The recent surge of U.S. tariffs has added a new dimension to an already complex environment for multifamily development. As the CEO of Atlas, I’m watching these shifts closely, not just through a macroeconomic lens, but also from the practical standpoint of what they mean for builders, owners and investors in multifamily housing.
The conversation isn’t just about geopolitics or trade imbalances anymore — it’s about how tariffs intersect with affordability, construction cycles, capital costs and the evolving supply-demand dynamic in the U.S. rental market.
Three questions keep coming up that are especially relevant right now: Will tariffs significantly raise development costs and slow new multifamily starts, or are these fears overstated? Could tariffs genuinely foster U.S.-based manufacturing in a way that benefits multifamily real estate over the long term? How can multifamily developers, owners and investors adapt to or even capitalize on these dynamics?
Let’s dive in.
What Do Tariffs Mean for Costs?
In short, the cost side of the equation just got tougher. The whopping 145 percent tariff that had been slapped on Chinese goods April 9 has been replaced with a 30 percent tariff as of May 14. These rising and fluctuating tariffs threaten to raise the cost of key systems and materials like steel, aluminum, cabinetry, electrical components and HVAC systems. Multifamily development, already under pressure from elevated interest rates and tighter lending standards, is now facing a fresh round of cost inflation.
This won’t stop all development in its tracks, but it will reshape it. Developers who haven’t broken ground yet may hit pause, rethink the development plan or shelve the project entirely.
Builders who are deep into construction are likely to see margin erosion. For deals still in the planning phase, capital partners will demand more rigor and less risk.
But there’s another side to the story. The U.S. is currently experiencing the tail end of a multifamily supply surge. Over the past three years, tens of thousands of units were delivered across major metros, driven by pandemic-era demand and a rush of capital into developing assets owners plan to hold for a long period. That wave of new supply has been a headwind for rent growth, particularly in Sun Belt markets and secondary-market areas.
Now, however, that supply glut may prove to be a gift. With fewer new starts expected in 2025 and 2026 — thanks in part to tariffs and construction cost pressures — the existing pipeline looks increasingly valuable. Owners of recently delivered or soon-to-deliver multifamily properties may find themselves in an enviable position: offering high-quality, stabilized assets in an environment where new competition is slowing down. As these properties stabilize and lease up, they could command premium rents relative to the broader market.
Will Tariffs Lead to a Domestic Manufacturing Base?
Proponents of the tariff plan argue that it’s a necessary correction, one that will stimulate domestic manufacturing, reduce dependence on foreign suppliers and ultimately stabilize the cost structure for builders. There’s a long-term logic to this. If the U.S. can shorten supply chains and make key materials here at home, developers would gain more predictability and control over resources essential to build.
But this kind of reshoring takes time — years, not months. Building factories, training workers and navigating permitting is a slow-moving process. In the meantime, builders are stuck between rising material costs and investors seeking better risk-adjusted returns.
Some may seek partnerships with domestic manufacturers or pre-buy key materials to hedge against volatility. Others may delay project launches entirely until the long-term policy trajectory becomes clearer.
So yes, tariffs could support long-term supply chain resiliency. But they’re not a short-term solution. For now, they create more friction in an industry already facing a delicate balancing act.
What Should Multifamily Developers and Owners Do?
If you’re building, owning or investing in multifamily, here’s how to move forward:
- Reassess development pipelines: Projects that looked viable six months ago may no longer pencil out. Input costs, financing assumptions and lease-up timelines should be re-evaluated.
- Prioritize high-barrier markets: In places with constrained land supply and ongoing population growth the slowdown in new development could enhance pricing power for existing assets. Investors may find more upside in these high-barrier markets than in overbuilt regions.
- Strengthen supplier relationships: Developers with reliable, domestic supply partners may gain an edge. Now is the time to renegotiate terms, explore alternative materials and secure long-term contracts that minimize exposure to global supply chain risks.
- Capitalize on stabilized assets: If you own newly delivered communities, your timing may turn out to be excellent. Lease-ups could accelerate in 2025 and beyond as new competition drops off. In some markets, this could support stronger NOI (net operting income) growth and future refinance potential.
- Watch rent dynamics carefully: While supply is tightening, affordability remains a key constraint. Rent growth won’t be automatic. Properties that deliver differentiated value — better design, amenities, service — will outperform.
- Consider mid-cycle renovations: For existing assets, targeted investments in energy efficiency or modest unit upgrades could improve operating margins and enhance asset competitiveness. These strategies become especially important when new construction is less feasible.
What This Means for the Industry
Multifamily developers are navigating a profoundly different world than the one they operated in just a few years ago. Low-cost capital has evaporated. Construction inputs are volatile. Tariffs are reshaping the price and availability of key goods. And yet, demand for quality rental housing remains strong.
The irony is that the very oversupply we worried about in 2022 and 2023 might now be insulating us from the disruptive effects of the current environment. Slower new starts and strong renter demand could support a healthier balance. Tariffs may not be the policy solution the industry needs, but they do create a new set of conditions that could yield meaningful opportunity.
Tony Julianelle is CEO and partner of Denver-based Atlas Real Estate. This article was originally published in the May issue of Multifamily & Affordable Housing Business.