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Donald Trump has begun his second term. All week, Inman is diving into what we know about the administration’s housing policies — from the privatization of Fannie Mae and Freddie Mac to mounting antitrust issues in the real estate industry. Join us tomorrow for part two, outlining the outlook for the economy.
On Monday, Donald Trump begins his second presidential term.
During his campaign, Trump vowed to cut unnecessary building regulations, open unused federal land for new home construction, provide tax incentives for first-time homebuyers and solve the nation’s inventory crisis by deporting a record number of undocumented immigrants over the next four years.
Trump’s vision ultimately won over voters, with the former president clinching the popular and electoral college votes.
Although many of his plans for the housing industry remain unclear, the president-elect has been adamant about beginning mass deportations on the first day of his second term. The deportations could have a disruptive effect on housing starts, as undocumented workers account for nearly a fourth of the nation’s construction force, according to economists.
Meanwhile, a constricted workforce along with heightened tariffs on goods imported from Canada, Mexico and China, could derail inventory gains and raise prices.
“We really find ourselves in the situation where anything that kind of disrupts the process of [adding] housing supply would be detrimental to the housing affordability crisis,” Harvard University’s Joint Center for Housing Studies senior analyst Riordan Frost told the Texas Tribune.
The challenge of mass deportations
While Trump has been opaque about a number of his plans — “I have concepts of a plan,” he said in response to a debate question about the Affordable Healthcare Act — he hasn’t been shy about his approach to immigration. The president-elect has promised to use his first 100 days in office to undo President Biden’s executive orders, close the U.S./Mexico border, and begin the mass deportation of more than 11 million people without legal status or temporary status.
The Trump administration’s mass deportation goal has been a moving target. However, Vice-President-elect J.D. Vance provided the latest estimate of 1 million people per year — a number that would eclipse the 1.5 million people deported during Trump’s first term. If Trump successfully deports 5.5 million people across two terms, that would put him ahead of Obama’s (4.8 million) and Biden’s (1.49 million) deportation record.
Veteran Border Patrol agent and former Immigration and Customs Enforcement (ICE) Acting Director Tom Homan will be Trump’s border czar, the person responsible for the logistics behind the president’s deportation plan. Homan said his priority is removing undocumented immigrants who pose national security and public safety risks. However, undocumented immigrants outside of that category may get swept up in those raids.
“We’re gonna concentrate out of the gate on public safety threats. What mayor or governor does not want public safety threats taken out of their communities? So again, help us or get out of the way,” Homan said during an interview with TV psychologist Dr. Phil. “If you force us into the community, we’re gonna find a bad guy. There are probably others we’re gonna find, which means they’re gonna be arrested, too.”
In a recent CNN interview, Homan said the success of Trump’s mass deportation goal largely hinges on Congressional funding and military support. The border czar said Congress needs to expand ICE’s budget so the department can increase its detention centers from 40,000 to 100,000 beds. There’s also a shortfall of ICE agents, he said, making military support crucial to transporting undocumented people to detention centers.
“I don’t have a number. We want to arrest as many people as we can that are in the country illegally,” he said. “If you’re here illegally, you’re not off the table. It’s a violation of the law; it’s a crime to enter this country illegally … We’ll be ready to launch the day of the inauguration.”
As for the children who are part of more than 4 million mixed-status households, Homan said undocumented parents will have to make a difficult choice — take their children with them or leave them behind with a documented family member.
“Their child can stay and live with a relative, they can stay with the other parent, or they can take them with them. We don’t deport U.S. citizens. But they put themselves in the position; we didn’t,” he said. “The bottom line is, having a child in this country does not make you immune from our laws.”
Secretary of Homeland Security nominee Kristi Noem, who currently serves as the governor of South Dakota, said she supports Homan’s approach and, if confirmed, will work to fast-track Trump’s immigration plans.
“As you know, I’ve taken a stand against this invasion,” Noem said in a speech before her Jan. 17 confirmation hearing. “We’ve deployed our South Dakota National Guard to our southern border eight times. That includes five state deployments to support Texas’ work to stop the flow of illegal aliens.”
Civil rights and nonpartisan research groups have outlined the social and legal implications of Trump’s other proposed immigration policies, which include ending programs like Deferred Action for Childhood Arrivals (DACA), tightening requirements for lawful permanent status (i.e. green cards), reinstating a 2019 policy that requires asylum seekers along the southern border to stay in Mexico while they await court hearings, and eliminating temporary protected status for immigrants from specific countries, including Venezuela, Afghanistan and Haiti. The president-elect also said he wants to revoke birthright citizenship, which would require overhauling the 14th Amendment.
“[There could be] more bark than bite,” the Brookings Institute said of Trump’s immigration policies. “The administration will almost certainly make visible anti-immigration efforts in the first 100 days. This would likely include some high-profile deportation raids, immediately ending the Biden administration’s humanitarian parole programs and restrictions on travel or student visas from certain countries. But the first Trump administration had comparatively modest deportation rates overall, and the same could be true again if the interests of the business community prevail.”
