The latest tariffs from President Donald Trump’s administration appear likely to drive up the costs of housing production in the already expensive New York region at a time when city and state officials have been aggressively pushing to increase supply, according to multiple industry experts.
The Trump administration recently imposed 25% tariffs on most imports from Mexico and Canada and increased its tariff to 20% on Chinese goods. Canada and China have already retaliated with tariffs of their own, while Mexico said it plans to announce its response Sunday.
Canada specifically is New York’s largest trading partner, with trade totaling $44 billion in 2023, according to data from the U.S. Census Bureau. This included $22.5 billion in imports and $21.7 in exports.
Housing production has long been notoriously costly in New York and its surrounding suburbs, and many in the real estate industry predict these tariffs will only make the problem worse. The country gets many construction materials, including lumber, from Canada, for instance, and a tariff on these goods will make it more expensive to build homes, in turn leading to higher prices for prospective homebuyers, said Miller Samuel CEO Jonathan Miller.
If the tariffs plunge the economy into a recession, that could ultimately help lower the stubbornly high mortgage rates that have limited activity in the housing market for years, Miller said. But the loss of jobs and income that would result is not the best path to get there.
“That doesn’t seem like a good strategy of causing large-scale unemployment to get mortgage rates to fall, but here we are,” Miller said.
Indeed, there are concerns that the escalating trade war, paired with data pointing to some softness in the economy at the start of the year, could lead officials to face an environment of slower growth and above-target inflation — a scenario that could force policymakers to make tough decisions between employment and price stability goals.
The Labor Department will offer an update on the job market on Friday. Officials will meet for their next policy gathering on March 18 and 19.
Cost craziness
Barry LePatner, a construction attorney and industry adviser, estimated that tariffs could raise construction costs by 4% to 8% in the short term and by as much as 15% if they remain in place in the long term. He stressed that many in real estate “balk at those kinds of increases,” which could ultimately cause developers to delay or outright cancel projects, reducing the overall supply in the market.
This comes at a time when city and state officials are undertaking a major push to build more homes in New York. Gov. Kathy Hochul announced plans at the beginning of 2023 to add 800,000 homes to the state’s housing supply over the next 10 years, while Mayor Eric Adams announced a goal of building 500,000 more homes in the city at the end of 2022. Both levels of government have since instituted a wave of new housing laws to help achieve these goals.
But housing remains pricy. The median sales prices in Manhattan, Brooklyn and Queens during the fourth quarter of 2024 were $1.1 million, $989,000 and $700,000, respectively, while the median rent in January was $4,350 in Manhattan, $3,500 in Brooklyn and $3,400 in northwest Queens, according to data from Douglas Elliman.
And the tariffs could cause these prices to rise, said LePatner.
“I’m not sure of any good that’s going to come,” he said. “When you put tariffs on, two things happen: It stunts growth, and it raises prices.”
What’s next?
The uncertainty around whether there might be additional tariffs down the road is an issue for the retail and industrial sectors as well. David Greek of Greek Real Estate Management, which develops and owns industrial real estate in the Northeast, noted that the firm’s industrial tenants were experiencing uncertainty about their businesses going forward.
“A lot of the concerns I’ve heard from our tenants are kind of like, is this it? Are there more to come?” he said. “Certainly there have been signals from the White House that this is not it.”
New York Building Congress President and CEO Carlo Scissura echoed this, noting that stability is vital for the construction industry, and lately that has been in short supply. The administration had already briefly imposed 25% tariffs on goods from Canada and Mexico earlier in the year, for instance, only to pause them soon after, throwing the New York business community into upheaval.
“The question becomes, what is the endgame for the administration?” Scissura said. “For the building industry, having some sort of sense as to what’s coming next is very critical.”
There are things the construction industry can do in the meantime to mitigate the tariffs’ impact, said Joy Construction Principal Eli Weiss. This includes simply looking to countries outside of Mexico, Canada and China for supplies. Although doing so could lead to other issues around supply chains and quality control, he was confident in the industry’s resilience overall.
“It’s not going to be just [add] tariffs and prices go up. There will be a lot of cause and effect,” he said. “If this was the first time the construction industry had ever been going through this, we’d be more concerned. We’ve been through it before.”
Reporting from Bloomberg was used in this article.
