Trump Administration Tariffs Could Result in 450,000 Fewer New Homes Through 2030

Housing costs are at an all-time high. Unfortunately, the Trump administration’s tariffs on homebuilding materials such as lumber, copper, cabinets, and steel are further increasing new home costs by thousands of dollars. New analysis by the Center for American Progress estimates that tariff-induced higher building costs will lead to 450,000 fewer homes being built over the next five years, exacerbating the housing supply shortage. At current homebuilding rates, an extra $27 billion in tariffs adds $17,500 in costs per new home, further worsening housing affordability.

Housing is increasingly unaffordable, driven primarily by a lack of supply

For the past two decades, housing prices have risen far faster than the general cost of living. Home prices, as measured by the Case-Shiller National Home Price Index, rose rapidly in the 2000s housing bubble, then crashed, but since 2013 have again consistently risen faster than overall inflation. (see Figure 1) This rapid increase in prices has fallen especially hard on first-time homebuyers. Rents have also risen faster than household incomes over the past two decades, leaving half of renters cost burdened—spending more than 30 percent of their income on rent.

The growing affordability crisis has worsened because the number of available homes falls far short of demand, with a deficit of 2 million units or more by some estimates.* Home construction in the United States fell sharply after the Great Recession and still has not returned to pre-2008 levels. The country is now facing years of underbuilding that will require sustained, above-average construction rates to correct. Yet the Trump administration’s tariff policies are pushing homebuilding in the opposite direction by raising construction costs, which will slow new construction activity, raise costs, and worsen housing affordability.

The Trump administration’s tariffs are driving up building costs

In January 2025, the Trump administration expressed a goal of lowering housing costs, yet it is doing the opposite by imposing new tariffs, adding more cost pressures to an already strained housing market.

Tariffs announced since President Donald Trump took office in January 2025 are expected to disproportionately affect the housing construction industry, with estimates from The Budget Lab at Yale suggesting that overall construction sector output could fall by 4.1 percent over the next three years due to tariffs. Several key building materials have been among the products most affected by tariff-related cost increases, including steel mill products, copper, and aluminum, which face a 50 percent tariff. In addition, softwood lumber is subject to a blanket 10 percent tariff and a number of anti-dumping and countervailing duty tariff rates. Moreover, tariffs on upholstered products and kitchen cabinets and vanities—key components of a new home—are set to rise further, to 30 percent and 50 percent, respectively, on January 1, 2026, with the Trump administration utilizing laws that allow tariffs on goods deemed a national security threat.

These tariffs are expected to result in nearly half a million fewer homes

Analysis from the Urban-Brookings Tax Policy Center suggests that currently active and announced tariffs will add roughly $30 billion to the annual cost of investment in residential structures in 2027, with about 90 percent of that cost—roughly $27 billion—affecting the cost of constructing new homes and apartments.

This implies that these new tariffs would effectively raise the cost of building a new home by about 3.3 percent, using recent levels of residential investment as a baseline and adjusting to 2027 dollars. Higher construction costs slow the pace of new housing construction and prevent marginally profitable housing units from being constructed. Applying academic estimates of how housing supply responds to cost increases (see Methodology section), CAP analysis finds that the Trump administration’s tariffs would result in roughly 450,000 fewer new homes being built over the next five years, through 2030, including more than 100,000 yearly from 2030 onward. This would be equivalent to eliminating 6 percent of the homes constructed in the five years from 2020 to 2024.

In supply-constrained markets, fewer homes mean higher prices

In a market already struggling with too little supply, losing that many units would deepen existing shortages, intensify competition for available homes, and place further upward pressure on prices. At $27 billion per year, tariffs would raise the cost to build a home by $17,500 per new home constructed, if current homebuilding rates continue. However, if homebuilding falls as CAP predicts, then tariffs will add $18,500 in additional cost per home in 2028. With the average home sales price having already risen by 31 percent—or over $120,000—since 2020, this tariff-induced change could put homeownership further out of reach for millions of Americans.

