost increases from tariffs and action against the immigrant labor force. He predicts “wide-spread bankruptcies.”
“The industry can’t take more shock. It can’t absorb more loss,” Poyo says. “What we are going to see if things continue to drive up the costs of housing, and particularly the costs of producing, operating, and preserving affordable housing—if that goes up further and there are no meaningful other additional resources to close that gap—we’re going to see for profit and nonprofit developers going under, or just pivoting away from the space.”
The Affordable Housing Business Model “Breaks First”
Developing affordable housing is more difficult, more expensive, and more complicated than developing market-rate or luxury housing. Affordable housing developers and providers face tighter profit margins, skyrocketing insurance rates, and greater competition for land and building resources. Securing financing is harder. Meeting regulations is harder because there are more of them and the developers are often smaller. Administering and maintaining tenancy is harder. Funding upkeep and capital expenditures is harder. And all of those complications and barriers mean fewer developers want to work in the space.
Now, facing Trump’s deportations and tariffs, affordable housing providers wonder how they’ll absorb more financial blows.
If you want to have housing that is dangerous for people to live in but it’s cheap, well, OK, I think that’s a policy choice that has to be brought forward as an honest policy decision to be made by Congress and the president.”
Arthur C. Nelson, University of Arizona
“In a market rate development, if costs go up, you can increase prices. Prices increase and people are willing to pay them,” says David Dworkin, National Housing Conference (NHC) president and CEO. “In an affordable housing development, rents or costs are tied to income, so you can’t simply raise prices to make up for costs. What you end up with is either having to build fewer units or use more subsidy to build the same number of units. That’s a constraint that ultimately limits the supply of affordable housing and exacerbates the crisis.”
“So the business model that breaks first is the business of affordable housing. That is true with for profits and nonprofits, so this is not a tax status question,” Poyo says. “I would be very surprised if you went to a for profit that primarily worked in the affordable housing space, they’re like, ‘Oh no, honestly, we’re fine. No worries. I don’t have the slightest concerns. My margins are spectacular.”
NAHB’s Tobin agrees that affordable housing developers operate on razor-thin margins, reducing their capacity to absorb any price fluctuations compared to market-rate developers.
“Those deals are so razor thin and put together so expertly that . . . large price swings could jeopardize the financial stability of those deals,” Poyo says.
Poyo notes that if funding for supportive services offered by affordable housing providers is cut, that could put their organizations at further risk. “Whether it’s housing counseling by nonprofits that do single-family development, whether it’s providing resident services or operating permanently supportive housing with the services that are required, those things cost money,” he says. “And if you don’t invest in them, you have consequences for the property and for the residents that actually play out in the bottom line.”
Deportations and the Labor Shortage
Trump and Vice President James David Vance have both regularly scapegoated immigrants as driving up housing costs, promising that mass deportations will free up housing and that refusing mortgages to undocumented immigrants will increase for-sale home numbers. (The numbers show that the recent immigration surge has in fact had little to no effect in housing costs.) If the administration follows through with those deportation promises, the construction industry, which is already facing a shortage of skilled construction workers, according to an Oct. 2024 NAHB report, will feel the effects almost immediately. Even the fear of stepped-up immigration harassment could affect labor force participation.
But when asked if he thought deportations would affect NAHB constituents, Tobin predicted Trump will “focus on what I would call the ‘criminal element’ of the undocumented population in this country.”
Tobin downplayed the rest of Trump’s threats, saying they are “impractical in the short term” because “immigrant labor is an incredibly important part of the residential construction labor force.” But he did acknowledge that mass deportations “could potentially send a shock, so that is something we’re watching very carefully.”
“I certainly believe our members believe that if there are undocumenteds that are working in crews on residential construction, that they’re not going to be a target of any kind of initial enforcement action,” Tobin says. “It is my sincere hope that what the rhetoric does is allows us an opportunity to talk about comprehensive immigration reform, securing the border all the way through, [and] talking about what do we do with the undocumented that are in the country.”
Dworkin, too, is “less concerned” about mass deportations, calling them “a concept and political jargon.” Dworkin did acknowledge that threatening mass deportations or increasing U.S. Immigration and Customs Enforcement presence on construction or other job sites asking for proof of legal residency, would “have a chilling impact on the willingness of foreign-born workers to show up. . . . Some maybe because they are undocumented, and others maybe because they’re afraid that they either could be brought in incorrectly or expose people they know and love by being part of that sweep.”
The Laken Riley Act, which passed the Senate on Inauguration Day, could certainly have such a chilling effect. The ACLU points out that it requires mandatory detention for undocumented immigrants associated with theft-related nonviolent offenses—even if they have not been charged with a crime.
