(iStock)
An ongoing labor shortage and tariffs on building materials continue to weigh heavily on the construction industry as the calendar inches toward 2026.
Danushka Nanayakkara, assistant vice president for forecasting and analysis at the National Association of Home Builders, told attendees at Tuesday’s Home Builders Association of Greater Baton Rouge luncheon that the industry has faced workforce challenges since the Great Recession.
“We lost about a million workers at that time, and you don’t hear young people running to go into trade careers, so because of that, we have an aging labor force. We don’t have enough women working in the trades either,” Nanayakkara says. “Immigrants make up about 30% of the construction force, so with the immigration crackdown, the labor supply will be affected going forward.”
Tariffs have also driven up construction costs. Builders report tariffs have added roughly $10,000 to homebuilding expenses, Nanayakkara said. Lumber prices are up 15% from last year, and Canadian lumber—accounting for about 30% of U.S. residential lumber—now faces a 45% tariff. The U.S. imported $11.2 billion in residential building materials last year, mainly from China and Mexico.
High interest rates have compounded the problem, with loan rates rising from 5%-6% to 8%-10%, putting pressure on smaller builders. Regulatory costs now add an estimated $94,000 per home—about one-quarter of the price—underscoring the need for deregulation to improve affordability.
Nanayakkara said single-family housing starts are projected to decline 7% this year after surpassing 1 million units in 2024.
“We’ve had a few years where we did pretty good right after the pandemic, but single-family construction has not recovered since the Great Recession,” she said. “We estimate a 1.5 million unit deficit.”
This year, about 947,000 single-family starts are expected, rising slightly to 951,000 in 2026 and 982,000 in 2027. Single-family permits are down nearly 5% statewide and about 3% in Baton Rouge.
“Multifamily had the opposite [performance] since the end of the Great Recession, because this is where the majority of the household formations took place, because the single-family market was truly unaffordable for many people,” Nanayakkara said. “Multifamily had great years after the pandemic, especially 2022, when over half a million units were constructed. That’s the best year since the 1980s for multifamily construction.”
Roughly 410,000 multifamily units are expected to be built this year, up 15% from 355,000 in 2024.
