Rising Construction Costs Amid Tariff Policy Changes

The recent imposition of tariffs by President Donald Trump on goods from Canada and Mexico—including steel and aluminum—has compelled building contractors to increase their pricing, potentially by as much as 20%. This strategic adjustment is aimed at mitigating the anticipated financial impact of these tariffs on real estate projects.

Insights from Jon Paul Pérez, CEO of Related Group

Jon Paul Pérez, CEO of Related Group, emphasized that the construction environment is currently rife with uncertainty due to fluctuating tariffs and inflation pressures. He noted, “We’re seeing [subcontractors] throw an additional cushion into their numbers anticipating tariffs,” referring to the adjustments made in bids for the seven active projects underway at Related Group.

Pérez elaborated that these price increases are largely precautionary, as the contractors seek to safeguard against higher material costs that may arise in the future. “When you go through their numbers in detail and you start negotiating, you quickly find out they’re just sort of padding to protect themselves,” he explained.

Potential Effects on the Housing Market

The ramifications of these tariff-related price hikes are likely to exacerbate the challenges already faced by a housing market burdened with skyrocketing prices and elevated mortgage rates. A survey from the National Association of Home Builders suggested that escalating construction material costs could lead to an additional $9,200 in expenses for a typical home.

Related Group’s Development Landscape

As one of the foremost developers in the United States—encompassing a diverse range of projects from affordable housing to luxurious high-rise condominiums—Related Group is actively managing over 90 ongoing developments across various categories. Pérez noted that the high-end segment of the market remains robust, particularly in Florida, where the company recently recorded sales of two luxury penthouses totaling $150 million.

Additionally, Related is in the process of constructing Rivage Residences Bal Harbour, a luxury condo tower that features opulent units and extravagant amenities.

Immigration Policies and Industry Implications

Beyond the tariffs, the impact of the Trump administration’s immigration policies is projected to further raise costs in the construction industry. Founder Jorge Pérez remarked, “There will absolutely be a cost effect in our industry, in particular the construction industry.” He pointed out that the sector significantly relies on foreign workers, and any reduction in this labor force could lead to inflationary pressures.

Market Responses to Economic Uncertainties

While the ultra-luxury property market appears resilient, buyers in the middle market—those considering condos priced between $1 million and $3 million—are adopting a more cautious stance due to the prevailing uncertainties. This demographic is particularly attuned to shifts in immigration policies, which have previously influenced buying decisions. “We had a project where we just lost seven or eight Canadian and Mexican buyers that were ready to sign contracts, but when all these things came from tariffs, they didn’t want to buy,” Pérez mentioned, though he expressed optimism that the situation may stabilize.