Mass deportations, or even the threat of them, will likely lead to a shortage of construction workers. In places like Texas and California, between 30 and 40 percent of construction industry laborers are undocumented. And Poyo predicts that with fewer people available to hire, the laborers will mostly be scooped up by the larger companies that can pay more, outbidding cash-strapped affordable housing developers.
He offers Hurricane Harvey as an example. In 2017, Harvey tore through Nederland, Texas, a Houston suburb, causing $125 billion in damage. “Every contractor from six states around all went to Houston to start rebuilding—in all the places they left, all the deals got delayed,” Poyo says. “Luxury developers paid more and got first in line. Affordable housing developers lost six months on a deal.”
Most laborers on a construction site aren’t employees of the developer; they’re subcontractors. For example, a general contractor on a multifamily project will hire subcontractors that specialize in electrical or heating/air conditioning installation, landscaping, or drywall. Those subcontractors are paid by the general contractor, who’s hired by the project development company. Those subcontractors are always in high demand, and their expertise can become prohibitively expensive as labor availability shrinks.
“So, if you’re a drywall contractor, do you want to be on a deal with the nation’s 10 largest home builders, or do you want to be on a deal with an affordable housing developer that that develops 10 times fewer units? Those kinds of dynamics are what happens when you get a shortage in the construction industry,” says Poyo. And it’s not just construction, he adds. “It’s the maintenance crews, the property managers, the landscapers—these are all contractors . . . All of those things become more expensive with fewer people in fewer places.”
Iris Figueroa, a policy strategist on Center for Popular Democracy’s immigration team, finds the labor shortage issue an “interesting dichotomy.” While the construction industry is worried about labor shortages, CPD’s immigrant constituents are worried about losing their livelihoods, their housing, and, potentially, their ability to stay in the country.
“The actual building and supply side of housing depends so much—like so many crucial sectors of the country—on immigrant labor. But these people are not just their labor,” Figueroa says. “We are talking about their families, their communities, their neighborhoods, and many of them are active in their tenant organizations. So that same ‘chilling effect’ that Julio [López Varona] is talking about might make folks less willing to step out and assert some of their rights as tenants—and that affects not just them, of course, but all the other tenants in the building or in the neighborhood.”
Tariffs and the Cost Increases
Speaking of “chilling effects,” Trump in a Day One speech repeated his intention to impose sweeping tariffs on imported materials, to the tune of a 25 percent tax on all goods imported from Canada and Mexico, as well as a crippling 60 percent tax on Chinese imports. While Trump has long insisted foreign companies will pay the tariffs, it’s the importers (American businesses) that pay the increased prices, passing them on to the consumer. So although Trump touts them as “the greatest thing ever invented,” promising they’ll lower prices for Americans, mainstream economists generally say tariffs are bad for the economy.
How bad? According to NAHB estimates, a 10 percent across-the-board tariff plus 60 percent on imports from China would result in a more than $3.2 billion increase in the cost of imported construction and building materials. The biggest jump in costs would be for household appliances, since 34 percent of them are imported, and 54 percent of those come from China. And the price hike won’t just make materials pricier; they’ll also be scarcer.
“Price can be absorbed into a pro forma and be offset by either more subsidy or higher costs for the market, but supply is trickier,” Dworkin says. “If you’re trying to build and put online a unit of housing and you can’t get appliances, or a transformer, regardless of the cost of supplies, you are not getting a certificate of occupancy. And that unit is going to sit empty until you put those things in there.”
That is, it’s going to sit empty if it even gets built.
In 2023, nearly three-quarters of sawmill and wood products imported into the U.S. came from Canada, with a total value of $5.8 billion. Many industry insiders say increasing tariffs to 25 percent (they’re already more than 14 percent) would increase the cost of building a home—for American consumers. One of those insiders is Rajan Parajuli, an associate professor of forest economics at North Carolina State University. Earlier this month, Parajuli told the College of Natural Resources News that “tariffs unequivocally work towards pushing domestic lumber prices higher. When that happens, it usually adds up to higher costs for consumers.”
That’s exactly what happened during Trump’s first term, when Trump imposed a 20 percent tax on Canadian softwoods. The result: a $9,000 increase in the cost of new-build homes, according to NAHB research.
Tariffs would also hurt individual consumers’ pocketbooks by increasing individual tax burdens. The Tax Foundation, a nonprofit, nonpartisan tax policy analytics firm, in November reported that a 20 percent universal tariff would increase taxes on U.S. households by an average of $2,045. Former Vice President Kamala Harris’s campaign estimated that American consumers would see an almost $4,000 increase in their taxes.
Could Deregulation Reduce Costs? By How Much?
