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Photo: Trump Administration

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

Most of the talk has been about China, but it’s Canada that’s going to have the most impact on our industry.

Tariffs on Canadian lumber are adding about $9,000 to single-family home prices and more than $3,000 to multi-family homes, Randy Noel, chairman of the National Association of Homebuilders said last month.

Some companies can shield themselves, for now, with long-term contracts already in place for materials but other builders are starting to feel the pinch and construction has been halted.

According to the most recent single-family permit numbers for June, new home construction has decreased. The United States Census Bureau has reported 1,493 single-family permits for the month of June, a 10 percent decrease from May of 2018 and an 8 percent decrease from June of 2017 when 1,663 permits were pulled.

In Indiana for example, builders are already starting to show that they may be hurting from the 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 Chief Executive Officer, Rick Wajda said “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.”

What this means for the multi-family industry can be both good and bad. The good is that higher home costs mean more and more people will be passing on home ownership and moving into multi-family housing. The bad is that new construction of apartment homes could stall and result in a shortage of properties to work for in the future, thus constricting the job market for leasing professionals, managers, and maintenance technicians.

Maintenance could be another area that will hit apartment properties in the wallet. The cost to repair, and maintain properties could be going up with items such as washing machines, doors, lumber, and other objects usually sourced from heavily tariffed countries such as China increasing in price. This could result in a rising rent prices, or a lowering of entry-level pay for multi-family housing professionals to offset the higher costs incurred by the properties.

All of these predictions are dependent on the length of time Trump will continue his trade war. If what the president is saying (and tweeting) is true, it seems like he is in for the long run and our predictions for the multi-family housing industry could indeed come true.