Trump Effect

TRUMP IMPACT ON HOUSINGTrump’s presidency has impacted the housing industry.   

By Steven Cvitanovic

As a presidential candidate, Donald Trump promised he would eliminate excessive regulations, pull out of trade agreements that were “bad deals,” and slow or eliminate illegal immigration to protect American workers. Trump has been able to fulfill his promises through Executive Orders, at least temporarily, but has the flurry of Executive Orders had any impact?  Yes, but it is not all good.

The National Association of Homebuilders (NAHB) estimates that nearly 25 percent of the cost of a new home is due to governmental regulations. Trump himself has referred to this estimate and promised “a temporary pause on new regulations and a review of previous regulations to see which need to be scrapped.”  So, let’s look at three of the noteworthy regulations that Trump has targeted. 

WOTUS 

President Trump signed an Executive Order that directed the EPA and the Army Corps of Engineers to begin rescinding or revising the controversial “waters of the United States” (WOTUS) rule.  The WOTUS rule would expand both of the agencies’ authority under the Clean Water Act into most bodies of water already being managed by the states.  

According to the NAHB, the rule “would harm housing affordability by requiring expensive and time consuming federal permits for countless ditches, isolated ponds and dry channels.” The WOTUS rule also has been the subject of dozens of legal challenges and two courts have issued injunctions against its implementation.

Stormwater  

The EPA plans to take final action on proposed regulations that would update specific elements of the existing National Pollutant Discharge Elimination System. The rule would make targeted revisions to outdated requirements in order to eliminate inconsistencies and clarify existing regulations. 

FFRMS  

President Trump rolled back President Obama’s Executive Order Establishing of a Federal Flood Risk Management Standard (FFRMS), which governs federal actions in floodplains.  The FFRMS was designed to reduce future flood disasters.  According to the NAHB, the FFRMS was “an overreaching environmental rule that needlessly hurt housing affordability.”  

Trump has broad powers as Executive-In-Chief to administer the laws enacted by Congress. However, he is not able to override those laws with Executive Orders. Whether these or other Executive Orders do that remains to be seen, and will be the subject of litigation.

Free Trade

Trump has railed against NAFTA. While NAFTA may have moved jobs to Mexico, it also creates high paying jobs for U.S. workers. Some of the U.S. job losses are in industries where we are uncompetitive anyway – like garment manufacturing – and some losses are due to automation.  

Experts may debate the “net effects” of NAFTA but there is no doubt that the auto, agriculture and pharmaceutical industries – among many others – have flourished under free trade. What’s more, Mexico and Canada account for approximately 35 percent of U.S. exports. Canada also imports more from the United States than it exports to the United States, not such a bad deal after all. 

U.S homebuilders rely greatly on Canadian lumber and building products manufactured in Mexico. The NAHB is greatly concerned about the current softwood lumber dispute with Canada and is actively involved in finding a long-term solution that provides a steady supply of lumber at a reasonable price. NAHB CEO Jerry Howard said that he can’t overstate the importance of solving the U.S.-Canadian softwood lumber dispute. The U.S. Commerce Department has imposed duties averaging 26.75 percent on Canadian lumber shipments into the United States.   

The NAHB released the following statement regarding new tariffs on Canadian lumber: “NAHB is deeply disappointed in this short-sighted action by the U.S. Department of Commerce that will ultimately do nothing to resolve issues causing the U.S.-Canadian lumber trade dispute but will negatively harm American consumers and housing affordability.”

According to the NAHB, the cost of this new duty will increase Canadian lumber costs for U.S. customers by 6.4 percent, increasing the price of an average new single-family home by $1,236.

The United States, Canada and Mexico started discussing changes to NAFTA last August, and are now in the fourth round of negotiations.  The Trump administration is talking tough and the alarm bells are now going off in Washington, D.C.  

Business leaders and lobbyists swarmed Capitol Hill on Oct. 24, 2017, to preserve NAFTA and warn that withdrawing from it could devastate their profits and harm the United States’ ability to compete in a global market.

The world is getting smaller, not bigger. For the United States to compete, it must be part of trade agreements that are fair to all parties. Withdrawing from NAFTA would be a major mistake and harm to the U.S. economy as a whole and likely increase the costs of construction projects.

Labor Shortage

Rebuilding from hurricanes in Texas and Florida, and the fires in Northern California, will only add to the shortage. There are well over 10 million unemployed Americans between the ages of 25 to 50.  Trump’s statements that these jobs should be filled by U.S. workers is laudable, but not realistic.  

According to the Los Angeles Times, “the share of immigrants in construction in California jumped from 13 percent in 1980 to about 43 percent today, according to a UCLA analysis of federal data.”  President Trump has placed the blame on immigrant labor for the high American unemployment.  

He is confusing cause and effect. Immigrants are not displacing American workers in the construction trades. Rather, immigrants are filling the void in the construction workforce that has been created by Americans not seeking or wanting to do that work.  

On April 18, 2017, President Trump signed the Buy American and Hire American Executive Order, which “seeks to create higher wages and employment rates for U.S. workers and to protect their economic interests by rigorously enforcing and administering our immigration laws” according to the Department of Homeland Security Website.  He has also decided to eliminate the Deferred Action for Childhood Arrivals (a.k.a. DACA).

Trump can issue all the Executive Orders he wants, but those orders are not going to motivate a U.S. worker to join a trade. In fact, his Executive Orders may worsen the labor shortage. 

Steven Cvitanovic is a partner in Haight Brown & Bonesteel’s Los Angeles office. He has extensive experience with construction litigation and claims involving public facilities and infrastructure. 

 

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