Since President Donald Trump took office again in January, his administration has enacted rapid and significant policy changes. These shifts have left the construction industry questioning how they will be impacted. Within the first month, major executive orders and regulatory adjustments have emerged, influencing environmental policies, labor laws, and federal funding. Understanding these changes is crucial for construction company executives to make informed decisions and adapt effectively. Below, we examine key areas of impact and strategies for navigating these new developments.

Rollbacks and Policy Changes

The Trump administration has imposed a regulatory freeze, halting new rules that were pending publication. This affects various aspects of construction, including environmental standards and labor regulations, as policies undergo review and potential revision. Additionally, several environmental initiatives from the previous administration have been rescinded, including policies promoting electric vehicle adoption and restricting deep-sea drilling. Some implications to this include:

Environmental Regulation Rollbacks: Streamlining regulations could lower compliance costs and speed up project timelines, though it introduces uncertainty for projects reliant on pending environmental guidelines.

State vs. Federal Compliance: While federal regulations are being relaxed, states with stricter policies, such as California and New York, may pose compliance challenges for multi-state construction firms.

Labor Market Effects: Changes to wage laws, safety standards, and worker classification rules could impact contractors and subcontractors.

Material Costs and Supply Chains: Potential changes to trade and tariff policies could drive up costs for essential materials, such as like steel, aluminum and lumber, and other such construction materials, negating savings from regulatory rollbacks.

Energy and Sustainability Trends: The green construction movement sees its worth re-evaluated. Federal support for green construction may decline but private-sector demand for sustainable projects could continue to drive growth.

Federal Funding

A temporary halt on certain federal financial assistance programs, particularly those tied to diversity, equity, and inclusion initiatives, as well as environmental projects, has been imposed. Construction firms must reassess financial strategies and explore alternative funding sources. The recent HUD funding freeze, which temporarily halted Section 8 housing vouchers and community development block grants, has created uncertainty in the housing sector. Although rescinded, future funding interruptions could impact residential construction, particularly in urban areas.

Immigration Policies and Workforce Impact

Stricter immigration policies have been introduced, exacerbating labor shortages. Foreign-born workers constitute approximately 30 percent of construction trade jobs, including carpentry, masonry, and electrical work.

As in other segments in construction, wall and ceiling contractors will experience stronger immigration policies that could further tighten the labor market, increasing costs and extending project timelines. This will also impact the labor pool and further enhance the labor shortage.

Heightened worksite immigration audits and enforcement actions may discourage undocumented labor, a traditional component of the industry. States heavily dependent on immigrant labor (such as California, Texas, Florida, and New York) may be hit hardest. Some local governments might counteract federal restrictions with their own workforce policies.

Companies may need to invest in workforce development programs, vocational training, and apprenticeships to build a sustainable labor force.

Tax Reform and Financial Considerations

The Tax Cuts & Jobs Act introduced provisions impacting construction businesses, many of which are set to phase out.

Bonus Depreciation: Previously, companies could deduct 100 percent of equipment costs upfront. However, the deduction is set to phase out (80 percent in 2023, 60 percent in 2024, 40 percent in 2025, and 20 percent in 2026). Firms should plan investments accordingly.

Section 199A Deduction: The 20 percent pass-through business deduction is scheduled to expire at the end of 2025, making C-corporation status potentially more attractive depending on future tax rates.

Interest Deductibility Changes: The 30 percent limit on interest deductibility now excludes depreciation and amortization, potentially affecting project financing structures. Firms should stay updated on possible policy adjustments.

Potential Tax Policy Shifts: If the administration allows these provisions to expire, construction firms may face higher tax burdens beginning in 2026. However, Congress could introduce new tax incentives for infrastructure investment.

Recommended Actions for Construction Companies

To navigate these changes effectively, construction firms should take proactive measures, some professionals suggest:

Stay Informed: Assign a team member to monitor regulatory updates and report on changes affecting project planning and compliance.

Review Financial Strategies: Assess the impact of funding freezes and shifts in federal spending. Diversify funding sources and seek private-sector opportunities.

Expand Workforce Development: Invest in vocational training, apprenticeships, and technology to mitigate labor shortages.Tax Planning: Work with financial advisors to maximize tax benefits and adjust strategies for impending tax policy changes.

Embrace Technology: Utilize construction tech solutions, such as BIM, software and drones, to improve efficiency and reduce labor dependency.

The Trump administration’s policy shifts present both challenges and opportunities for the construction industry. Companies that stay informed, adapt their strategies, and engage with policymakers can position themselves for success in a rapidly evolving regulatory landscape. By focusing on workforce development, financial resilience, and technological innovation, firms can mitigate risks and capitalize on new opportunities in the changing construction market.

For more insight, listen to this discussion between W&C's Group Publisher Jill Bloom and Adams + Reese's Trent Cotney https://www.wconline.com/videos?bctid=6368376156112.