The Supreme Court's ruling that President Donald Trump's sweeping tariffs on imports across the globe exceeded the executive branch's authority has left multifamily developers in a state of relief — and uncertainty.
The decision means multifamily developers could receive refunds on tariffs they paid over the previous year. But Trump responded with a new 15% tariff under a different section of the law.
“While the Supreme Court’s ruling reins in presidential authority to impose tariffs under [the International Emergency Economic Powers Act], President Trump still has wide latitude in setting tariff policy," said Bill Owens, chairman of the National Association of Home Builders. The home builders' Multifamily Council represents developers and builders of rental apartments.
"With the nation facing a housing affordability crisis, NAHB urges the president to exempt building materials as part of his tariff strategy because they raise construction costs, impede supply chains and result in market and business uncertainty that make it difficult for builders to price their homes," Owens said. "NAHB will continue to work with the administration and Congress to remove regulatory obstacles that hinder the construction of new homes and apartments.”
Trump claimed the International Emergency Economic Powers Act of 1977 allowed him to impose what he called "liberation tariffs" on more than 100 countries without congressional approval. In the majority opinion, Chief Justice John Roberts said the tariffs are not within this power.
“The president asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration and scope. In light of the breadth, history and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it,” the chief justice wrote.
Tariffs differ
Jeff Klotz, CEO of The Klotz Group, a real estate development and investment company that specializes in multifamily, told CoStar News, “We’re relieved and excited and curious, but sort of cautiously optimistic because we don’t know exactly what's going to happen.”
Still, tariffs under other sections of the law, including those on steel and aluminum, remain in place. On Saturday, Trump announced a new 15% tariff across the board using a different legal avenue, Section 122. This would last for 150 days; at that time, Congress would have to approve an extension of the policy.
Greg Brown, senior vice president of the National Apartment Association, said his group "continues to closely monitor changes to federal tariff policy. As housing shortages persist in most communities across the country — and multifamily starts and permits have sharply declined — the industry’s advocacy remains focused on boosting supply and reducing costs."
He added that "the time for bold action on housing development is now, and our nation must build a whopping 4.3 million more apartments by 2035 in order to meet demand, address affordability and account for the current shortfall."
After Trump took office last year, many multifamily developers, including Klotz, stockpiled inventory and or delayed starting on a project because tariffs made financing uncertain.
“The tariff issue’s real," said Klotz, who is based in Jacksonville, Florida. "We prided ourselves on being able to source building materials from China and Southeast Asia at extreme discount and that really came to an end with the tariffs.”
What does this mean for multifamily developers?
For now, multifamily developers are in limbo as they look for ways to finance projects with the higher and unknown costs of materials.
“Over the past two years, tariffs on imported goods have materially increased the cost of construction,” Klotz said.
Developers across the country are left wondering what this means for the future and for the tariffs they have already paid. Under the ruling, the court could order the government to issue refunds to importers affected by overreaching tariffs. Klotz said he is not banking on it, though.
“The thought of being able to get refunds on tariffs already paid … seems a bit far-fetched,” Klotz said, noting that if they were to happen, they would receive upwards of seven figures in returns.
For now, Klotz said they are still working to navigate the complex pricing game the volatile economy has created.
“It became almost next to impossible to lock in pricing beyond a certain time frame,” he said. “Lenders became more skeptical and cautious in their underwriting. Equity investors became the same.”
Klotz — who oversees 14,000 apartment units in Florida, Georgia, North Carolina, South Carolina, Tennessee, Texas and Alabama — said relief in the high tariff policy could help consumers down the line.
“The tariff thing really wreaked havoc … for the resident as well,” Klotz said.
How tariffs refunds work
Refunds of this nature are not uncommon for the federal court that oversees civil cases stemming from international trade law and customs, but professionals on this issue say there has never been a case of this magnitude before.
“The Supreme Court has kicked the refunds back to the CIT court, which is the Court of International Trade, and so they will handle the refund process, which is probably the best-case scenario because they have expertise in this from the past,” Kyle Peacock, a tariff consultant based in Ontario, Canada, told CoStar News. “It’s not immediate, but once that happens, there will be a significant amount of companies that are able to secure refunds based on this from the past year’s tariffs.”
Developers impacted by the tariffs over the previous year should gather receipts for all affected imports so they can file a case when the process opens.
“Documentation’s going to be key," Peacock said. "My first advice is find out what is going to be required and secure all that information upfront."
The rise in tariffs hit developers on the tail of challenges brought on by the pandemic and ensuing supply chain issues. Refunds should give developers a cash influx if delivered.
“We saw the run-up of tight capital, and now with that going to be released, we’re going to see a bunch of capital go back into these businesses and developers, and they will reinvest it in future projects,” Peacock said.
The timeline for those refunds is unknown, especially given the number of businesses impacted by tariffs over the last year.
“Once it’s opened, I think you’ll see a rush of small, medium, large companies all trying to do it (file cases) at the same time,” Peacock said.