Recent tariffs have created a complex and multifaceted impact on the multifamily real estate sector, primarily by increasing construction costs and creating uncertainty among developers and investors. Rising costs and uncertainty present challenges for developers. However, it can be a significant boon for existing multifamily assets and bolster the long-term fundamentals of the multifamily sector.
Impact on Development and Construction
- Increased Construction Costs: Tariffs on key building materials such as steel, aluminum, and lumber have driven up the cost to varying degrees depending on stick-built or aluminum construction of new multifamily properties. It’s much less than investors think but not immaterial. These cost increases, driven by taxes on imported goods, can be exacerbated by supply chain issues. This dynamic can obviously lead to narrower profit margins for developers and, in some cases, make projects unfeasible.
- Project Delays and Uncertainty: As mentioned, tariffs can create price volatility and supply chain disruptions, making it difficult for developers to accurately budget. This uncertainty has led some developers to delay or even cancel new projects. For projects that are already underway, unexpected cost increases can strain budgets, lead to delays, cost overruns, and create financing issues.
- Housing Affordability: For renters, the higher costs of construction could worsen the housing affordability crisis. With fewer new units being built and rents potentially rising on existing ones, finding affordable housing becomes even more challenging, particularly for first-time buyers who are already facing a difficult housing market and inventory shortage.
Impact on Current Multifamily Fundamentals
- Reduced Construction Starts: The slowdown in new multifamily construction, exacerbated by tariffs, is leading to a decrease in the supply of new units entering the market. This can be seen as positive for owners of existing properties, as reduced supply, coupled with continued demand for rental housing, can lead to rent growth. One should not underestimate this halt in construction due to rising costs and its positive impact on multifamily fundamentals long-term. Renter demand has surged to levels that few expected because of household formation and affordability.
- Appreciation for Existing Properties: As the cost of building new properties rises, the value of existing multifamily assets may increase. This is because the cost to replace these assets would be significantly higher, creating a favorable supply-demand dynamic for current owners.
- Investment Strategy: In response to these challenges, some real estate managers and developers are shifting their strategies from “building” to “buying.” Investing in existing or stabilized multifamily assets is becoming a more attractive option as it avoids the risks associated with new construction costs and delays with evolving trade policies. For well-capitalized investors, the current environment may present a buying opportunity with properties trading at a discount relative to replacement costs.
In summary, while tariffs can present a headwind for multifamily developers, their indirect impact on the market—primarily through the construction of new supply—may benefit owners of existing properties and contribute to rent growth in specific markets. The long-term effects depend on the duration and scope of the tariffs and how the market and broader economy adjust. Not only can tariffs benefit apartment fundamentals, but it can also give American workers a chance to compete on the global playing field for a living wage.
Disclaimer: This document is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell securities. Investment opportunities offered by Bam Capital are made pursuant to Rule 506(c) of Regulation D and are available exclusively to accredited investors, as defined by the Securities and Exchange Commission (SEC). Verification of accredited investor status is required before participation in any investment. The information contained herein reflects the opinions of the author and does not necessarily represent the views of Bam Capital. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect opinions and are subject to market fluctuations, economic conditions, and investment risks. Investing in private real estate securities involves significant risks, including but not limited to illiquidity, economic downturns, and potential loss of invested funds. Past performance does not guarantee future results. Prospective investors are strongly encouraged to conduct independent due diligence and consult with legal, tax, and financial advisors before making any investment decisions. Bam Capital makes no representation or warranty regarding the accuracy or completeness of the information contained herein.
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Author: Tony Landa, Senior Economic Advisor, The BAM Companies, November 2025
