Scarcity and an acute, sustained rise in building material costs — from softwood lumber to distribution transformers — are driving up the cost to construct homes and harming housing affordability. There are several factors driving this trend, notably inflationary pressures and global factors, including trade uncertainty.
NAHB estimates that $204 billion worth of goods were used in the construction of both new multifamily and single-family housing in 2024. Some $14 billion of those goods were imported from outside the U.S., meaning approximately 7% of all goods used in new residential construction originate from a foreign nation.
A tariff is essentially a tax on an imported good, meaning the importer pays an additional cost for importing such an item from another country. This effect raises the price of imported products, where the price increase is then typically absorbed by the importer or passed on to the end consumer of the good, usually in some combination. For most goods, the cost is passed on the end-users, meaning consumers. So tariffs on building materials raise the cost of housing, and consumers end up paying for the tariffs in the form of higher home prices.
For example, if a retailer imports a $500 washing machine from a country subject to a 25% tariff, the retailer will owe $125 in tariffs to the U.S. government. This is what could happen next:
— The retailer could try to get the importing country to pay for some of the tariff cost by telling that country it will pay less for the product.
— The retailer could absorb the cost of the tariff and reduce its profit margin.
— The retailer could raise the price of washing machines in its stores.
— The retailer could do any combination of the above options.
For most goods, the cost is passed on to the end-users, meaning consumers. In this case, the consumer would pay an extra $125 for the $500 washing machine. So tariffs on building materials and home appliances raise the cost of housing, and consumers end up paying for the tariffs in the form of higher home prices and goods.
Softwood lumber is a key component in home building. Canada accounts for roughly 85% of all U.S. softwood lumber imports and represents almost one-quarter of the supply in the U.S. The Commerce Department is currently imposing 14.5% tariffs on Canadian lumber and has signaled that it plans to more than double 14.5% tariff rate later this year to 34.5%.
These duties are completely separate from the global reciprocal tariffs initially announced by President Trump on April 2 but have since been paused. When the president made his announcement, NAHB scored an important win when Trump chose to continue current exemptions for Canadian and Mexican products, including a specific exemption for lumber from any new tariffs at this time.
It’s clear we are not out of the woods yet on the possibility that Canadian lumber tariffs could run even higher than 34.5% later this year. The White House issued an executive order in March commanding the Commerce Department to investigate the national security impacts of imports of timber and lumber.
Additionally, numerous raw materials and components, ranging from steel and aluminum to home appliances, are sourced from nations across the globe that are subject to Trump’s latest tariffs. These tariffs are projected to raise the cost of imported construction materials by billions of dollars, depending on the specific rates. For some materials, where imports are critical to supply, prices could see dramatic increases, adding layered costs that could substantially impact builders’ ability to deliver new projects.
The cost of building materials has already risen by 34% since December 2020, which is far higher than the rate of inflation. Data from the NAHB/Wells Fargo Housing Market Index (HMI) March 2025 survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home. Keep in mind this survey was conducted before Trump announced his reciprocal tariffs on April 2.