Cost of building homes rises as immigrant labor becomes harder to access

As home prices soar and demand continues to outpace supply, a growing question looms over the U.S. construction industry: What happens if the immigrant labor force and foreign-sourced materials that have quietly underpinned the sector for decades are suddenly restricted or disappear?

In Phoenix, builder Nathan Anderson is already running the numbers. His current project — a high-end home in a quiet suburban neighborhood — cost about $1.29 million to build. However, projections show without immigrant workers and with new tariffs on imported materials, that figure could climb by more than $235,000. For Anderson, it’s a warning sign of how fragile the homebuilding economy has become and how deeply it depends on global labor and supply chains.

Anderson, 40, owns Rebuild the Block, a construction company specializing in high-end custom homes. While he doesn’t directly hire labor crews or purchase materials, he tracks every dollar spent in his detailed project budgets. For one recent project — the teardown and rebuild of a suburban Phoenix home — his estimated costs totaled approximately $1.29 million. However, under a scenario without immigrant labor and with new tariffs on imported goods, those costs could jump by more than $235,000, according to an analysis by The New York Times and the Observatory of Economic Complexity.

“If I had to list this house for $2.9 million instead of $2.65 million to cover increased costs, I’m not sure the market would bear it,” Anderson told The New York Times.

Immigrant workers – both documented and undocumented – make up a significant portion of the construction labor force. According to the U.S. Census Bureau’s 2021 American Community Survey, nearly 30% of construction workers nationwide were foreign-born. In states like Arizona and Texas, that figure is even higher.

“Construction is more dependent than most industries on imported materials and foreign-born workers,” Ken Simonson, chief economist at the Associated General Contractors of America, said. “Imposition of tariffs and limits on immigration or expanded deportation measures will drive up costs, snarl supply chains, slow projects, and potentially lead to project cancellations.” 

In Anderson’s Phoenix project, immigrant workers were integral in nearly every stage of construction. From laying the foundation to drywall installation and flooring, immigrant laborers accounted for as much as 90% of the workforce on certain tasks. For example, the foundation crew, primarily immigrants, cost about $40,000 in labor. Without those workers, labor costs for that phase alone would rise to nearly $50,000.

The potential cost increases are not limited to labor. Material expenses are also sensitive to global trade dynamics. The Observatory of Economic Complexity estimated that tariffs — such as a 25%increase in goods from Canada and Mexico and 10% from China — could raise material costs by nearly 5% across a typical project.

Items like drywall, tile, HVAC systems, and flooring materials — much of which is imported — would be directly affected. The U.S. became the largest global importer of cement in 2023, and gypsum imports, used for drywall, remain high. In Anderson’s case, drywall material costs could increase by $1,540 with new tariffs.

Even more dramatic is the potential impact on finishes and fixtures. The data shows cabinets and countertops, where 85% of costs are for materials, could see price hikes of more than $13,000 due to tariffs.

Anderson’s situation reflects broader trends across the country. If builders must absorb a 17% labor increase and a 5% hike in materials, profit margins shrink, or buyers pay more. A $235,000 increase could be factored into the listing price for luxury homes like the one Anderson built. For entry-level homes, the impact might mean fewer homes are built.

“There’s a limit to what buyers can pay,” Anderson said. “We can’t build homes no one can afford.”

As the construction industry grapples with a constrained labor supply and fluctuating material costs, many in the field say the role of immigrant labor and foreign-sourced materials remains essential.