Understanding Trump Tariffs and Their Economic Impact to Multifamily Real Estate

Mar 10, 2025

Hello Friends,

A tariff is a tax imposed by a government on imported goods and services. Governments utilize tariffs to protect domestic industries from foreign competition, generate revenue, or influence trade policies. While tariffs can shield local businesses, they often lead to increased prices for imported goods, triggering inflationary pressures. Consumers may face higher costs, and industries reliant on imported materials can experience escalated production expenses, potentially reducing their competitiveness.

What does the tariffs look like currently? How much do we charge other countries, and how much do they charge us. Well just take a look below to see the disproportion.

So, what will happen to the US Economy if we try to make these tariffs fair for America and specifically how will this affect multifamily real estate? That is what this article will try to explain.

Tariffs' Direct Impact on Multifamily Real Estate

The multifamily real estate sector is particularly sensitive to tariffs due to its dependence on construction materials, many of which are imported. Key materials such as lumber, steel, and aluminum are integral to building projects. When tariffs are imposed on these imports, the immediate consequence is a surge in material costs, leading to higher overall construction expenses. Please see below illustration on what happened the last time we raised tariffs in 2017. New home construction prices jumped from 1.67% to 7.70% in 2021.

Increased Costs for Importers:
- Tariffs on imported lumber, such as those from Canada, increase the cost for U.S. importers. For example, a 25% tariff on Canadian lumber means U.S. companies must pay an additional 25% on top of the original price.
Higher Prices for Consumers:
- Importers often pass these increased costs onto consumers. This results in higher prices for lumber, which can affect various industries, particularly construction and homebuilding
Reduced Supply:
- Higher costs may lead to a reduction in the amount of lumber imported. This can create supply shortages, further driving up prices
Increased Domestic Production:
- Tariffs can incentivize domestic production as companies seek to avoid the additional costs of imported lumber. However, ramping up domestic production can take time and may not fully offset the reduced imports.
Impact on Housing Market:
- Higher lumber prices increase construction costs, which can lead to higher home prices. This can make housing less affordable and potentially slow down the housing market. The U.S. has periodically imposed tariffs on Canadian softwood lumber, a critical component in residential construction. For instance, in 2024, the U.S. increased tariff rates on Canadian softwood lumber products from 8.05% to 14.54%. Such measures have historically led to increased lumber prices, thereby elevating construction costs for multifamily housing projects.
Economic Ripple Effects:
- The increased costs and reduced supply can have broader economic impacts, affecting everything from job growth in the construction industry to the overall economic growth of regions dependent on affordable housing.
Steel and Aluminum Tariffs: Similarly, tariffs on steel and aluminum imports have raised the costs of these essential materials. The National Association of Home Builders (NAHB) projected that a 25% tariff on these imports could significantly increase the cost of residential construction, affecting both single-family and multifamily housing sectors.
Historical Examples Illustrating Tariff Impacts

Historically, the imposition of tariffs has led to notable shifts in construction costs and housing prices:

2021 Lumber Tariffs: Higher lumber prices increase construction costs, which can lead to higher home prices. This can make housing less affordable and potentially slow down the housing market. The U.S. has periodically imposed tariffs on Canadian softwood lumber, a critical component in residential construction
2002 Steel Tariffs: The U.S. implemented tariffs on imported steel in 2002, resulting in increased domestic steel prices. Industries dependent on steel, including construction, faced higher costs, leading to project delays and increased prices for end consumers.
2018-2019 Trade Policies: During this period, tariffs on various building materials contributed to a rise in construction costs. The multifamily housing sector experienced increased expenses, which were often passed on to renters through higher rents.

Visualizing the Impact: Construction Costs and Tariffs

Graph: What happens when Tariffs are imposed. Decline in Imports, Consumer Surplus falls, Government raises revenue, Increase in Domestic Suppliers

What can we expect from Trump's Tariffs on Multifamily

Increased Construction Costs:

The tariffs target essential building materials:

Lumber: Canada supplies approximately 70% of U.S. lumber imports. The newly imposed tariffs have led to a surge in lumber prices, with futures climbing over 14% year-to-date. This escalation is expected to increase the cost of constructing multifamily units, as lumber is a primary material in residential building. ft.com+2fox9.com+2politico.com+2
Steel and Aluminum: The 25% tariffs on these metals are anticipated to raise construction costs, particularly for mid- and high-rise multifamily developments that rely heavily on steel frameworks. The National Association of Home Builders (NAHB) projects that these tariffs could substantially elevate the expenses associated with residential construction. businessinsider.com nahb.org

