On Nov. 8, 2016, an almost two-year presidential campaign finally came to an end. Now, industry groups are responding to our newest president-elect. Donald J. Trump will be the 45th president—and while housing and the construction industry didn’t play much of a role in Election 2016, the implications of a new administration and a Republican-led Congress could impact remodelers nationwide.
So how have remodelers responded? Depends on who you ask. Some industry pros told Remodeling that Trump’s background in business and real estate are positive signs for the industry, “If he does what he said, I think our business will triple in volume over the next three years and beyond,” says Chris of CJ’s Finish Carpentry in Hathorne, Mass. Others have seen the opposite effect so far. “I fear the uncertainty generated by the election will persist into Trump’s presidency,” says another remodeler who wished to remain anonymous. “We believe the uncertainty/preoccupation with the election has hurt sales.”
Until Trump takes the oath of office, a lot is still unclear as to what policy measures his administration will take and how those policies will impact remodelers down the road. So what should remodelers be on the lookout for under a Trump presidency? In short: regulations, tax reform, immigration, and the skilled labor market.
Regulation Nation
In interviews with Remodeling, both Jerry Howard, CEO of the National Association of Home Builders (NAHB), and leaders with the National Association of the Remodeling Industry (NARI) expressed cautious optimism over the effects of a Trump presidency.
When it comes to regulations, Howard says, “I think what you’re talking about is a man who has [made] the hallmark of his campaign [to] reduce the regulatory burdens on businesses.” In discussing ways in which the NAHB could work with Trump, Howard mentioned the potential for rolling back “overzealous” environmental and labor regulations.
Many remodelers believe regulations are hurting their business and hope a Trump presidency will mean changes for the industry. However, the focus of industry leaders is largely the same. “If there’s any way that we can make sure that we can continue to raise awareness and the advocacy of what it means to be a small-business owner in this country and how to make it at least less taxing—less red tape, all those things that would allow us to prosper—we’re all for that,” says NARI CEO Fred Ulreich. “That mission hasn’t changed.”
Kermit Baker, director of the Remodeling Futures Program at the Joint Center on Housing Studies (JCHS) of Harvard University, says that exactly what Trump’s impact on the industry will be is hard to tell so early on. “I think there are few direct effects on remodeling that we’re likely to see coming out of this administration, but many indirect affects,” Baker tells Remodeling. “In terms of direct impact, that starts with regulations,” he says. “The overall construction industry, residential market, and remodeling has been very much heavily regulated in recent years. And certainly the Trump administration has talked about rolling those back.”
According to the NAHB, regulations account for 24.3% of the final price of a single-family home, though not all of those regulations directly impact remodelers. While on the campaign trail, Trump spoke to the NAHB Board of Directors meeting in Miami on Aug. 11. There, he said he would cut the “horrible” and “burdensome” regulations on the home building industry. His expressed goal is to bring that 24.3% down to just 2%.
Trump also promised the NAHB that he would freeze new proposed regulations. That promise is highlighted on his transition team’s website, greatagain.gov, stating, “Regulatory reform is [the] cornerstone of the Trump Administration, and the effort will include a temporary moratorium on all new regulation, canceling overarching executive orders, and a thorough review to identify and eliminate unnecessary regulations that kill jobs and bloat government.”
On the campaign trail, Trump told the Economic Club of New York on Sept. 15 that he would “eliminate all needless and job-killing regulations now on the books.”
However, according to a speech by Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, regulations have not had a significant impact on small businesses overall. Between 2011 and 2013, according to the Census Bureau, the number of companies that employ fewer than four people has increased by 43,232 to 3.48 million. In fact, Lockhart says, the impact regulations have on small business is exaggerated. He says there has been a slight slowdown in small business growth because businesses are using personal savings, home equity, and credit cards to finance new companies.
Some of the regulations that Trump wants to address pertain to the EPA and the expansion of the Clean Water Act via the Waters of the U.S. Rule. Remodelers and home builders say the rule would expand the authority of millions of land acres under federal jurisdiction, leading to increased litigation and delay. The NAHB in May 2016 came out against the rule, saying small businesses would be hurt because they lack the time and resources to fight the changing regulations, which the NAHB says have had businesses “held hostage by the EPA.”
