The Tariff Roller Coaster: What It Means for Multifamily Real Estate
In the world of multifamily real estate, stability is king—steady returns, predictable costs, and long-term planning drive investment decisions. But over the past 6 months, tariff policy has turned that predictability upside down. Recent attempts to impose tariffs on imported construction materials were blocked in court, offering temporary relief. Yet with an appeal underway, developers and investors are left in suspense. The policy ride isn't over—and the stakes are high. Here’s a breakdown of how this ongoing tariff drama is shaping the multifamily sector.
E&S Properties
6/2/20252 min read
🚧 The Highs: Potential Advantages for U.S. Suppliers
1. Domestic Sourcing Gets a Boost
Tariffs make foreign materials—like steel, aluminum, appliances, and plumbing fixtures—more expensive. This encourages developers to buy American, supporting domestic manufacturers and possibly reducing shipping delays.
2. Supply Chain Resilience
Developers burned by international delays in recent years are seeing tariffs as a nudge toward more reliable, regional supply chains. While this doesn’t reduce costs short-term, it may improve long-term stability.
3. Strategic Repositioning
In select markets, local governments may offer incentives to offset higher construction costs, creating unique value-add opportunities for savvy investors who can navigate the shifting environment.
🔻 The Lows: Real-World Headwinds for Multifamily Projects
1. Higher Construction Costs
Tariffs on essential inputs—metal framing, electrical components, HVAC systems—can raise project costs by 5% to 15%, squeezing margins and forcing developers to delay or cancel projects altogether.
2. Uncertainty in Underwriting
Developers can’t accurately price deals when tariffs are in flux. Cost assumptions in pro formas become unstable, complicating financing, equity raises, and feasibility analyses.
3. Rent Pressure and Affordability Risk
When costs rise, so does the temptation to pass increases on to renters—but that’s not always possible in rent-stabilized or low-income markets, which rely on razor-thin margins and tight pricing controls.
4. Fewer Renovations and Upgrades
Value-add investors are holding back on unit upgrades and capital improvements, wary of ballooning material costs and labor delays. This slows unit turnover, impacts rent growth, and can stagnate asset performance.
⚖️ Whiplash: The On-Again, Off-Again Tariff Saga
Tariffs Proposed: Market reacts with cost projections, stalled bids, and material stockpiling.
Court Blocks Enforcement: Prices ease slightly, developers reconsider shelved projects.
Appeal Filed: Uncertainty returns—deal flow slows, contingency budgets grow.
This cycle has created a roller coaster of risk and hesitation in a sector that traditionally relies on predictable costs and timelines.
🏢 Who’s Feeling It?
Ground-Up Developers: Struggling to pencil out projects as hard costs swing unpredictably.
Syndicators: Facing tough conversations with investors as projected returns soften.
Contractors and GCs: Adding contingencies or “tariff escalation clauses” to protect themselves.
Lenders: Tightening scrutiny on construction budgets and appraisals.
🔮 The Road Ahead
If the court upholds the block, we may see renewed activity—paused projects reactivated, and more confidence in renovation timelines. If the appeal reinstates the tariffs, expect more cost-cutting, repricing, and possibly sharper rent hikes in Class B and C assets where margins are already thin.
Either way, the sector needs clarity. Until then, expect developers and investors to move cautiously—tightening underwriting standards, adding buffers, and planning for a few more bumps ahead.