Why Trump Steel Tar­iff Won’t Hurt Hous­ing

National Mortgage News - - Compliance & Regulation -

the trump ad­min­is­tra­tion’s new tar­iffs on im­ported steel and alu­minum may raise prices on a va­ri­ety of con­sumer and com­mer­cial prod­ucts, but will only put min­i­mal strain on the hous­ing in­dus­try.

The 25% tar­iff on steel and the 10% tar­iff on alu­minum are more likely to be a con­cern for com­mer­cial and mul­ti­fam­ily con­struc­tion than the sin­gle-fam­ily sec­tor, said Tim Rood, manag­ing di­rec­tor at Si­tus and chair­man of con­sult­ing firm The Colling­wood Group.

“I think for sin­gle-fam­ily, im­ported steel and alu­minum are go­ing to con­tribute a small per­cent­age to the home’s cost, but when you talk about mul­ti­fam­ily and com­mer­cial con­struc­tion, it’s sub­stan­tially higher,” he said.

But while the Amer­i­can Iron and Steel In­sti­tute es­ti­mates 43% of steel im­ports go to the con­struc­tion in­dus­try, very lit­tle of it is used in res­i­den­tial con­struc­tion. Steel frames ac­counted for less than 0.5% of new sin­gle-fam­ily houses and about 4% of mul­ti­fam­ily build­ings, ac­cord­ing to Cen­sus Bureau es­ti­mates.

What’s more, new mul­ti­fam­ily con­struc­tion ac­counts for less than 12% of res­i­den­tial con­struc­tion spend­ing and only 6% of to­tal pri­vate con­struc­tion spend­ing, ac­cord­ing to the Cen­sus Bureau.

“Is it the end of the world? No. Is it go­ing to have an im­pact on the mar­gins? Yes,” Rood said.

Across all types of com­mer­cial con­struc­tion, steel ac­counts for 6% to 8% of the cost to con­struct a build­ing. That per­cent­age can rise to as much as 20% when the costs to in­stall heat­ing, ven­ti­la­tion, and air con­di­tion­ing are fac­tored in, ac­cord­ing to Kathryn Thomp­son, CEO of Thomp­son Re­search Group, an eq­uity re­search firm spe­cial­iz­ing in con­struc­tion and re­lated in­dus­tries.

But in mul­ti­fam­ily build­ings, steel ac­counts for only 1% to 6% of con­struc­tion costs. The con­struc­tion in­dus­try pri­mar­ily uses im­ported steel for build­ing ma­te­ri­als like steel studs and ceil­ing grids, ac­cord­ing to a re­cent Thomp­son re­port. The mul­ti­fam­ily and of­fice sec­tors have been driv­ing de­mand for steel studs, and cer­tain geo­graphic ar­eas, like the West Coast and Florida, use a larger per­cent­age of im­ported steel than other parts of the coun­try.

Alu­minum us­age may vary even more widely. Some projects might use it for win­dow frames but oth­ers might use a plas­tic com­pos­ite in­stead.

“It could be re­ally high or not much at all,” Thomp­son said.

While the new tar­iffs are “prob­a­bly go­ing to be neg­li­gi­ble from a sin­gle-fam­ily or res­i­den­tial point of view,” Rood said, there are other rea­sons for the hous­ing in­dus­try to be con­cerned.

The tar­iffs, which were signed last month, aim to pro­tect do­mes­tic in­ter­ests, but crit­ics fear the move could back­fire by in­flat­ing prices, hurt­ing the econ­omy or up­set­ting key U.S. trade part­ners. The tar­iffs do in­clude ex­emp­tions for Canada and Mex­ico, which ac­count for 16% and 19% of U.S. steel im­ports, re­spec­tively.

So even if res­i­den­tial con­struc­tion isn’t di­rectly af­fected, higher costs of other prod­ucts may hurt con­sumer spend­ing and im­pede hous­ing af­ford­abil­ity at a time when prices are soar­ing due to low in­ven­tory lev­els. An­other rea­son home­builders are wary of the new tar­iffs is the soar­ing cost of lum­ber due to a 20% tar­iff im­posed on Cana­dian im­ports last year.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.