A construction standstill
Housing experts and economists have raised red flags about Trump’s immigration policies, which he claims will help alleviate the nation’s housing shortage and astronomical rise in housing costs.
Economists have poked holes in Trump’s argument, noting that only 4.8 percent of the country’s 130 million households include undocumented people. Of that 4.8 percent, the majority already live in low-income rental housing and cannot qualify for mortgages due to their status — meaning they aren’t contributing to the shortage of for-sale single-family housing.
“It’s important to push back against the argument that housing for one group comes at the cost of another,” Harvard Joint Center for Housing Studies senior analyst Riordan Frost told Maine Morning Star in a December feature about Trump’s immigration policies. “Net immigration increasingly drives population growth, accounting for all population growth beginning in 2040.”
In addition to not alleviating the housing shortage, economists fear deporting millions of undocumented people will ultimately exacerbate inventory and affordability issues, as they account for 23 percent of the construction workforce. They also account for 29 percent of painters, 32 percent of roofers, 38 percent of drywall and ceiling tile installers, 25 percent of masons, and 24 percent of carpet and floor installers, according to the Center for American Progress’s 2021 workforce report.
A 2022 National Association of Home Builders report estimated immigrants — documented and undocumented — account for 40 percent of the construction labor force in Texas and California and 30 percent of the construction labor force in Florida, Maryland, Nevada, New Jersey and New York. When broken down into raw numbers, The National Immigration Forum estimates immigrants — again, documented and undocumented — account for one million to two million construction workers.
“The construction industry will likely require over half a million new workers in 2024 alone to meet development goals,” the National Immigration Forum report read. “Construction is one of the key United States industries that cannot satisfy their labor needs with native-born U.S. workers alone. To secure an immigrant labor flow to meet the needs of the U.S. in this industry, there must be stronger employment-based pathways to enter the country.”
The U.S. already experienced the consequences of a severe construction labor shortage during the early days of the pandemic, as construction companies streamlined their workforce following social distancing procedures. There was also the significant death toll from COVID — as the virus was the top killer of construction workers in 2020. By 2021, slowed supply chains, weakened labor supply and the lingering effects of Trump’s 2020 tariffs on Canada had added $35,872 to the price of an average new single-family home.
A ‘chilling effect’ on home sales
In a previous Inman article, Bright MLS Chief Economist Lisa Sturtevant said Trump’s mass deportation policy would have a “chilling effect” on the housing market, “shrinking the already constrained labor force and stalling badly needed new housing construction,” she said. “At the same time, proposed tariffs will increase building costs. Limited inventory will keep home prices high and will continue to sideline many first-time buyers.”
Roughly 30 percent of real estate agents agree with Sturtevant’s outlook, according to a survey from Indiana-based real estate software company REsimpli. Of those who fear Trump’s second term, the greatest concern is a rise in building material costs (60 percent), a drop in foreign investment (51 percent), and a reduction in skilled labor (46 percent).
Regarding tariffs, Trump has proposed hiking import taxes on goods from Mexico, Canada, and China in an attempt to shift manufacturing power to the U.S. and lower the price of food among other things, such as reducing the federal deficit. Goods from Mexico and Canada are poised to face a 25 percent tariff, while goods from China will face an additional 10 percent tariff.
He also threatened to punish BRICS countries — Brazil, Russia, India, China and South Africa — with 100 percent tariffs if they attempt to deprioritize the U.S. dollar.
“Tariffs are the greatest thing ever invented,’’ Trump said during a September rally in Flint, Michigan.
Although Trump seems to see tariffs as a sort of economic cure-all, economists say heightened import taxes will put more financial pressure on Americans. When a buyer imports a good, they pay a tariff with the Customs and Border Protection. The tariffs range from 2.5 percent for passenger cars to 6 percent for golf shoes and are sent to the U.S. Treasury to help fund the government. But when tariffs go up, businesses usually raise prices for consumers to offset the impact.
“Imposing tariffs on trade flows into the United States without first preparing alternative sources for the goods and services affected will raise the price of imported items at once,” High-Frequency Economics economists Carl B. Weinberg and Rubeela Farooqi told AP News. “Since many of these goods are consumer goods, households will be made poorer.”
At the National Association of Realtors’ latest economic summit, National Home Builders Association Chief Economist Robert Dietz said Trump’s tariff and immigration policies were worrying. However, he said the president-elect’s tax policy could offset some of the pain.
“We think about a little less than 10 percent of construction materials used in housing are imported, and there’s already a 14 percent tariff on lumber so that potentially could increase the cost of construction,” he said. “In terms of the big wildcard, how is immigration enforcement policy going to play out? That could have demand-side and supply-side effects.”
“On the positive side, we are expecting an extension of the 2017 tax cuts, which will help businesses, including builders and remodelers,” he added. “The big thing is the conversation has shifted. We’re expecting improvements in the regulatory environment that will help housing supply and construction and increase inventory.”
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