The Federal Reserve Bank of New York and New York University's Furman Center recently hosted a series of roundtable discussions. These talks brought together builders, developers, and housing experts to uncover the issues they face in providing affordable housing.
And their findings are bound to raise many eyebrows. Indeed, it may go against the grain, but readers might just end up feeling sorry for developers and builders, especially over the following three challenges.
1. Site, Construction, and Materials Costs
An HVAC system that might have cost $10,000 for a residential unit in 2016 now comes in at $25,000-$30,000. So, it's risen 150%-200% in just a decade. Talk about inflation!
Meanwhile, changes to building codes that protect families and the environment add significantly to costs. Developers in many places now need to provide all-electric homes, protect them against stormwater, and mitigate noise nuisance.
Challenges are particularly difficult in urban and densely populated suburban environments. There, previously occupied sites may be "brownfield", meaning they could be contaminated by previous use if they were once gas stations, factories, dry cleaners, warehouses, or in any of several other categories of usage.
Even if clear of contamination, many sites need extensive and expensive remediation to manage water, remove large rocks, flatten sloping sites through extensive groundworks, or deliver necessary infrastructure.
The extra complexity from all these requirements means more input from professionals such as lawyers and architects. And some of those have tripled their fees.
Meanwhile, although not mentioned at the roundtables, which were held before recent announcements, 50% tariffs on imports of many building materials from Canada may be about to make affordability even worse, especially in states that have close ties with our northern neighbors.
Luckily for developers (and homebuyers), the new 50% tariffs don't apply to Canadian softwood lumber, which is already subject to separate duties. Still, the National Association of Home Builders (NAHB) is unhappy with the new costs:
"NAHB continues to closely monitor the changing tariff landscape," says the Association. "With housing affordability already near historic lows, we continue to urge the Trump administration to exempt building materials from its broader tariff strategy and avoid new trade barriers that could worsen the housing crisis."
2. Labor Costs
"New York’s labor market faces significant wage pressures," says the New York Fed's article, which then points out that the baseline minimum wage for private construction in New York City, Westchester, and Long Island rose to $17 per hour in January 2026. However, the Fed also noted that actual minimum wages are typically closer to $20 per hour. For public works projects in NYC, that figure becomes $42.39 per hour in prevailing wages, as well as an additional $49.01 per hour in benefits.
"Builders stressed that the gap between prevailing and non-union wages has shrunk in upstate markets due to competition from data centers and massive projects such as the Micron semiconductor site in Syracuse pulling electricians and other trades away," continued the NY Fed. It then went on to point out that many non-union contractors have gone out of business, reducing competition even further.
Although these issues are specific to New York, others in many other states must recognize them. High wages offered to attract skilled construction workers to data centers and other commercial projects inevitably make home construction more expensive. Meanwhile, mass deportations aren't helping construction costs either.
"Construction employment fell 1.3% in the five states most reliant on immigrant labor [in February 2025 through June 2026], while it grew 3.3% throughout the rest of the country," said CNBC earlier this month.
This drop was most notable in the Northeast, where the construction workforce is estimated to be comprised of 23% immigrant laborers. There, permits for new single-family homes declined 23.5% between March 2025 and June 2026. At the same time, home prices in the region jumped 15.4% between Q1 2025 and Q1 2026.
3. Financing Costs
Following the 2007-08 financial crash and Great Recession, lenders imposed onerous new rules on developers' financing. It's common now for borrowers to have to show sufficient cash reserves to pay interest on their loans for five years.
Holding such sums is a huge and costly burden. Imagine if mortgage lenders imposed the same requirement on consumers!
But that's only one part of the financing headache. Affordable housing developments commonly rely on several sources of funding, each with its own requirements and conditions. Developers have to assemble those different pieces and get them all to work together before a project can move forward.
That takes time. And time can be especially expensive when borrowing money at today's higher interest rates.
This creates an unfortunate feedback loop. We need developers to build more homes to improve affordability. But the more expensive and complicated it becomes to finance those homes, the harder it is for builders to make new projects financially viable.
And readers thought we were kidding when we said they might feel sorry for home builders.
