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How Tariffs Affect Leasing in 2025

How Tariffs Affect Leasing in 2025
By Ackley Florida Property Management Friday, April 11, 2025

Introduction: Tariffs are often discussed in the context of international trade disputes, but they have very real impacts on local real estate markets. For property owners in Central Florida, understanding how tariffs on key construction materials can influence the economy and leasing trends is crucial. (Tariff Impact Real Estate | Building Material Costs)These import taxes can drive up construction costs, slow down new development, and ultimately affect rental prices and demand. In this post, we’ll explain what tariffs are, explore their effect on construction costs and property development, and examine how those economic ripples influence leasing trends in Central Florida. We’ll also discuss broader factors like inflation and supply chain disruptions, and offer actionable insights for property owners to adapt.


What Are Tariffs and How Do They Work?

In simple terms, a tariff is a tax on imported goods. When a tariff is imposed, the importer must pay an extra charge to bring the product into the country. Typically, this cost gets passed on to the end consumer in the form of higher prices (How Tariffs Impact the Home Building Industry | NAHB). For example, if a $500 appliance faces a 25% import tariff, the importer owes $125 in tax – and consumers usually end up paying that extra amount in the appliance’s price (How Tariffs Impact the Home Building Industry | NAHB). Tariffs are meant to protect domestic industries by making imported goods more expensive, but in practice they often act as a hidden tax on businesses and consumers. In the housing context, tariffs on building materials make construction and renovations pricier, and those costs eventually filter down to home buyers and renters (How Tariffs Impact the Home Building Industry | NAHB).


Tariffs Driving Up Construction Costs

One of the most immediate effects of tariffs is an increase in construction costs. Key building materials like softwood lumber, steel, aluminum, and electronics are frequently imported, so tariffs on these items raise the cost of building homes and apartments. For instance, the U.S. has imposed tariffs on Canadian lumber (around 14-15% in recent years) (How Tariffs Impact the Home Building Industry | NAHB) and a 25% tariff on imported steel products (Tariffs on steel set to drive home prices up). Home builders rely on these materials for framing, concrete reinforcement, siding, appliances, and more. When tariffs make materials more expensive, developers face higher project budgets.

These higher material costs have been significant. The National Association of Home Builders (NAHB) reports that overall building material prices have surged 34% since December 2020, far outpacing general inflation (How Tariffs Impact the Home Building Industry | NAHB). In fact, about 7% of all goods used in U.S. residential construction are imported, and recent tariff actions have added an average of $9,200 to the cost of constructing a new home (Will tariff

hikes on construction make affordable housing more expensive?). This means every new house or apartment building is thousands of dollars more expensive to build than it would be without those tariffs. Such cost increases squeeze developers’ profit margins and make some projects financially unfeasible.

Tariffs also can create supply chain complications. If builders try to avoid a tariffed country’s goods, they must source materials elsewhere – but that surge in demand for alternate suppliers often drives those prices up too (Tariff Tension: How tariffs could affect central Florida home prices – WFTV). For example, Florida historically gets much of its lumber from Europe rather than Canada, but if Canadian wood becomes pricier due to tariffs, many builders might flood the European lumber market, causing price hikes across the board (Tariff Tension: How tariffs could affect central Florida home prices – WFTV). Additionally, import tariffs can introduce delays at customs and discourage “just-in-time” inventory strategies (Tariff Impact Real Estate | Building Material Costs). Builders have reported uncertainty in pricing and availability – as one industry expert noted, contractors now sometimes shorten the validity period of their price quotes or add clauses to address sudden material cost changes (Tariff Tension: How tariffs could affect central Florida home prices – WFTV). All of this uncertainty and extra cost ultimately “gets rolled into the price of homes”, as the Greater Orlando Builders Association explains (Tariff Tension: How tariffs could affect central Florida home prices – WFTV). In short, tariffs on materials act like a rising tide that lifts all construction costs, making it more expensive to develop new housing.


Impact on Property Development and Housing Supply

When construction costs climb, property development tends to slow down. Developers may delay or cancel projects, especially in more price-sensitive segments like affordable housing.

