In the aftermath of Donald Trump’s inauguration as the 47th President of the United States, the new administration’s trade policies are raising concerns, especially regarding the potential impact on New York City's housing market. Trump announced plans to impose 25% tariffs on goods imported from Mexico and Canada, set to take effect on February 1. According to Wells Fargo economist Jackie Benson, the proposed tariffs could significantly increase construction costs, ultimately affecting housing prices across the city.

Impact on Construction Costs and Housing Prices

“If the tariff proposal becomes law, it will certainly have an impact on construction costs,” said Jackie Benson, vice president and economist at Wells Fargo. “Concrete, lumber... these construction materials are traded internationally.” Canada is the largest exporter of lumber to the U.S., and lumber is a crucial component in construction projects. A rise in lumber prices, due to the tariff, could drive up the cost of building materials and labor, which in turn could lead developers to raise prices on newly constructed homes and apartments.

Additionally, the tariffs could exacerbate existing challenges related to supply chains, particularly in industries reliant on materials from both Canada and Mexico. Increased material costs would likely result in developers passing on those costs to consumers, potentially making housing even more unaffordable for many New Yorkers.

Labor Shortages and Immigration Policies

In addition to the tariffs, Trump’s proposed immigration policy could contribute to labor shortages in the construction sector. With a crackdown on undocumented immigrants, many workers currently employed in construction could be affected. According to Benson, “The president’s immigration policy may also have an impact on construction labor. We are also building that into the forecast.” Given the essential role of immigrant workers in the construction industry, any reduction in labor supply could slow down the construction of the thousands of housing units promised under Mayor Eric Adams' City of Yes initiative.

Large-Scale Construction Projects in NYC

The City of Yes legislation, passed by Mayor Eric Adams, pledges to deliver over 80,000 new housing units over the next 15 years across the five boroughs. This ambitious project aims to address New York City’s ongoing housing crisis by making space for more residents, especially as the population continues to grow. However, with construction costs potentially rising due to tariffs and labor shortages, the feasibility of meeting these housing goals becomes more uncertain.

According to Benson, “If the costs of construction increase considerably as a result of Trump’s policies, consumers can expect developers to increase the pricing of housing in their portfolio.” As developers contend with higher costs for materials and labor, it’s likely they will look to offset these increases by raising the prices of their residential units. This could have a direct effect on affordability, particularly for middle- and low-income families who are already struggling to find affordable housing in the city.

The Broader Economic Impact

Benson also pointed out the potential negative effects of these tariffs on New York City's broader economy. “Job growth among office-using industries is already declining on a year-over-year basis in the New York Metro, and tariffs could present an additional headwind to employment growth,” she said. Office-using industries, such as finance, law, and real estate, have already experienced slowdowns, and the tariffs could add further pressure to these sectors, potentially leading to slower job creation and reduced economic growth in the region.

Moreover, as the city’s economy struggles with these pressures, it’s possible that any resulting slowdown could trickle down into the housing market. With fewer jobs available and the cost of living increasing, demand for affordable housing will likely rise, but it may become increasingly difficult for developers to meet that demand without raising prices.

Conclusion: A Complex Picture for NYC’s Housing Market

Trump’s proposed tariffs are just one of many factors influencing the future of New York City’s housing market. While the city is set to see significant construction growth under the City of Yes initiative, rising construction costs, labor shortages, and broader economic challenges could complicate these efforts. The net result may be higher housing prices, making it even harder for New Yorkers to find affordable homes and apartments. As these policies continue to unfold, the city will have to navigate an increasingly complex economic landscape to meet the growing demand for housing.