In the weeks leading up to the inauguration of the 47th president, Julio López Varona saw fear and uncertainty ripple through the immigrant communities he works with. It was similar to eight years ago—though this time mixed with a sense of weariness. As the 2025 inauguration approached, López Varona, co-chair of campaigns at the Center for Popular Democracy (CPD), a national network of progressive civil rights organizations, says the “chilling effect” of the returning president’s oft-repeated mass deportation threats was palpable among his friends and constituents.

“People don’t want to talk to each other—people want to, to a certain extent, hide,” he says. “People feel cornered, because in many cases, the people that are living in the U.S. are trying to find a way to become citizens or residents and haven’t been able to do that for a long time, are in this weird limbo.”

In fact, much of the nation was in a “weird limbo” as President Donald Trump’s second term approached. He repeatedly promised (threatened?) day-one policy changes so dramatic “your head will spin,” including astronomical tariffs on imported goods and mass deportations. And he didn’t appear to be bluffing: On his inauguration day, Trump signed dozens of executive orders, among other things mounting what’s been called a shock-and-awe campaign on border security and immigration. While he did not announce any tariffs immediately, he did sign an executive order creating an “External Revenue Service” and said that he was still looking at imposing a 25 percent tariff on Canada and Mexico by Feb. 1. He had earlier denied reports that he’d accept a “pared back” tariff schedule.

While Trump’s threats and initial actions have created uncertainty within several U.S. industries, the construction industry—which relies heavily on both immigrant labor and imported materials—could be doubly hard-hit. Several industry outlets in the weeks following the election have reported that developers are bracing for a “one-two punch” to their bottom line if Trump follows through with his most extreme deportation and tariff threats.

Not everyone is worried. National Association of Home Builders (NAHB) President and CEO James W. Tobin says his organization’s members are feeling “cautious optimism” that Trump’s background as a builder and a landlord means the new administration will follow through on its deregulation and other developer-friendly policy promises. “Our members remember the economic environment and the building environment in President Trump’s first term, and they see that same economic activity in [a] low regulatory environment as positives in the second term,” Tobin says. “I think they’re anticipating an uptick in economic activity and therefore home building.”

Trump’s grab bag executive order on the cost of living instructed all agency heads to take action to reduce regulation that drives up the cost of housing.

But where Tobin’s market-rate developer constituents anticipate economic opportunity, affordable housing developers fear a catastrophe is coming. Noel Andrés Poyo, executive vice president of Housing Partnership Network (HPN), a nonprofit network of housing and community development organizations, is more focused on the dangers of cost increases from tariffs and action against the immigrant labor force. He predicts “wide-spread bankruptcies.”

“The industry can’t take more shock. It can’t absorb more loss,” Poyo says. “What we are going to see if things continue to drive up the costs of housing, and particularly the costs of producing, operating, and preserving affordable housing—if that goes up further and there are no meaningful other additional resources to close that gap—we’re going to see for profit and nonprofit developers going under, or just pivoting away from the space.”

The Affordable Housing Business Model "Breaks First"

Developing affordable housing is more difficult, more expensive, and more complicated than developing market-rate or luxury housing. Affordable housing developers and providers face tighter profit margins, skyrocketing insurance rates, and greater competition for land and building resources. Securing financing is harder. Meeting regulations is harder because there are more of them and the developers are often smaller. Administering and maintaining tenancy is harder. Funding upkeep and capital expenditures is harder. And all of those complications and barriers mean fewer developers want to work in the space.

Now, facing Trump’s deportations and tariffs, affordable housing providers wonder how they’ll absorb more financial blows.

“In a market rate development, if costs go up, you can increase prices. Prices increase and people are willing to pay them,” says David Dworkin, National Housing Conference (NHC) president and CEO. “In an affordable housing development, rents or costs are tied to income, so you can’t simply raise prices to make up for costs. What you end up with is either having to build fewer units or use more subsidy to build the same number of units. That’s a constraint that ultimately limits the supply of affordable housing and exacerbates the crisis.”

“So the business model that breaks first is the business of affordable housing. That is true with for profits and nonprofits, so this is not a tax status question,” Poyo says. “I would be very surprised if you went to a for profit that primarily worked in the affordable housing space, they’re like, ‘Oh no, honestly, we’re fine. No worries. I don’t have the slightest concerns. My margins are spectacular.”

NAHB’s Tobin agrees that affordable housing developers operate on razor-thin margins, reducing their capacity to absorb any price fluctuations compared to market-rate developers.

“Those deals are so razor thin and put together so expertly that . . . large price swings could jeopardize the financial stability of those deals,” Poyo says.

Poyo notes that if funding for supportive services offered by affordable housing providers is cut, that could put their organizations at further risk. “Whether it’s housing counseling by nonprofits that do single-family development, whether it’s providing resident services or operating permanently supportive housing with the services that are required, those things cost money,” he says. “And if you don’t invest in them, you have consequences for the property and for the residents that actually play out in the bottom line.”

Read the full article about affordable housing solutions by Shelby R. King at Shelter Force.