CNN
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After officially taking office earlier this week, President Donald Trump ordered “emergency relief” for Americans on housing and other living costs.
“Many Americans are unable to purchase a home due to historically high prices, in part due to regulatory requirements which, according to a recent analysis, alone account for 25% of the cost of building a new home ” reads an executive decision signed by Trump on Monday.
However, the executive action offers few details on how the administration plans to reduce housing costs. Reducing federal regulations may provide some savings, but many regulations are enforced by state and local governments – outside the jurisdiction of the federal government.
Additionally, reduced regulations may not be enough to offset some of the Trump administration’s other expected economic policies, like tariffs and evictions, which could increase the cost of building new housing.
The “recent analysis” cited by Trump’s executive action echoes data from the National Association of Homebuilders released in May 2021, less than four months after Trump first left office. The study found that regulations imposed by all levels of government at the time accounted for $93,870, or 23.8 percent, of the then average sales price of a new single-family home, or $397,300. The median sales price of a new home for sale in November 2024, according to the latest available data, was $402,600, according to the U.S. Census Bureau.
A separate NAHB study released in 2022 found that the regulations increased the development costs of multifamily housing construction by about 40.6%. (The NAHB has lobbied against what it calls costly regulations regarding housing construction.)
Jim Tobin, CEO of The NAHB said that while many land use decisions are made by local governments, easing federal restrictions would help reduce construction costs for homebuilders.
“(Federal regulation) is one of the biggest issues our builders face,” Tobin said. “It really hampers our ability to build more affordable housing, especially at the lower end of the market.”
Trump’s executive action comes amid a growing need for affordable housing. However, regulations aren’t the only reason homes have become so expensive.
Many experts say the United States needs to build millions of homes to adequately meet growing demand, driven in part by a growing number of millennials, the largest generation, reaching the age at which they would like to buy a home.
This housing shortage, along with high interest rates, has has made buying a home much more difficult for many Americans.
The standard 30-year fixed mortgage rate was just below 2.8% when Trump left office in January 2021 during the Covid-19 pandemic. Last week it was 7.04%.
The rise in borrowing costs can be partially attributed to the Federal Reserve’s recent interest rate hike campaign to tame a historic inflation surge. Although Trump promised to lower interest rates on the campaign trail, the president has no direct impact on monetary policy and the Fed likely won’t cut interest rates for a few months.
Closing costs, or fees due on the day a home purchase is finalized, have also been added to the expenses buyers must pay before officially owning a new home. The median cost of a loan paid by home buyers – including origination fees, appraisal and credit report fees, and title insurance — stood at about $6,000 in 2022, an increase of nearly 22% from 2021, according to a report from the Consumer Financial Protection Bureau.
The Biden administration has cracked down on “junk fees” hidden in closing costs, although it is unclear whether the Trump administration will continue this effort.
Tariffs, expulsions could hurt cost-cutting efforts
Despite Trump’s executive actions aimed at reducing the cost of building new housing, many of his administration’s planned economic policies could have the opposite effect.
On Monday, Trump said he planned to impose a 25% across-the-board tariff on Mexican and Canadian goods on Feb. 1, but many homebuilders use lumber from Canada to build new homes. Without an exception for these imports, a 25% tariff on Canada would make the cost of building a home much more expensive, several homebuilders told CNN.
“I’ve been in this business since 1988 and I’ve never had a problem getting lumber, but if the price of lumber goes up, we have to pass it on to the customer,” said Gary Franke, owner of a house. framing construction company in Southern California. “We can’t maintain this, so we’re passing it on.”
Mass evictions could also make labor costs more expensive, said NAHB’s Tobin.
“We don’t have enough new skilled workers in the domestic workforce, so we have to reach across our borders to attract that workforce,” he said. “We’re going to be paying attention to how the construction workforce from the immigrant pool is affected by what the president does.”
“Even though rates may go up on one side, if we reduce the regulatory burden on the other side, a lot of these things could be a failure,” he added. “We will have to look at everything holistically over the next four years. »