Each project’s feasibility is weighed against expected rents or sale prices; if costs surge but market prices can’t adjust enough, builders pull back. We’re already seeing this effect: builders estimate that tariffs and related cost spikes force them to scale back and build fewer homes than planned (Tariff Tension: How tariffs could affect central Florida home prices – WFTV). In other words, higher costs are preventing some new housing units from coming to market.

A reduced pace of construction means a tighter housing supply. Nationwide and in Florida, the supply of new homes has not kept up with demand in recent years, contributing to housing shortages. Central Florida exemplifies this dynamic – it’s a high-growth region where builders have been racing to add inventory. In 2023, roughly 30,000 new rental units were under construction in the Orlando metro (Orlando rents expected to rise by year-end, experts say), yet that still barely met the enormous demand (the past two years saw record absorption of new units) (Orlando rents expected to rise by year-end, experts say). If tariffs and high material prices cause builders to cut back, the pipeline of new homes could “taper off” sooner than expected (Orlando rents expected to rise by year-end, experts say). In fact, experts predict that as the current wave of projects finishes, fewer new developments will break ground, and that could quickly lead to a supply crunch (Orlando rents expected to rise by year-end, experts say).

Central Florida’s population keeps growing (about 138 people move to Orlando every day (Orlando rents expected to rise by year-end, experts say)), so any slowdown in construction intensifies competition for existing homes. A Florida builders’ group pointed out that tariffs on materials like lumber will inevitably result in higher prices on new and existing homes for buyers (Tariff Tension: How tariffs could affect central Florida home prices – WFTV). For would-be homebuyers, this can push ownership out of reach – and many will remain renters

longer. For developers and landlords, limited new supply can be a mixed blessing: on one hand, less competition and higher property values; on the other, an affordability crisis that can strain the market. In Florida, we already face an affordability challenge despite a construction boom – a recent University of Florida report noted a continued shortage of affordable housing for the workforce even as construction hit record levels (Florida struggles with affordable housing despite construction boomNews | University of Florida) (Florida struggles with affordable housing despite construction boomNews | University of Florida). In short, tariffs contribute to making new development more costly and scarce, which tightens housing supply at a time of strong demand.


Rising Costs Influence Rents and Maintenance

Tariffs not only affect builders – they also hit property owners’ operating costs. When the price of lumber, steel, or appliances goes up, it’s not just new construction that gets pricier; maintaining and upgrading existing properties becomes more expensive too. Everything from replacing a roof to repairing an HVAC system or buying new kitchen appliances costs more when materials are subject to import taxes. For example, tariffs on imported steel can raise the cost of air conditioning units or structural repairs, and tariffs on appliances mean a new refrigerator or washing machine might carry an extra premium (How Tariffs Impact the Home Building Industry | NAHB). These higher maintenance and renovation costs squeeze landlords’ budgets. Many landlords will try to pass on these costs in the form of higher rents, where the market allows, to maintain their profitability (Tariff Impact Real Estate | Building Material Costs).

Indeed, rents tend to rise when new supply is constrained and costs increase. Central Florida has witnessed this first-hand. Over the past few years, Orlando rents skyrocketed – roughly 30–40% higher now than they were before 2020 (Orlando rents expected to rise by year-end, experts say). The average rent in the metro jumped from about $1,200 in 2020 to over

$1,800 by 2022 (Orlando rents expected to rise by year-end, experts say). Rents leveled off slightly in 2023 as a lot of new apartments hit the market, but with construction slowing, vacancy rates will tighten and rents are expected to climb again heading into 2025 (Orlando rents expected to rise by year-end, experts say). In other words, whenever demand exceeds supply – which high building costs help ensure – landlords gain pricing power. Property owners often find they can charge more, especially as many prospective homebuyers are forced to rent longer due to expensive home prices and higher mortgage rates.