On Trump’s campaign website, he pledged he would “eliminate our most intrusive regulations, like the Waters of the U.S. Rule. We will also scrap the EPA’s so-called Clean Power Plan, which the government estimates will cost $7.2 billion a year.” Trump since has picked Oklahoma Attorney General Scott Pruitt, an ally of the fossil fuel industry who has been critical of the EPA in the past, to head the agency.
Other regulations through OSHA and the Department of Labor include the overtime rule, confined spaces rule, and the lead-paint rule—all of which the NAHB has contested. “I think that the [overtime rule] is something that is right in [Trump’s] wheelhouse and something we would encourage him to take a look at,” Howard tells Remodeling.
Industry groups are anxious about DOL’s overtime rule, which was set to take effect on Dec. 1. However, on Nov. 22, a federal judge in Texas issued a preliminary injunction on the rule, whose fate now hangs in the balance. DOL is appealing the injunction and says, “We remain confident in the legality of all aspects of the rule.” Trump’s pick to run the DOL, CEO of CKE Restaurants Andy Puzder, has spoken out against the rule, making its fate even more uncertain.
A Taxing Road
Trump was vocal about tax reform before the election results. In his Sept. 15 speech to the Economic Club of New York, Trump said he would create “bold new tax reform.”
“One of the things we’re looking at is tax incentives, tax extenders,” says Dan Taddei, director of education and certification with NARI. “We’ve asked Congress to really integrate that and pass those for the coming year. And [we are] also looking at long-term tax reform, the whole tax structure. I think that’s what the new president brings in is a look at taxes—how that affects the corporate tax and how to bring those in line and reduce that burden.”
Howard says this is another area where the NAHB supports the new administration. “On GSE reform and housing reform, President-elect Trump will be very progressive in trying to get those entities [to] ... come to a final resolution.” Howard adds that attention will be paid to what happens in the House Ways & Means Committee, chaired most recently by Rep. Kevin Brady (R-Texas).
Howard also spoke about the continued efforts by House Speaker Paul Ryan (R-Wis.) for tax reform, which he hopes will lead to concrete legislation that the NAHB would support. Trump economic adviser Stephen Moore, distinguished visiting fellow for the Project for Economic Growth at the Heritage Foundation, has said Trump will pursue tax reform for businesses in the first 150 days. In his speech to the NAHB, Trump said that “no small business in our plan will be taxed more than 15%.” That contrasts with Ryan’s plan to lower the top tax rate for corporations to 20% and the top tax rate for small businesses to 25%; the plan makes reductions across the board, but they are more modest than those suggested by Trump.
Economists at the Tax Policy Center say Trump’s plan would cost the federal government as much as $9.5 trillion over the next 10 years, potentially giving heartburn to deficit hawks in Congress.
One possible side effect of a Trump presidency is fewer tax cuts for sustainable building and alternative energy sources, which haven’t been at the forefront of Trump’s plans. Says Michael Winn of WINN Design+Build in Falls Church, Va., “A Trump administration is unlikely to support tax credits for sustainable building products, which may tamper consumer demand.”
Eye on Immigration
One priority is clear under a Trump administration: deporting undocumented immigrants. One of Trump’s major campaign promises was to overhaul immigration by building a “wall” on the Mexican-American border. In an interview with CBS’ 60 Minutes on Nov. 13, Trump said he plans to deport as many as 3 million undocumented immigrants.
An analysis by the National Bureau of Economic Research says that 1.1 million undocumented immigrants work in the construction sector, out of 8 million in all fields. And according to data from the Pew Charitable Trusts, immigrants make up 9% of the overall construction workforce. If Trump follows through on deporting all undocumented workers, the National Bureau of Economic Research says that the construction, leisure, and hospitality sectors would see an 8% decline in workers.
“The construction industry relies heavily on immigration. … Any restrictions there, I think are likely to create reasonably dire circumstances in terms of supplying labor,” says the JCHS’ Baker. These concerns were echoed by Remodeling readers. Says Winn of WINN Design+Build, “Deportations of immigrant labor will have a direct and significant impact on the construction industry.” Jim Hughes of Building Ventures in Cartersville, Ga., says, “In our area, it is difficult to find labor that is not Hispanic. If he were to deport them, we would have an extreme labor shortage and the cost to build or remodel would rise dramatically.”