Consequences for the Multifamily Housing Market

The escalation in material costs due to tariffs is likely to have several effects:realestateinthedistrict.com+1corelogic.com+1

Higher Rents: Developers facing increased construction expenses may transfer these costs to consumers in the form of higher rents, exacerbating the existing housing affordability crisis. businessinsider.com
Project Delays or Cancellations: Elevated costs can render some projects financially unfeasible, leading to delays or cancellations. This reduction in housing supply could further tighten the rental market. businessinsider.com
Market Uncertainty: The unpredictable nature of trade policies introduces volatility, making it challenging for developers to plan long-term projects. This uncertainty can hinder investment in new multifamily developments.

Strategies for Stakeholders

To mitigate the adverse effects of tariffs, stakeholders in the multifamily real estate sector might consider:

Diversifying Supply Chains: Exploring alternative sources for materials not subject to tariffs can help control costs.
Advocacy: Engaging in dialogue with policymakers to communicate the unintended consequences of tariffs on housing affordability.
Innovative Building Practices: Adopting construction methods that reduce reliance on tariffed materials could alleviate cost pressures.
Summary The Impact of Proposed Tariffs
Let’s take a look of how these tariffs can impact the multifamily sector in the short term, midterm, and long term.
Short-Term Impact (6-12 Months)
In the immediate term, Trump's tariffs will lead to increased costs for construction materials such as lumber, steel, and aluminum, impacting multifamily development projects already underway or in the planning stages. Developers will likely experience:
- Higher construction costs: Lumber and steel prices are expected to rise due to increased import taxes, driving up per-unit development costs.
- Delayed or canceled projects: Some developers may put projects on hold until pricing stabilizes or seek alternative materials.
- Rising rents: As new supply slows down and development costs increase, landlords may pass additional expenses onto renters.
- Investor hesitation: Increased uncertainty in material costs and construction delays may lead investors to take a cautious approach toward new multifamily projects.
Mid-Term Impact (Next 3 Years)
As tariffs remain in effect, the multifamily sector will start to feel deeper financial and operational impacts:
- Decline in new multifamily construction: Many developers will reduce their pipeline due to higher costs and uncertainty in the market.
- Tighter rental supply: With fewer new units coming online, rental inventory will shrink, leading to continued rent hikes.
- Shift toward value-add acquisitions: Investors may move away from ground-up development and instead target existing properties for renovation and repositioning.
- Increased modular and alternative construction: Developers may start exploring prefabricated or alternative materials to mitigate costs.
- Political uncertainty: The impact of tariffs will become a key talking point for policymakers, potentially influencing legislative changes in housing policy.
Long Term Impact (Next 3 Years)
Over a longer time horizon, the multifamily sector will have adapted to the tariffs, but structural shifts in the industry will become apparent:
- Permanent shift in supply chains: Developers will look for domestic or non-tariffed international suppliers to manage costs.
- Higher baseline construction costs: The industry may settle into a "new normal" where multifamily development is more expensive overall.
- Continued upward pressure on rents: The lack of new supply will exacerbate housing affordability issues in major markets.
- Increased government intervention: Cities and states may introduce incentives for developers to encourage multifamily construction despite rising costs.
- Potential repeal or renegotiation of tariffs: If the economic impact on real estate and housing affordability becomes too severe, there may be political pressure to adjust tariff policies.
Conclusion
Trump’s tariffs will have a significant short-term and mid-term impact on multifamily real estate, making development more expensive and slowing down new supply. Over the long term, the sector will adjust, but the affordability crisis could worsen unless policies shift or alternative construction methods emerge. Investors should stay informed and adjust their strategies accordingly.
Level 7 Investors: Navigating the Current Landscape

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Understanding the ripple effects of tariffs on the multifamily real estate sector is essential for making strategic investment decisions. By staying informed and adapting to policy changes, investors can better position themselves to mitigate risks and capitalize on emerging opportunities.

Thanks for reading we hope we provided value to you.

To your success,
Manny Del Val
CFO, Level 7 Multifamily Investors
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