The ripple effects of newly announced tariffs are making waves across global markets. While media headlines focus on tumbling equities and supply chain panic, we’re watching something far more interesting unfold—and it’s playing directly into our investment strategy.
In short: the newly announced tariffs are accelerating an already significant slowdown in new multifamily construction—a trend we covered in our Q1 2025 State of the Market webinar. Tariffs are compounding financing challenges and developer caution, reinforcing a trend that’s been working in our favor for the past year.
For developers, the rising costs caused by tariffs on materials and equipment are yet another nail in the coffin. But for owners of existing multifamily properties, like us, the result is a leaner playing field with fewer new competitors. That means less supply, more pricing power, and stronger long-term value.
This month, we’re breaking down how the current economic environment—specifically the impact of tariffs—is not only supporting but accelerating our thesis: buy great properties, hold them through constrained supply cycles, and unlock massive value.
The Great Construction Vanishing Act: Why Tariffs Are Slamming the Brakes
Multifamily construction has been declining since its peak in 2022, but the latest round of tariffs is deepening the slowdown. Developers are already facing financing challenges and high labor costs. Now, with imported building materials seeing 10-60% price hikes due to tariffs, the feasibility of new projects is disappearing.
In January 2025, multifamily starts dropped to 355,000 units—a sharp decline of 11% from December. Forecasts from Fannie Mae and the NAHB project even lower figures for the rest of the year, with potential starts falling to as low as 311,000.
The reason? Economics. A modest mid-rise complex now costs over $11 million to build, and many developers simply can’t make the math work. Tariffs are a powerful accelerant, making every imported pipe, window frame, and elevator that much more expensive. Add tight lending and a cautious Fed, and the result is clear: developers are on pause.
Less Construction = More Opportunity
This supply shortage won’t resolve quickly. Even if financing conditions improve in 2026 or beyond, the 17-month average timeline for new builds means existing properties will face minimal competition well into 2027.
That gives us an enviable runway. Every year without significant new supply increases the value of our assets, particularly in markets where demand continues to grow and tenants are priced out of homeownership.
Occupancy rates already average 94.5% nationally, and we’re seeing lease renewals hit 55% as renters choose stability over the unknown. With fewer options available, our retention remains strong, concessions stay low, and operational performance thrives.
From Tariffs to Returns: How This Impacts the Bottom Line
When fewer units are built, prices rise on existing ones. That’s Econ 101. CBRE forecasts that 2025 construction starts will be 74% below 2021 levels. Rent growth projections have already climbed from 1.0% in 2024 to up to 2.6% in 2025.
Meanwhile, absorption remains strong, with over 370,000 units absorbed annually—despite supply slowing. That’s real demand, and it’s playing out across our portfolio.
Higher occupancy + rising rents = higher Net Operating Income (NOI), and even modest increases in NOI translate into large valuation gains through income capitalization or GRM-based valuation models. For example, a $20,000 increase in NOI at a 5% cap rate boosts property value by $400,000.
That’s what makes our model so powerful: not only do we collect stable income, but our equity positions compound over time through operational improvement and market momentum.
Final Takeaways
This moment in time may seem chaotic—and it is. But hidden within the noise is a clear signal for real estate investors: now is the time to own what others can’t build.
As tariffs strain supply chains and developers step back, we’re stepping forward. Our portfolio of existing, income-generating properties is perfectly positioned to benefit from this slowdown.
And our strategy? Stay disciplined, make smart acquisitions, and invest in upgrades that matter. When the market rebounds, we won’t just have weathered the storm—we’ll have used it to fuel growth.
Happy Investing,
Reed, Ben & The RSN Team
Reed Goossens is an Australian-born real estate entrepreneur, investor, author, public speaker, and an all-around good bloke. Reed got his start in real estate investing back in 2012 when he moved to the US.