While Howard says it is not up to him to determine the best way to fix the broken immigration system, he hopes the new administration and new Congress will be able to pass comprehensive reform. “Immigrants have built this country from the first house built when the settlers came,” Howard says. “So we are very engaged with that.
“I am hopeful; it’s long overdue that we do an overhaul on immigration reform. … I think President-elect Trump puts such emphasis on the immigration issue that they have to do something, and it’s our hope that they have to be comprehensive and our hope for a consistent legal flow. And [it’s] our hope that while employers should be liable for the legal status of their employees, that contractors should not be liable for subcontractors’ employees’ legal status.”
Building Skills
The impact of Trump’s potential immigration and deportation policy comes at a critical time in the construction and trade industries, when many are concerned about finding talent. Though there has been a boom in both residential and commercial construction activity following the recession, many of the workers who left the trades haven’t returned, and labor shortages have plagued the industry.
According to Hanley Wood’s Data Studio, between January and June of 2016 spending in the commercial/industrial sector was $113.2 billion, a 9.6.% gain from the same period last year. Economists forecast that spending on housing in 2017 will increase. Metrostudy, also a Hanley Wood company, predicts remodeling activity as a whole will rise another 4.4% in 2017 and 3.3% in 2018.
But the industry needs workers to meet that demand. Leading up to the election, Trump campaigned on a platform of bringing more jobs to America. Both he and Democratic candidate Hillary Clinton made increased vocational training part of their campaign platforms.
At a campaign event on Nov. 1 in Philadelphia, Trump noted that often people who attend college but who aren’t successful in traditional academic pursuits have considerable talents for vocational skills that currently aren’t being maximized. He said, “Vocational training is a great thing. … We don’t do it anymore. Vocational training for our country is so, so, so important.”
Howard says Trump’s past business experience could be a benefit in office. “President-elect Trump does in fact understand the importance of skilled labor in the construction sector, whether the residential or commercial sector. We have had a great deal of success—including in Indiana with then-Governor, now Vice President-elect Pence—in bringing some of our training programs into the states with the support of state government.” The NAHB would like to see those programs include incorporating vocational training in schools at a national level and expects to voice that to the next Secretary of Education (Trump has nominated Betsy DeVos for the job).
On Trump’s White House transition team website, the administration says it will seek to invest $550 billion in infrastructure over the course of a five-year period. His current transition team has emphasized the importance of infrastructure spending and anticipates working with a Republican-led Congress to pass concrete infrastructure spending reform. Skilled employees will be needed to execute those plans, and while implementation may put an initial strain on the available workforce, there’s future potential for greater dividends.
“While that may cause some shortages in the short run, I think this is really going to kickstart the training and workforce development programs and really drive interest into those programs,” says NARI’s Taddei. “Because they are good-paying jobs. So it’s going to, over time, build our work force.”
When asked what impact Trump will have on the labor force, remodelers’ impressions were mixed. Hughes says, “I think he will encourage more training schools for younger folks to get training and prepare to enter the field.” Countered another Connecticut-based remodeler who wished to remain anonymous, “Since his policies will have a negative impact on the economy, I think more people will be unemployed in the trades.”
There is less than a month until inauguration day on Jan. 20. And remodelers, along with the nation, will be on the edge of their seats over the next four years—waiting with bated breath.
—additional reporting for this story was contributed by Curtis Sprung
Additional reading:
- NAHB’s CEO Details Four Hopes from a Trump Administration
- Remodelers Respond to Election 2016
- Trump's Plan to Fix the Nation's Infrastructure
- Builders React to Election 2016
- During These Uncertain Times, Learn to Live in the Present Tense
- Seven Ways a Trump Presidency Could Impact Contractors
- NARI: Post-Election, Stay the Course, Advocate, and Educate
- NAHB Remains 'Steadfast' In Its Mission Post-Election 2016
- Overtime is Better Than a Salary
- NAHB Endores 137 Congressional Candidates
- Builders and Uncertainty
- Housing's Divided on Immigration
- Change Won
- Smaller Construction Firms May Miss Out on Infrastructure Spending
