Last week, the Trump Administration announced a new tariff of up to 24 percent on Canadian lumber. According to a report by CNN Money, Canadian lumber accounts for nearly a third of all lumber used in the United States, and the new duty could raise the price of homebuilding by six percent, on average.
“For builders, it’ll increase the cost of construction by about $3,000 on the average home, which unfortunately will be passed on to consumers,” said Jerry Howard, CEO of [the National Association of Home Builders].
Builders argue that higher prices will translate into a slowdown of construction activity that could cost 8,000 U.S. jobs and $500 million in lost wages.
How could a lumber tariff affect homebuilding in Dallas-Fort Worth? We reached out to John Scott of Scott Homebuilders for a clearer picture of how local trades and buyers could be impacted.
Despite acknowledging that a sudden increase in lumber prices on an already-contracted home could narrow already slim profit margins, Scott shied away from criticizing the measure. His interest lies in the long game.
“I would end up absorbing that cost, on what is already a razor thin profit margin, for sure,” he said. “We don’t like doing that. But if it’s the result of a policy that’s in the long-term best interest of our customers, I and other builders that I’m familiar with are willing to absorb that.”
The price of building – specifically, the cost of lumber – has already risen significantly in 2017, before any proposed tariff Scott says. “We’ve seen probably a $3,000 price increase on the cost of lumber for an average home so far this year, from factors not associated with a tariff on Canadian soft wood products. Building products have been increasing across the board and certainly a tariff will have an effect on the cost of lumber, I’m sure, and the overall affordability of building a home.”
Housing Affordability Threatened by Municipal Taxes, not a Lumber Tariff
Housing affordability, he says, is one of his chief concerns as a builder in North Texas. Government entities, he believes, play a heavy hand in that. “I would say that over and above the tariffs on Canadian number, a municipality’s taxes and fees associated with building have increased costs. I think government overall, not limited to this administration, is causing an increase in the price of houses.”
According to the CNN Money article, Canadian lumber is subsidized by the government and Zoltan van Heyningen, executive director of the U.S. Lumber Association, was quoted defending the measure, saying it benefited American labor.
“The duties are an essential step to make sure we don’t lose more jobs,” he said. “We have 360,000 [lumber] jobs dependent on a level playing field with Canada.”
Scott seems to agree with Heyningen’s sentiments.
“I hate anything that sees the cost of homebuilding increase, especially when affordability is such a factor. But I see the upside,” he said. “If we can get more jobs as a result of a tariff, or better trade deals that result in more jobs and higher pay for American workers, that means more Americans can afford houses. If a tariff is necessary to put us on a more equal trading basis with one of our largest trading partners, then I support the president’s decision to do that.”