- Tariffs on construction materials imported from Mexico, Canada and China were set to take effect in early April.
- The tariffs were projected to increase the cost of building a new home in metro Phoenix by several thousand dollars.
- Experts predicted the added costs will be passed on to consumers, impacting both buyers and renters.
Higher tariffs on construction materials set to go into effect in early April will likely push up the costs of building homes and apartments for metro Phoenix buyers and renters already stretched to afford roofs over their heads.
The additional taxes scheduled to go into effect on April 2 on steel, aluminum and lumber could add $7,500 to $10,000 to the cost of building a new house, according to the National Association of Home Builders.
Tariffs on new apartments, which are typically built of mostly steel, could drive up the costs of building them by a few thousand dollars a unit, say multifamily experts.
The tariff increases come as building costs have already jumped in the past few years. Also, Phoenix is proposing double-digit jumps in impact fees that builders pay for developments, including homes and apartments. The fees go toward building and maintaining roads, sewers and other infrastructure.
The tariffs are being placed on three of Arizona’s top countries for imports: Mexico, China and Canada.
“I am very concerned tariffs are going to raise construction costs across the board,” said veteran Arizona developer Steve Betts. “We are already budgeting 5% to 10% higher costs on our projects.”
On Feb. 1, President Donald Trump signed an executive order to impose an additional 25% tariff on imports from Mexico and Canada and doubled the tariff on imports from China to 20%.
Tariffs on Mexican and Canadian construction materials will raise the cost of imported building materials by more than $3 billion, according to the NAHB.
Tariffs imposed on China will raise home appliance costs.
Mexico is Arizona’s biggest international trade partner. Last year, 27.5% of the state’s imports came from its southern neighbor, according to the University of Arizona’s Making Action Possible for Southern Arizona research group. China was second, responsible for 12.7% of Arizona’s imports. Canada was fourth with 6.4% of Arizona’s imports.
Ken Peterson, vice president of sales and marketing for Shea Homes Arizona, estimated tariffs would add about $1.50 to $2 a square foot to its houses for a total increase of about $5,000 to $8,000.
He said new homebuyers would not see higher costs right away because Valley homebuilders have houses under construction that are already permitted and being built with pre-tariff purchased materials.
Metro Phoenix had a severe housing shortage a few years ago but had started building out of it. The Valley ranked third in the U.S. for the most new homes and apartments planned or under construction last year.
Permits to construct 28,000 Valley houses and 17,000 apartments were issued during the 12 months ending in September 2024, according to the U.S. Census Bureau and builders. That put the Valley behind only Dallas and Houston for adding housing.
“Tariffs are creating uncertainty that could exacerbate our housing supply problem,” said Mark Stapp, director of the master of real estate development program at Arizona State University.
He said development is already starting to slow because of cost concerns.
Eric Gruber, chief operating officer of Acanthus Senior Living, said the tariffs “will compress profits” and that’s a big detriment to developing much-needed housing.
Real estate experts expected the higher building costs to be passed onto consumers because development profit margins are tight due to already higher building, land and labor costs.
“While these tariffs create headaches for developers, renters will bear much of the financial burden over the next five years,” said Derrick Barker, CEO of commercial real estate financer Nectar.
Construction costs for commercial projects, including offices, warehouses and shopping centers, could climb 3% to 5%, tighten supply and delay projects, according to brokerage CBRE.
In early March, Trump delayed tariff increases on certain products, including lumber from Mexico and Canada.
So far, there’s no indication he will delay the taxes again.
“We are watching the impact of tariffs closely and trying to update business plans quickly,” said Sharon Harper, CEO of Arizona commercial real estate firm Plaza Cos. “It’s a tense time for developers.”
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