I
n the scorching Phoenix sun, Nathan Anderson, a 40-year-old high-end home builder, is on the cusp of completing his latest project. The sleek, modern house on a quiet suburban street will soon be listed for sale at $2.65 million. But what if labor costs skyrocketed due to a shortage of workers? Anderson's company, Rebuild the Block, has a contract with a trade partner that handles crew management and material selection, but he keeps a tight budget that accounts for every detail.

    Anderson estimates that without immigrant workers, his labor costs could jump by 17%, adding $116,000 to his budget. The Observatory of Economic Complexity, using conservative calculations, predicts a nearly 5% increase in material costs. Tariffs on goods from Canada and Mexico would drive up prices further, while the recent tariffs on China would hit key home-building imports like HVAC systems and tile.

    A closer look at the major line items reveals how costs could change with tariffs and without immigrant labor:

    * Concrete foundation: +25% (tariffs) +18% (labor shortage)

    * Framing: +25% (tariffs) +4% (labor shortage)

    * Exterior windows and doors: 0% (labor) +11% (tariffs)

    * Roofing: +20% (tariffs) +21% (labor shortage)

    * Siding: +26% (tariffs) +7% (labor shortage)

    * Plumbing, electrical, and mechanicals: 0% (labor) +8% (tariffs)

    * Insulation and drywall: +35% (labor shortage) +20% (tariffs)

    * Flooring: +30% (labor shortage) +2% (tariffs)

    * Painting and wall coverings: +19% (tariffs) +11% (labor shortage)

    * Cabinets and countertops: +30% (labor shortage) +17% (tariffs)

    * Appliances: 0% (labor) +11% (tariffs)

    Anderson's budget breakdown reveals that labor costs account for a significant portion of the expenses. For example, on the foundation alone, about 70% of the $59,000 cost went to labor, with almost 90% of the crew being immigrants. Without them, his labor costs could swell to $49,800.

    Tariffs would also drive up material costs, particularly for key imports like cement and drywall. Conservatively, tariffs could increase construction costs by 18%. The Observatory of Economic Complexity estimates that a 25% tariff on goods from Canada and Mexico and a 10% tariff on those from China would have a significant impact on Anderson's budget.

    Anderson hopes to attract a buyer for the new house this summer, but he acknowledges that the market is tough with interest rates high. If building costs increase by another $236,000, he might list the house for as much as $2.9 million.