With the Affordable Housing Crisis still dominating much of the economic agenda in the United States, government policymakers and housing experts are increasingly focused on the question of how the housing crisis will be impacted by Donald Trump’s return to the Oval Office? Based on both proposed and past legislation from the Trump administration, as well as campaign rhetoric pertinent to the housing file, let’s examine the expected impacts in key areas such as deregulation, tariffs, tax incentives, mass deportations, and federal land management.
In a speech to the Economic Club of New York on Sept. 5/24, Trump said, “We will eliminate regulations that drive up housing costs with the goal of cutting the cost of a new home in half.”
Deregulation is a core tenet in the President-Elect’s approach to housing policy with his previous administration consistently supporting initiatives to loosen regulations on developers. By rolling back building codes, zoning laws, and environmental restrictions, Trump’s administration would likely look to lower the regulatory burdens that delay expedited housing construction in urban and suburban areas.
Particularly in states such as California where local housing restrictions are seen as too restrictive, pushing for less stringent rules to reduce red tape is viewed as a strong stimulus to rapidly increase the affordable housing supply. With 24% of the cost of a single-family home and about 41% of the cost of a multifamily home directly attributable to regulatory costs at the local, state and federal level, there is certainly ample evidence to support increased deregulation.
While deregulation certainly reduces costs for developers and theoretically increases the speed to market for affordable housing stocks, the downsides to this approach are the increased potential for lower building standards resulting in lower quality housing. Housing policies that empower developers to cut corners on building standards and environmental protections could result in affordable housing stocks that are cheaper at the expense of safety, sustainability, and energy-efficiency.
“Any tariffs that raise the cost of building products are going to flow directly to the consumer, and this will have a detrimental effect on housing affordability.”
Jim Tobin, CEO, National Association of Home Builders
Tariffs aimed at protecting U.S. industries are a cornerstone of the Trump administration’s economic plan and trade policies, both currently and historically. In advance of Trump’s return to office in January 2025, the President Elect announced that he will sign an executive order placing a 25% tariff on all imports from Canada and Mexico, along with an additional 10% tariff on imports from China. The announcement is consistent with Trump’s previous tariffs on lumber, steel, and aluminum imports that resulted in price hikes for construction materials and, consequently, for new homes.
Given the construction industries’ reliance on affordable building materials, tariffs on essential goods such as steel and lumber could significantly increase the cost of building new homes while simultaneously delaying or even halting planned affordable housing projects unable to absorb higher material costs. As a reaction to higher material costs, widespread tariffs may discourage developers from pursuing affordable housing projects, with builders preferring instead to focus on luxury housing or high-end commercial properties yielding higher profit margins.
As evidenced by the factors spurring the current affordable housing crisis, when the supply of affordable housing fails to meet market demands, potential buyers remain in the rental market where lower vacancy rates inevitably result in rent increases for low and middle-income housing.
“Affordable housing developers have had a hard time making the Opportunity Zones tax benefits work with low-income housing tax credits (LIHTCs)—and the Opportunity Zones program expires in 2026.”
With the passing of the Tax Cuts and Jobs Act (TCJA) in 2017, tax reform was confirmed as a central plank in the Trump administration’s economic policy, particularly corporate tax cuts to incentivize business investment and tax breaks to encourage developers to invest in low-income neighborhoods.
Examples of these policies in action included Opportunity Zones that leverage tax breaks to increase investment in underserved low-income neighborhoods. Bonus Depreciation is another policy favored by Trump. Enabling apartment developers and investors to deduct more depreciation in the first year of ownership, Bonus Appreciation incentivizes developers to buy dilapidated apartment buildings and renovate them for usage as rental units. By spreading out the depreciation over a longer period, taxpayers can reduce their taxable income each year, providing a valuable incentive for investors and developers to progress with affordable housing projects.
Housing experts argue that while such policies can increase investment in affordable housing, the benefits are not always equitably distributed. Without a significant legislative focus to encourage developers to meet the needs of low-income communities, such policies can have the opposite effect—encouraging developers to leverage tax incentives to focus on projects catering to higher-income individuals rather than the most vulnerable populations.
