By Chad Taylor, the Taylor-Made Team
We have a housing supply problem in this country. I have written about it before. We simply do not have enough homes in many of the places people want to live, and that shortage has helped push prices higher and affordability lower.
So if we want more housing, it would seem fairly straightforward that we should be looking for ways to make homes easier and less expensive to build. Instead, we are making many of the materials used to build them more expensive.
Recent U.S. tariffs on Canadian products include a 50% tariff on plywood and engineered wood products, including laminated veneer lumber, commonly called LVL.
Canadian softwood lumber is subject to a separate set of tariffs and duties.
It is easy to look at those policies and think this is primarily a new construction issue. It isn’t.
This isn’t just a tax on new construction. It is effectively a tax on home building and home improvement. The same lumber that frames a new house is used to finish a basement, rebuild a deck or repair a roof. Plywood and engineered lumber are used in additions and remodeling projects. Your roofer buys these materials. Your remodeling contractor buys them. Your general contractor buys them. Eventually, you will buy them.
That matters because most Americans aren’t building a new house this year, but millions of homeowners will repair, remodel or improve the homes they already own.
Maybe a family loves its neighborhood but needs another bedroom. Maybe a couple wants to stay in their home but needs to reconfigure the main level. Maybe the roof needs to be replaced, or the 1980s kitchen finally needs to go. Higher material costs work their way into all of those decisions.
And we’ve seen a version of this movie before.
During COVID, lumber prices became incredibly volatile. Builders sometimes couldn’t confidently tell buyers what a home would ultimately cost because material pricing could change so dramatically during construction. According to the National Association of Home Builders, nearly half of builders surveyed in the spring of 2021 were using price-escalation clauses, and nearly one in five reported delaying construction or sales when costs spiked.
That is the part worth remembering. The problem wasn’t simply that lumber became expensive. The problem was that nobody knew what it was going to cost next.
A builder deciding whether to start ten homes has to estimate those costs months before the homes are completed. When those numbers become too unpredictable, the safest business decision may be to start fewer homes. That is exactly the behavior we don’t need when we already have a housing shortage.
I am not suggesting we are headed back to the craziness of 2021, but that period taught us something important: uncertainty has a cost of its own.
And building-material costs are already moving higher. The National Association of Home Builders reported that softwood lumber prices were up 17.3% year over year in July. Builders surveyed this summer said the median cost of materials needed to build the same house had increased 6.7% in just one year.
Those increases don’t stop at the builder’s job site. They eventually affect the resale market, too.
For the last several years, we have understandably focused on mortgage rates when discussing affordability. Today’s buyer is already calculating what a home will cost each month at a much higher interest rate than buyers enjoyed a few years ago.
But buyers don’t stop calculating once they know the mortgage payment. They are also looking around the house.
What will that kitchen cost to update? What about the unfinished basement? How much life is left in the roof? Could we someday add onto the house?
Those questions matter more when the answer keeps getting more expensive. A buyer who might once have paid $500,000 for a home knowing it needed significant improvements may look at that same house differently when those improvements cost substantially more.
That affects the seller, too.
Housing affordability isn’t one number. It is the mortgage rate, the purchase price, property taxes, insurance, maintenance, repairs and eventually the cost of making a house work for the family living in it. Buyers and homeowners don’t experience those expenses individually. They experience them from the same household budget.
It all adds up.
There may be legitimate trade-policy arguments for tariffs, and those debates are bigger than this column. But from a housing perspective, the math is pretty simple.
We need more homes. We need existing homes to remain affordable to maintain and improve. And we need builders and contractors to have enough confidence in their costs to keep building and remodeling.
Making the materials required to do all of that more expensive doesn’t make our housing shortage easier to solve.
It makes it harder.
Follow Close-In KC on Instagram
Close-In KC is your window into the neighborhoods that define Kansas City’s urban/suburban edge: Prairie Village, Brookside, Waldo, West Plaza, and beyond. Local homes, local stories, favorite hangouts and restaurants, and the everyday vibe of the places that make KC feel like home. Click Here!
