When I first wrote about Trump’s tariffs and their impact on the Multifamily & Affordable Housing Business just two weeks ago, the housing market was already bracing for impact. Now, with the tariffs officially enacted, then officially rescinded for a second time, the situation is evolving faster than anyone anticipated. And, let's be clear: tariffs, whether they are a bargaining chip or a permanent policy, aren't a temporary disruption. They're a symptom of a global economic realignment that's happening in real time. The U.S. now sources 23% of imports from non-China Asian nations (up from 14% in 2022), and domestic material production has grown 17% since 2023.

As someone who is a student of economic history, has developed over 4,700 affordable housing units and leads Nectar—a fintech platform providing capital to multifamily developers—I’ve seen how policy shifts can ripple through the housing ecosystem. These ripples create both painful disruptions and market-defining opportunities. These tariffs are no exception, and their effects will hit developers, vendors and renters hard in the years ahead.

Why This Hits Close to Home

Between 2013 and 2020, my business model relied on purchasing distressed properties at substantial discounts and investing heavily in renovations. During that time, we sourced 50% of our materials from abroad—granite, fixtures, cabinets, flooring from China, and softwood lumber from Canada. If today’s tariffs had been in place back then, renovation costs would have skyrocketed:

Canadian Softwood Lumber: Tariffs now total nearly 40%, compared to the previous 8.5%. Lumber was a cornerstone of our renovation-heavy projects.

Chinese Imports: The tariff on Chinese goods has doubled to 20%, driving up costs for essential materials by an estimated 30%.

These increases would have strained our budgets across hundreds of units, forcing us to choose lower-quality materials or scale back renovations altogether. And that’s just one side of the equation— restrictive immigration policies would have created workforce shortages, delaying projects and adding significant labor cost pressures.

The Immediate Impact on Developers

The new tariffs are already reshaping construction economics:

Material Costs: CoreLogic predicts construction costs will rise by 4-6% in 2025, adding $17,000-$25,000 to the price of a new home. This is a significant hurdle for all builders but has an outsized impact on builders focused on affordable housing.

Labor Shortages: Immigrant labor comprises 30% of the construction workforce, but stricter immigration enforcement could shrink this pool by up to 15% in 2025 alone. Less labor will mean fewer units constructed in the near term and, assuming a stable demand for housing, higher housing costs and higher wages.

Financing Volatility: Due to policy factors including unpredictable development costs, developers are facing higher equity requirements and risk spreads on loans. For a $20 million project, this could add $1.2 million in upfront capital requirements and $400,000 annually in debt service.

For operators like me, these challenges may mean higher rents on existing properties, but it also means fewer new housing starts and scaled-back renovation plans, which is a direct blow to housing supply at a time when demand continues to climb.

The Human Cost for Renters

While these tariffs create headaches for developers, renters will bear much of the financial burden over the next five years:

Rising Rents

As construction costs increase and supply tightens, rents are expected to rise steadily:

• A $20,000 increase in per-unit construction costs translates to roughly $100/month in additional rent per unit.
• Over five years, renters could pay an extra $6,000 per unit annually due solely to tariff-related cost pressures.

Affordability Challenges

Rising rents impact all households, however, they impact lower income households the most.

For instance, families earning $40,000 face a crisis. Their housing costs already consume 51.1% of income, and a $100 increase would push this to 54.1%, leaving less than half their earnings for food, healthcare, transportation, and other essentials. Ideally, these households would pay no more than $1,111 monthly for housing—far below the current market average of $1,703.

These calculations reflect tariff impacts alone. Additional rent increases from interest rate and labor driven construction slowdowns will further strain affordability, creating a compounding effect that will make housing even less accessible for lower-income families.

Quality of Life Impacts

For all renters, tariff-driven price increases and construction slowdowns will force trade-offs. For low-income renters, this will often mean downsizing to inadequate spaces, affecting children’s education and mental health. Others will accept substandard housing with poor ventilation, outdated appliances, and deferred maintenance as landlords delay renovations, exposing residents to health hazards like mold and inadequate climate control.

For the most vulnerable, the choice increasingly becomes unaffordable rent or homelessness—reflected in the 18.1% rise in homelessness reported by HUD in 2024 alone.

Long-Term Opportunities Amid the Turbulence

While the short-term outlook is challenging, the US market is very dynamic and new and burgeoning players will step in to take advantage of shifting market dynamics. So sustained tariffs are likely to spur innovation:

1. Domestic Material Production: The surge in material costs will reduce the cost advantage that incumbent material producers have over sub-scale competitors. This could accelerate investment in U.S.-based manufacturing facilities and innovative materials and manufacturing methods.

2. Modular Construction: Developers may increasingly turn to modular building techniques that promise faster timelines and lower costs. Current modular building companies struggle to compete with traditional construction, mostly because modular building will be most efficient at scale. This period of high costs and reduced labor could level the playing field for modular companies and allow them to build the scale needed to drive efficiency and modernization in our construction industry

3. Policy Incentives: Some new techniques, such as modular development, encounter hurdles when navigating legacy permitting and code inspection processes. An acute drop in the amount of housing being developed will encourage municipalities to be more flexible and creative in their approach to housing production.

4. Higher property values: For some time, developers able to provide quality housing will face reduced competition from new developments, pushing performance and values higher.

Navigating the New Reality

For operators like myself, the key will be adaptability. Here’s how we can mitigate these challenges:

• Explore alternative material sources domestically to reduce reliance on imports.
• Invest in workforce development programs or hire and train young people directly to address labor shortages.
• Leverage new methods and technologies like modular construction to cut costs and improve efficiency.
• Work closely with local municipalities to update entitlement processes and subsidy programs to meet current market dynamics and needs

Final Thoughts

Trump’s tariffs are reshaping affordable housing in ways few anticipated, raising costs for developers while deepening affordability challenges for renters. As supply constraints worsen, we’ll see fewer new projects and rising rents in the short term. But longer-term opportunities exist for those willing to innovate and invest in the future, whether through domestic production or innovations in construction practices.

Nectar actively supports experienced operators who are working to increase the number of affordable housing units. We accomplish this by providing very flexible, very fast capital. We have streamlined the underwriting process utilizing AI tools and are providing capital to operators with market-rate, LIHTC, Section 8, and workforce housing-focused projects throughout the USA.

We are making access to capital for these projects easier than ever. Our platform also simplifies the process for investors to profitably invest in affordable housing-related projects while receiving a return that beats what they can find through most index funds, bonds, or other common investments. This digital investment to housing operator flywheel creates a scalable win-win situation for everyone involved.

As someone who has weathered market shocks before, adaptability is key. Developers who embrace change will find opportunities amid disruption—and investors who vote with their dollars to support housing supply can help shape a more equitable future.

Want to learn more about investing in affordable housing innovation? Join our free webinar on March 19th at 12pm ET where we'll demonstrate how Nectar finances experienced multifamily operators who are addressing America's housing crisis and outline the investment opportunities available. Click here to register now

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Derrick Barker is the CEO and Co-Founder of Nectar, a fintech platform revolutionizing commercial real estate lending. After trading bonds at Goldman Sachs and building a $450 million real estate portfolio, he launched Nectar in 2021 to provide flexible capital to experienced property owners while delivering consistent returns to investors.

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