In gauging the efficacy of the TCJA in producing affordable housing gains, a 2018 study by Novogradac & Co. estimated that the lowered corporate tax rate would result in a 14% decline in affordable rental home production and preservation. (Source)
An analysis released in December 2022 by the George W. Bush Institute and Southern Methodist University found U.S. metro areas with the fastest-growing immigrant populations had the lowest building costs.
With a new Trump administration confirming its intent to facilitate the mass deportation of migrants, housing experts anticipate that both the deportation of undocumented workers and an envisioned reduction in legal immigration will create significant impacts on affordable housing efforts.
With the construction industry hugely dependent upon immigrant labor, the removal of undocumented workers and/or a reduction in legal immigrants could drastically reduce the labor force. With fewer workers available, construction wages are likely to increase. Further, with its labor force reduced, construction companies are likely to experience delays in completing projects or may cancel planned projects altogether. Higher wages and project delays could work in tandem to increase the building costs for new affordable housing units, costs that would ultimately be passed onto the consumer through higher home prices.
In addition to projected labor shortages, mass deportation could lead to substantial demographic shifts in local housing markets. If such shifts resulted in fewer people in the market for low-cost housing, landlords could theoretically raise rents, further exacerbating the affordability issue for remaining low-income residents.
On this issue in particular, the research is inconclusive with many economists indicating there is no clear link between undocumented immigration and housing affordability. Further, recent studies have found that the Trump administration’s deportation plans could reduce U.S. employment and lower GDP. (Source)
“It’s simple in theory: The federal government — which owns roughly 28 percent of the land in the U.S. — would open up bidding for parcels to developers who commit to keeping a certain percentage of the units at an affordable level for the local population.”
In perhaps the most notable recent example of federal land management reallocation for low-income housing, the Bureau of Land Management under President Biden sold lands valued at nearly $20 million for $2,000 to Clark County, Nevada. While the allocation of federal lands for affordable housing increased under the Biden administration, such initiatives are expected to accelerate under the next Trump administration.
Facilitating access to vacant and surplus federal lands that present as viable development parcels (i.e. within existing development zones and in metros currently facing affordable housing shortages) is certainly a desirable outcome for affordable housing advocates, but many experts argue that the lack of access to core amenities makes most federal land parcels unsuitable for residential development. Further, they argue that the NIMBYism that historically plagues metropolitan low-cost housing initiatives will persist despite newfound access to federal lands.
In addition to NIMBYism, environmental and conservation concerns could block federal land reallocation efforts particularly in areas adjacent to natural resources, national parks, and wildlife habitats.
To ensure the viability of such initiatives, legislation would need to provide guarantees that the sold land would be developed for affordable housing with the necessary measures in place to ensure compliance by the development community. Without careful planning and a clear focus on improving affordability, development on public lands could lead to increased urban sprawl further straining local infrastructure.
The potential impacts of the next Presidential administration on the Affordable Housing Crisis are complex and multifaceted.
On the positive side of the ledger; increased deregulation and tax incentives in conjunction with federal land reallocations carry the potential to increase pathways to timely and affordable housing provision. On the negative side of the ledger; tariffs, mass deportations, and the elevation of private investment interests could worsen the crisis by increasing construction costs and delays, and incentivizing production towards the luxury end of the market instead of much needed affordable housing inventory.
Ultimately, as with any effort at government stimulus, success in remedying the Affordable Housing Crisis may boil down to the administration’s ability to balance the oft conflicting agendas of robust economic growth with the pressing housing needs of low-income Americans. With the right policy levers, the housing crisis can be fixed. However, without a clear and persistent policy focus on those issues plaguing its most vulnerable communities, the gap between the poor and wealthy could widen, leaving millions of Americans struggling to find affordable homes.
Modern planning and permitting systems like POSSE PLS deliver the critical efficiencies required by your development community to meet the affordable housing challenge, utilizing a proven solution with a demonstrable record of implementation success and customer achievement.
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