New Homes Could Get More Expensive Thanks To New Steel Lumber Tariffs

New Homes Could Get More Expensive Thanks To New Steel Lumber Tariffs

An influx of new construction at all price points could save us from the current housing crunch, but the hefty new tariffs on imported steel announced this week by President Donald Trump, on top of a tariff on Canadian lumber imposed late last year, could make the crunch even worse—and drive up home prices.

The planned tariffs would tack on 25% to the cost of steel, used in home foundations, floors, and high-rise construction, and 10% for aluminum from foreign suppliers. The controversial tariffs would make good on Trump's campaign promise to give American producers a boost.

Tariffs could measurably raise the cost of building materials and hinder home construction of affordable homes," Lawrence Yun, chief economist of the National Association of Realtors®, said in a statement.

Steel is used in the concrete flooring and foundations of most single-family homes. More of it is used in high-rise condo and apartment buildings, plus any dwellings over five floors. It's also used in elevator shafts, parking garages, and many stairwells.

There are alternative materials that builders can use if there is a steel shortage or if prices rise. But those newer materials are typically more expensive, says Jack Kern, director of research at Yardi Matrix, a commercial real estate data and research firm based in Santa Barbara, CA. There are also fewer construction crews trained in how to properly use those materials, Kern says.

“Anything that’s built that uses steel as a component is going to have a price increase," he says. But he doesn't expect it to be a substantial increase and expects it will fade as builders find cheaper, new materials.

That didn't stop builder trade groups from denouncing the new tariffs.

"Given that home builders are already grappling with 20% tariffs on Canadian softwood lumber and that the price of lumber and other key building materials are near record highs, this announcement by the president could not have come at a worse time," Randy Noel, chairman of the National Association of Home Builders, said in a statement. "Tariffs hurt consumers and harm housing affordability."

Several modular home builders have complained to the Modular Building Institute, a trade group, about their costs going up as a result of the tariffs as well.

"This will affect our prices," says Tom Hardiman, executive director of the institute. The association has yet to do a detailed analysis on just how much pricier modular homes may be.

Not knowing how much steel and lumber will cost makes it difficult for builders to price homes, or for buyers to know just how much they'll be shelling out on their new abodes.

"It hurts home buyers," says Rick Schumacher, editor and publisher of the LBM Journal, which covers the lumber and building materials industry. "It creates uncertainty ... and any uncertainty is bad."

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Dated: March 12th 2018
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