That said, property owners must be mindful of tenant affordability. General inflation in the economy means tenants are paying more for food, gas, and other essentials, leaving less income for rent. Tariffs contribute to this broader inflation by raising costs of goods; for instance,

the tariffs on building inputs and other consumer goods have added price pressure throughout the economy (Tariff Impact Real Estate | Building Material Costs). If rents rise too sharply while wages lag, renters face cost burdens. Parts of Central Florida, like Osceola County, are already seeing families struggling to afford rent and even facing evictions, as housing costs outrun incomes (Tariffs and rising costs force Central Florida families to rethink spending habits). Thus, while higher costs might justify rent increases to some extent, property owners must strike a balance to avoid high vacancy or turnover. In many cases, it’s cheaper to retain a good tenant at a moderate rent than to lose them and incur vacancy loss, especially in uncertain economic times.


Broader Economic Considerations: Inflation and Supply Chain Disruptions

Tariffs on construction materials don’t act in isolation – they amplify other economic challenges. One major factor is inflation. By making imported goods pricier, tariffs have a direct inflationary effect. We saw construction materials inflation far exceed overall inflation in recent years (How Tariffs Impact the Home Building Industry | NAHB), and higher material costs have trickled into higher home prices and rents (the cost of housing is part of inflation indices). When inflation rises, it can prompt central banks to hike interest rates to cool the economy. This is exactly what happened in 2022–2023: the Federal Reserve raised interest rates aggressively to combat the highest inflation in 40 years. Higher interest rates increase borrowing costs for developers and buyers alike, which can further slow down new construction and make mortgages (or refinancing) more expensive for everyone. In this way, tariffs indirectly contributed to a chain reaction – from higher building costs, to higher inflation, to higher interest rates – which altogether shape the real estate leasing environment.

Another factor is global supply chain disruption. In recent years, events like the pandemic and international trade tensions have tangled supply chains worldwide. Tariffs add to these woes by reshuffling where materials are sourced. If a key component (say, electrical transformers or plumbing fixtures) from abroad faces a tariff, domestic suppliers may not immediately have enough capacity, leading to shortages or long lead times (Tariff Impact Real Estate | Building Material Costs). Florida builders experienced such issues with everything from lumber to appliances – delays in deliveries and volatile prices became common. Supply chain hiccups mean construction projects take longer to complete, which delays the arrival of new rental units to the market. They also mean that repair parts for maintenance might be

back-ordered or more costly, potentially delaying how quickly landlords can fix units.

For property owners, these broader economic trends affect both costs and tenant demand. On the cost side, inflation drives up utilities, insurance, property taxes and more, in addition to maintenance expenses. You might see your property tax assessments climb because home values are up (partly due to construction costs), or your insurance premiums jump as rebuilding costs soar in Florida’s construction market. On the demand side, if inflation outpaces wage growth, renters may downgrade to smaller units, seek roommates, or move to more affordable

areas, which could soften demand for higher-end rentals. Conversely, if buying a home becomes even more expensive (due to high interest rates and material costs), that keeps more people in the rental market, bolstering demand for well-maintained rentals. Central Florida has remained economically robust, with job growth in industries like hospitality and tech, so demand for housing is still strong – but property owners should keep an eye on macroeconomic signals. A spike in inflation or a dip into recession (which could happen if tariffs and other factors significantly slow growth (Tariff Impact Real Estate | Building Material Costs)) would alter tenant behavior and ability to pay.


Actionable Insights for Property Owners

Given these complex dynamics, what can Central Florida property owners do to navigate the impact of tariffs and economic shifts on their leasing strategy? Here are some actionable steps to consider:

  • Stay Informed on Material Costs: Keep track of price trends for key materials and goods  (lumber,  roofing,  appliances,  etc.)  that  affect  your  properties.  If  you  know  a  major tariff  or  supply  chain  issue  is  coming  (for  example,  a  new  tariff  on  imported  electronics), plan significant repairs or improvements accordingly. You might choose to schedule renovations sooner to avoid future cost increases, or hold off if prices are temporarily spiked. Knowledge of cost trends can help you budget properly and time your expenditures.

  • Reevaluate Your Maintenance Budget: With costs rising, audit your property maintenance and repair budget. Expect to pay more for parts and labor than you did a few years ago. It may be wise to set aside a larger capital reserve for repairs and replacements. Also, invest in preventative maintenance – taking care of minor issues now can prevent major, more expensive problems later. For instance, if appliance costs are  up  due  to  tariffs,  extending  the  life  of  your  current  appliances  through  proper  upkeep or minor fixes could save you money.

