The effects of tariffs on softwood lumber, and perhaps to a lesser extent steel and aluminum, appear to be coming home to roost — literally.

Newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department shows that total housing starts fell 12.3 percent in June to a seasonally adjusted annual rate of 1.17 million units.

“We have been warning the administration for months that the ongoing increases in lumber prices stemming from both the tariffs and profiteering this year are having a strong impact on builders’ ability to meet growing consumer demand,” said NAHB chair Randy Noel, a custom home builder from LaPlace, La. “This is why we continue to urge senior officials to take leadership and resolve this issue.”

According to the National Lumber and Building Material Dealers Association, the Random Lengths Framing Lumber Composite Price has increased 44 percent over the past year, and the Random Lengths Structural Panel Composite Price has risen 41 percent over the past year. Additionally, since the Department of Commerce first started investigating what it calls unfair subsidies for Canadian softwood lumber in November 2016, domestic softwood lumber prices have increased 30 percent according to the Producer Price Index (PPI) published by the U.S. Bureau of Labor Statistics (BLS). Oriented strandboard (OSB) prices have increased 32 percent over the same period according to the PPI.

In December, the U.S. began imposing average tariffs of around 20.8 percent on imports of Canadian softwood lumber. The U.S. imports about a third of its lumber, and more than 95 percent comes from Canada. In 2016, imports of softwood lumber from Canada were valued at $5.66 billion.

The June reading of 1.17 million is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts fell 9.1 percent to 858,000 units. Meanwhile, the multifamily sector — which includes apartment buildings and condos — dropped 19.8 percent to 315,000.

Overall, permits — which are a sign of likely future housing production — dropped 2.2 percent to 1.27 million units in June, the lowest level of the year. Although single-family permits edged up 0.8 percent to 850,000, they remain at their second lowest reading of 2018. Multifamily permits fell 7.6 percent to 423,000.

While overall production is 7.8 percent higher than its level over the same period last year, the June report raises concerns about a softening in housing production over the near term.

“The concern over material costs, especially lumber, is making it more difficult to build homes at competitive price points, particularly for newcomers entering the housing market,” said NAHB senior economist Michael Neal. “Moreover, the soft permit report does not suggest a significant increase in housing production in the near term. However, consumer demand for single-family housing continues to increase as the overall economy and labor market strengthen.”

Combined single- and multifamily housing starts fell in all regions of the country. Starts fell 3 percent in the West, 9.1 percent in the South, 35.8 percent in the Midwest and 40 percent in the Northeast.

Looking at regional permit data, permits rose 6.2 percent in the South. Permits fell 1.8 percent in the West, 16.4 percent in the Northeast and 18.7 percent in the Midwest.

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