Trump has repeatedly promised to slash regulatory red tape, open up federal land for low-tax construction, and commit federal funds to public-private housing development projects. Several industry insiders predict Trump will include several provisions of the Affordable Housing Credit Improvement Act, which passed in the U.S. House of Representatives and had strong bipartisan support in both houses of Congress, in his forthcoming tax legislation. If that happens, it “will make a significant contribution to building affordable housing,” Dworkin says. He also anticipates the Trump administration will re-up its first-term Opportunity Zone program to further incentivize affordable residential construction projects.
Trump has spoken about loosening federal regulations and encouraging state and local governments to do the same in order to lower construction costs. But can that offset increases in material and labor costs caused by his tariffs and deportations? NAHB claims that government-mandated construction regulations—things like zoning and permitting costs, impact fees, environmental reviews, design standard hearings—account for nearly 41 percent of apartment development costs. Tobin says he doesn’t think it’s possible to remove all regulation-associated costs but posits that “if we could cut 25 percent off of that 40 percent, I think that would make a difference.”
Most of those are local policies, not under federal control. “Housing construction is overwhelmingly a local issue that the federal government can influence with broad strokes, but with much less precision,” says Dworkin. “The bigger impact is going to be what’s happening in local communities as prices get higher and political leaders find themselves more open minded to loosening zoning restrictions.”
But Tobin says there are some federal regulations that affect building costs. “If you’re going to build a large complex, you have to deal with federal environmental laws, or the interaction between the Clean Water Act or the Endangered Species Act in some instances, or a variety of energy-efficiency requirements are that are leveled at the federal level,” he says. In addition, Tobin says that he hopes “a deregulatory mindset from the Trump administration” would influence local governments to revamp their permitting, inspection, and other local-level requirements. “That’s where we would see the biggest bang for the buck.”
But it’s far from clear that even the most aggressive deregulation could counterbalance impending cost increases in supplies, labor, and insurance. Matt Reilein, president and CEO of the National Equity Fund, a nonprofit multifamily affordable housing lender and LIHTC (low-income housing tax credit) syndicator, noted at a December NHC event in Washington, D.C., that even “without tariffs, without immigration issues, we saw the combination [price] of steel and lumber go up . . . anywhere between 10 and 15 percent between 2023 projects and 2024 projects.” Reilein also reported that during that same period, NEF-sponsored projects faced a 5.5 percent increase in labor costs. Now “think about the ricochet impact of tariffs, of immigration reform—what that would do to just the bottom-line costs of affordable housing,” he added.
Not to mention that while overly burdensome regulations and problematic zoning codes definitely exist, quite a few others are crucial for safety, health, basic fairness, and even long-term economic stability, says Arthur C. Nelson, professor emeritus of urban planning and real estate development at the University of Arizona. Furthermore, he points out, rolling back energy efficiency standards will create more costs for residents, which directly contradicts this administration’s interest in lowering the cost of living.
“If we’re sacrificing energy efficiency in new buildings, that’s a two-edged sword,” Nelson says. “Energy efficiency reduces your monthly utility bills, so you’re basically shifting the cost. You’re reducing the housing cost, but increasing the maintenance cost. It could be a wash, but we don’t know.”
And, as we’ve seen as urban wildfires become more commonplace, relaxing standards about where housing can safely be built in a time of unprecedented climate disasters is courting tragedy. So, while regulations do often increase costs, “we have to remind ourselves why we have the regulations—to advance health, safety and welfare,” Nelson says. “If you want to have housing that is dangerous for people to live in but it’s cheap, well, OK, I think that’s a policy choice that has to be brought forward as an honest policy decision to be made by Congress and the president.” (It also bears mentioning that the administration has in the past been vociferously opposed to one of the deregulatory changes that has the most bipartisan support—zoning reform to allow increased density.)
Nelson suggests that the first step is to inventory which federal regulations increase housing construction costs “and then ask the question: Do we need them? Do we want them? Then move to a policy discussion. That’s a good thing to do. No matter who’s president, that should be done every so many years anyway.” But, he warns, before slashing regulations, it’s important to comprehensively study potential direct and indirect results.
“How much money will be saved?” Nelson wonders. “But also how much damage might occur, and what is the cost of that damage?”
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“If you want to have housing that is dangerous for people to live in but it’s cheap, well, OK, I think that’s a policy choice that has to be brought forward as an honest policy decision to be made by Congress and the president.” I think that policy choice was already made decades ago with respect to deeply affordable housing.
Another scenario is the Trump administration using HUD as a resource to find “mixed families”, that is children born in the U.S. and parents who were not, to again practice harmful separation policies and mass deportation. It could be used as a grand scapegoat to gut HUD affordable housing vouchers and render immigrants, elderly, and disabled homeless.