  • Optimize for Efficiency: Consider upgrades that reduce ongoing costs and make your property more resilient to price swings. This could include installing energy-efficient windows,  appliances,  or  HVAC  systems  (even  if  they  have  higher  upfront  costs,  they  can lower utility bills and maintenance down the road). Also, when you do replace items, choose durable, high-quality materials that will last longer. In an era of expensive construction inputs, a roof that lasts 30 years instead of 15 is a smart investment. These improvements can also make your rentals more attractive to tenants, justifying rent levels.

  • Review Contracts and Clauses: If you’re engaging in any construction or major renovation, work with your contractors to understand how they handle material price fluctuations.  Given  the  volatility,  many  builders  are  shortening  the  window  for  how  long  a quote  is  valid  or  adding  escalation  clauses  for  materials  (Tariff  Tension:  How  tariffs  could

affect central Florida home prices – WFTV). Make sure your contracts account for this – you don’t want to be caught off guard by a sudden cost overrun. It may be worth locking in prices for critical materials in advance when possible or purchasing some materials upfront if you have storage, to insulate against future tariff hikes.

  • Monitor  Local  Market  Trends:  Keep  a  close  eye  on  Central  Florida  housing  indicators  – vacancy rates, new construction in the pipeline, and rent trends. If you know that fewer new units are coming to market next year, that might be an opportunity to carefully raise rents (within reason) as demand outstrips supply. Conversely, if an economic slowdown hits and demand softens, you might focus on tenant retention with competitive pricing or lease renewal incentives. Aligning your leasing strategy with market conditions is key. Market data from local Realtor associations or apartment industry reports can guide these decisions.

  • Maintain Open Communication with Tenants: If you do need to implement rent increases  to  cover  rising  costs,  communicate  with  your  tenants  about  the  reasons.  Often, renters  are  more  understanding  when  they  know  that  taxes,  insurance,  and  maintenance expenses have gone up for you as a landlord (many will have seen news about inflation and housing costs). Consider a gradual increase or offer improvements (like a new amenity  or  upgrade)  to  add  value  alongside  the  rent  bump.  Happy,  long-term  tenants  are extremely valuable in a volatile market.

  • Consult Property Management Professionals: Last but not least, don’t go it alone. Engaging a knowledgeable property management firm can be one of the best ways to  adapt  to  changing  economic  conditions.  Experienced  property  managers,  like  Ackley Florida Property Management, continuously study market trends, vendor pricing, and local regulations. We can provide guidance on optimal rent pricing, cost-effective maintenance practices, and timing for renovations or acquisitions. We also leverage economies of scale – for example, managing many units allows us to negotiate better rates with contractors and suppliers, helping cushion the impact of tariffs on costs. If you’re feeling unsure about how tariffs or economic shifts might affect your rental business, a property manager can offer data-driven insights and take the day-to-day operational burden off your shoulders.


Conclusion

Tariffs on construction materials may seem like a far-off policy issue, but as we’ve seen, they have tangible effects on Central Florida’s leasing landscape. Higher material costs lead to more expensive construction and renovations, which in turn tighten the housing supply and put upward pressure on rents. Coupled with broader economic forces like inflation and supply chain disruptions, tariffs have contributed to an environment where property owners must be agile and proactive to protect their investments. The good news is that understanding these links helps you stay ahead of the curve. By monitoring cost trends, adjusting your strategies, and seeking

expert help when needed, you can successfully navigate the challenges and even find opportunities (such as improving your property’s value or filling a niche in the market).

If you’re a property owner in Central Florida and wondering how to best position your rental portfolio amid these economic changes, now is the time to act. Ackley Florida Property Management is here to help you interpret market conditions and make informed decisions – whether it’s setting the right rent, planning a cost-effective renovation, or simply managing tenant relations in a period of rising costs. Contact us today for a personalized consultation on how to adapt your leasing strategy to the evolving economic landscape. With professional guidance, you can turn challenges like tariffs and inflation into opportunities for smart growth and continued success in your property investment journey.

Sources:

(Tariff Tension: How tariffs could affect central Florida home prices – WFTV)

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