The news outlets are constantly reporting on President Trump’s trade war with China and other countries with many American industries having been impacted by the high tariffs on foreign imports. As many of us work in multi-family housing, it can be expected that we are concerned how the news headlines will translate to our industry.
While the multi-family housing industry has not been the most impacted by federal tariffs, it has not been untouched. Below we discuss what exactly defines the details of the trade war and how it specifically affects our industry.
What Is a Trade War and Why is Trump Doing It?
A trade war means tariffs or taxes are placed on imports. The purpose is to increase the cost of the product, and dissuade US consumers from buying foreign products. Trump is reportedly waging the trade war to cut America’s trade deficits.
America has the biggest trade deficit with China, almost $375 Billion, and Trump is seeking to close the gap by encouraging Americans to stop buying products imported from China and other targeted countries.
Long-Term Impact on Multi-Family Housing
Canada’s Tariffs Hit Harder than China
Most of the conversation has centered on China. However, it’s Canada that may have the greatest impact on our industry. Tariffs on Canadian lumber are adding about $9,000 to the price of a single-family home. They are also adding more than $3,000 to the cost of a multi-family home, according to Randy Noel, chairman of the National Association of Homebuilders.
Builders Already Feeling the Pinch
Some companies can shield themselves for now with long-term material contracts. Others, however, are already feeling the strain, and some construction projects have been halted.
According to the most recent numbers, new home construction has slowed. The U.S. Census Bureau reported 1,493 single-family permits for June. That number is down 10 percent from May 2018 and 8 percent from June 2017, when 1,663 permits were pulled.
Struggles in Indiana
In Indiana, builders are already showing signs of strain from high import tariffs.
“The concern over material and labor costs is making it more difficult to build homes at competitive price points, particularly for newcomers entering the housing market,” said Indiana Builders Association CEO Rick Wajda. “We will continue to have discussions with our federal policy makers on the rising construction costs and encourage them to take action to keep housing affordable across the country.”
The Good and Bad for Multi-Family Housing
For the multi-family industry, the impact could be both positive and negative. On the positive side, higher home costs mean more people may pass on home ownership and move into multi-family housing.
On the negative side, new construction of apartment homes could stall, creating a shortage of properties. This could limit job opportunities for leasing professionals, managers, and maintenance technicians.
Rising Maintenance Costs
Maintenance costs may also rise. Repairs and replacements such as washing machines, doors, and lumber could cost more, since many of these items come from heavily tariffed countries like China. Higher costs could push up rents or reduce entry-level pay for multi-family housing professionals as properties look to offset expenses.
Looking Ahead
Ultimately, the long-term impact depends on how long President Trump continues his trade war. If his statements and tweets are any indication, he plans to stay the course. If that holds true, these predictions for the multi-family housing industry could become reality.