Conclusion

The Trump administration has imposed unprecedented tariffs on working Americans while cutting taxes for the rich and powerful. After the implementation of the Trump administration’s tariffs, the United States has experienced falling employment in manufacturing and rising consumer costs. In addition, the increased tariffs can have outsize impacts on particular industries—especially ones that are already under stress, such as the housing market. These tariffs are driving up construction costs, slowing homebuilding, and worsening the nation’s already severe housing shortage. Building new housing supply is crucial to solving the housing shortage, and canceling tariffs on homebuilding materials is a necessary step to bring more housing online and improve housing affordability.

The authors would like to thank Jared Bernstein, Ryan Mulholland, Chad Maisel, Sara Estep, and Emily Gee for their reviews; Jazmine Amoako for her fact-checking assistance; and the CAP Production team. Particular thanks are extended to Elena Patel, Robert McClelland, and John Wong at the Urban-Brookings Tax Policy Center, without whose previous analyses this work would not have been possible.

Appendix: Methodology

To estimate the projected shortfall in new housing units due to tariffs, the analysis applies the Urban-Brookings Tax Policy Center estimate that new tariffs will add approximately $30 billion to residential structures investment, with about 90 percent of this amount—roughly $27 billion—affecting new construction. CAP calculated residential investment as the average 2023–2024 value adjusted to 2027 dollars across total residential private fixed investment minus improvements. The baseline level of new housing production was defined as the total number of single-family and multiunit (two or more units) completions recorded from the third quarter of 2023 through the second quarter of 2025, totaling approximately 1.55 million units. These time periods were selected to reflect the typical lag between when residential investment occurs and when the resulting housing units are completed.

Relative to the 2023–2024 average level of residential investment, the additional $27 billion attributed to tariffs represents a 3.3 percent increase in new construction costs. Elasticities of housing supply with respect to price were reviewed using six studies published since 2010, leading to the selection of a short-run elasticity of 1.5 and a long-run elasticity of 2.5, which align with the median values reported in these studies.** Applying these supply-elasticity parameters to the estimated cost increase implies reductions in new housing output of 5 percent in the short run and 8.3 percent in the long run.

These percentage adjustments are applied to the average number of new units completed over the third quarter of 2023 through the second quarter of 2025 to estimate the tariff-related shortfall in new housing production. This annual reduction in new housing unit shortfalls translates to about 69,000 units in the short run and 128,000 units in the long run. These annual values were then smoothed across the following eight years to reflect the transition from short-run to long-run elasticity. The 2026 estimate includes a 10 percent reduction due to the delayed implementation of some China tariffs included in the Urban-Brookings Tax Policy Center analysis.

The $17,500 increase in cost per home is estimated by taking $27 billion in increased tariffs, divided by 1.55 million new homes per year, which is the annual rate of new home construction from the third quarter of 2023 to the second quarter of 2025.

* For more information, see Urban Institute, “Bringing the Housing Shortage Into Sharper Focus” (2025). Estimates of the current housing shortage vary based on different methodologies, with estimates including 1.5 million estimated by the National Association of Home Builders, 3.8 million estimated by Freddie Mac, and 5.5 million estimated by the National Association of Realtors. Other academic estimates also estimate a wider range, from McClure and Schwartz (2025), who find almost no shortage of units, through to a potential shortage of 20.1 million estimated by Corinth and Dante (2022). See Brookings Institution, “Where do the estimates of a ‘housing shortage’ come from?” (2024).

** See Regional Science and Urban Economics, “Urban planning policies and the cost of living in large cities,” 96 (2022); BIS Quarterly Review, “Monetary policy and housing markets: insights using a novel measure of housing supply elasticity” (2024); MIT, “Error Correction Models of MSA Housing ‘Supply’ Elasticities” (2014); Journal of Political Economy, “The Microgeography of Housing Supply,” 132 (6) (2024); The Quarterly Journal of Economics, “The Geographic Determinants of Housing Supply,” 125 (3) (2010); Federal Reserve Board, “Supply Constraints and Housing Prices” (2013).