As U.S. cities face historic housing shortages and rising costs, one overlooked factor is making things worse: tariffs. Regardless if they stay, tariffs add additional uncertainty, which will impact housing supply for decades to come.

The hidden crisis

Tariffs create uncertainty, delay construction, and raise costs in a fragile market. Often seen as abstract, tariffs have real consequences for planners, developers, and communities. With the homeowner vacancy rate at just 1.1 percent, far below the healthy five percent mark, rising costs driven by tariffs are limiting what gets built and who can access it. As affordable homes disappear, renters and buyers face fewer options, shrinking mobility, and stalling community growth. The national rental vacancy rate rose to 7 percent in Q2 2025, from 6.6 percent in Q2 2024, tightening the market. If cities hope to expand affordable, inclusive housing, they must reckon with the hidden obstacle that tariffs place on progress.

Tariffs increase costs up to 20 percent on softwood lumber from Canada and Mexico, while strict immigration policies worsen labor shortages. Even standard projects struggle as prices for lumber, steel, aluminum, and gypsum climb. Since December 2020, building material prices have jumped 34 percent, far outpacing inflation and further straining development budgets. Builders say tariffs add $10,900 per month in costs. Smart growth projects, especially infill development in existing communities with tight budgets, are hit the hardest. Transit-Oriented Developments (TODs), which depend on imported steel, concrete, and glass, are now even more vulnerable to tariff-driven price swings. These developments, vital for walkable, connected neighborhoods, are most vulnerable to delays or never getting off the ground due to these increased costs.

Predicted results as tariffs continue

1. Housing prices could rise: Tariffs inflate material costs, especially for “for-sale” homes where buyers face the full cost, pricing out families. With a nationwide shortage of 4 million homes, fewer new builds will likely lead to increased competition and higher costs. Housing drives nearly 15 percent of GDP and generates about $1 million and 11 jobs per home, so slowdowns will also trickle down to local economies.

2. Multi-family and affordable housing will slow: These projects rely on tight budgets, and their funding depends on government programs like the Low Income Housing Tax Credit (LIHTC); even small cost increases threaten project viability. Tariffs and high costs make projects “pencil out,” meaning they’re financially unviable.

3. Single-family home prices will keep climbing: Fewer new homes mean rising prices for existing homes that will become more expensive, a trend evident in today’s low vacancy rates. Homeowners locked into low mortgage rates will have little incentive to sell, further constraining supply. This means fewer listings, more bidding wars, and widening wealth gaps between current homeowners and those trying to enter the market.

4. Developers will be forced to adapt or leave: Unlike large firms, small and infill-focused developers can’t easily absorb cost spikes. Without support, many will pause development or leave altogether, cutting off a piece of community-driven growth.

Future-proofing housing

Communities don’t have to wait for federal policy to act. By using these smart growth strategies, local leaders can guard against rising costs:

• Zoning and regulatory reform
  • Make building easier: Streamlined codes and faster approvals from local governments can help make projects viable despite rising material costs.
  • Support Accessory Dwelling Units (ADUs) and tiny homes: These small, affordable options use fewer materials and cost less to build. By loosening zoning and parking rules, cities can more easily add these homes in existing neighborhoods
• Expand diverse housing types
  • Support manufactured and masonry housing: Manufactured homes, built in factories, are cheaper and less wasteful than traditional homes. Cities can boost supply by easing zoning regulations, relaxing design requirements, and clarifying inspection procedures. Masonry homes, made from brick, stone, or concrete, use fewer imported materials, providing a stable and cost-effective option for the long term.
• Leverage broader planning and incentives
  • Collaboration and incentives: By coordinating regional plans and offering incentives like tax breaks, density bonuses, and fee reductions, cities can support walkable, transit-connected neighborhoods that use existing infrastructure efficiently, help developers absorb tariff-driven costs, and keep projects stable.
  • Engage in regional and collaborative planning: Tariffs and supply issues are too big for one city; regional coordination is essential. By pooling and advocating together, cities can drive stronger, more lasting solutions.

Building resilience amid tariffs

Tariffs and rising costs can feel overwhelming, but communities aren’t powerless. Local governments can act now, speeding up approvals and supporting affordable housing like ADUs, manufactured homes, and masonry construction. Residents can share their stories with advocacy groups to push for smarter trade policies. This is a chance to rethink how we build. With the right local action, communities can ease tariff pressures and create stronger, more affordable housing markets.