New tariffs on steel and aluminum could throw a wrench into some senior living development plans and drive prices higher in an already costly construction landscape.
The measure, which U.S. President Donald Trump unexpectedly announced earlier this month, is slated to go into effect on March 23. It would impose a 25% tariff on steel imports and a 10% tariff on aluminum imports, with exemptions for a handful of top exporters, including Canada, Brazil, Mexico, South Korea and countries that belong to the European Union.
Overall, the tariffs could drive up senior housing project construction costs by as much as 2% to 3%, according to Larry Graeve, senior vice president of construction firm The Weitz Company. Graeve, who tracks senior housing construction costs in an annual brief for the American Seniors Housing Association (ASHA), has in recent years noted a marked increase for those kind of expenses.
“Tariffs and general inflation are a concern, particularly in the busy markets, as well as the labor shortage, which can affect construction duration,” Graeve told Senior Housing News. “It’s important that owners accurately budget these in their pro formas.”
Bend but not break
Though the tariffs—in tandem with an ongoing construction labor shortage—could compound rising senior living construction costs, they likely won’t be a “dealbreaker” for most firms looking to develop, Graeve said.
And while the tariffs will impact all building types, they may affect some more than others. A steel-framed building is more at risk than a concrete- or wood-framed building, for instance. Still, builders use many steel and aluminum components when constructing senior living communities, including steel beams and rebar, metal roof trusses, steel stairs and railings, aluminum windows, steel fencing and aluminum ceiling grids.
One way owners can minimize costs is by using alternative building materials, such as wood framing in place of steel framing where building codes allow, vinyl windows in place of aluminum ones, or fiber cement in place of welded wire mesh in concrete slabs.
Evergreen Real Estate Group—which owns, manages and develops affordable multifamily and senior housing communities in nine states—already anticipates the tariffs will affect the cost of steel and aluminum, and is looking at alternative methods and materials to mitigate the potentially higher expenses, a representative for the company told SHN.
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“My hunch [is,] if the demand is there, then owners and project teams will find ways to make the deals work,” Graeve said.
Fear of the unknown
For Pathway to Living, a Chicago-based senior living owner, operator and developer with 29 communities throughout the Great Lakes region, the biggest worry with respect to tariffs lies in what is not currently known.
“We’re concerned, not with the fact that there’s a particular amount of change coming, but that we’re not fully informed on what that change is right now,” Matt Krummick, Pathway’s director of development, told SHN.
Some of the blame for that confusion lies with the Trump administration itself. After the president ordered the tariffs on March 8, questions swirled over whether they would be enacted as planned, and which trading partners would be exempt—a fact that was unclear to some as recently as Thursday morning.
Sensing uncertainty, some construction suppliers have advised Pathway to lock in prices now. The company opened four new properties last year and acquired one other this year. Pathway is also scheduled to break ground on a new community in La Grange, Illinois, in May.
One fear is that, in the face of stiff tariffs, manufacturers could limit the amount of building materials they sell to those suppliers each month. In turn, that could hinder new construction.
“It’s not always about the cost of materials. It’s also about the potential for the scarcity of materials,” Krummick said. “That slowdown in your construction cycle time can really hurt you from an interest perspective and cost-to-market perspective.”
In the end, while Krummick doesn’t think the worst case scenario is the likeliest outcome, the wait-and-see approach is causing some consternation.
“A lot of time, it’s not as bad as you first think it’s going to be,” Krummick said. “We’d love for that to be the outcome, but the frustration is the market is just not informed right now.”
Written by Tim Regan