What Trump’s tariff policies mean for Philadelphia real estate development

Real estate development in Philadelphia began slowing down long before President Donald Trump’s second administration began.

Rising interest rates, persistently elevated construction costs, an apartment glut, and the end of the city’s generous 10-year property tax abatement took their toll.

Going into 2025 there was hope that the Federal Reserve would start cutting rates if inflation continued to slow, while Trump promised action to reduce regulations that hamper housing construction. Locally, builders believed vacant apartments would be filled, and Mayor Cherelle L. Parker’s housing policies would juice production.

But with Trump’s massive tariff rollout, many local developers are expressing fears that the president’s policies could continue to dampen construction. Even as the president issued a 90-day delay to many of the levies on Wednesday, he further hiked tariffs on China — which supplies many projects with appliances like sinks, toilets, and flooring.

“This is really kicking us in the teeth,” said Mohamed “Mo” Rushdy, president of the Building Industry Association, which represents residential developers in Philadelphia. “A lot of our building materials, even for stuff that’s made here, comes from abroad.”

Philadelphia real estate developers work in a Democratically controlled city, and they are not in the habit of casually praising Trump in public. But they don’t reflexively criticize him either.

Most real estate industry actors interviewed for this article described the volatility that’s defined the second Trump administration as a further barrier to building, especially after this week of ever-shifting trade policies.

More than the actual costs incurred by the tariffs — the details of which seem to change by the day — they described economic uncertainty as a challenge, making it harder to borrow money for new projects.

“Even before the tariff situation, higher capital costs, higher debt costs were precluding a lot of new development anyway,” said Jerry Sweeney, CEO of Brandywine Realty Trust, a major Philadelphia-based commercial developer. “When you layer on increased cost uncertainty from the potential impact of tariffs, it extends that pause out even longer.”

When Trump unveiled his slate of tariffs on April 2, the Post Brothers — a major multifamily developer in Philadelphia — immediately began getting calls from investors and lenders about the effects of the policy changes on their projects.

The company conferenced with their subcontractors and suppliers and concluded that for the most part, price increase would be limited to 3% to 5%.

The president, after all, exempted many key construction materials like steel, aluminum, and lumber — all of which had been hit by earlier tariffs —from his sweeping April levies.

“We don’t think that the numbers on actual material cost increases are going to be super impactful,” Michael Pestronk, CEO and cofounder of Post Bros, said Tuesday.

Trump’s decision to pause many tariffs on Wednesday reaffirmed that analysis, although the baseline increase of 10% on most countries and the huge new levies on China remain in place.

Pestronk noted that his company, which develops high-end multifamily buildings, mainly relies on imports from Europe. He argues that Philadelphia developers in general are less exposed to a trade war with China.

“A lot of things in Philadelphia don’t use really much of anything from China,” Pestronk said.

While Trump paused many tariffs on Wednesday, he increased levies on China to 125%. While developers like Post Brothers that cater to the higher end of the housing market may be little affected, rowhouse and small apartment builders in neighborhoods beyond Center City and its surroundings could be harder hit.

“It impacts probably mid-rise and low-rise stuff more, so if you are using wood framing and vinyl product from China this is more impactful,” Pestronk said.

In an interview earlier this week, Rushdy of the Building Industry Association estimated that Trump’s tariffs would increase construction costs by 5% to 7%. He said such a hike would not dissuade luxury development but could hit homebuyers on a budget.

“I’m not too worried about a $3 million condo increasing by $200,000,” Rushdy said. “It’s bad for business, but the $3 million condo guy will survive. It’s the $70,000 a year person that’s going to see their affordability impacted.”

Even developers who aren’t too worried about the cost of tariffs say the volatility caused by Trump’s policies hurts — both because it will make lenders more nervous and the Federal Reserve more conservative in cutting rates.

“I believe that by the third quarter, there should be some stability and it will calm down,” said Rob Zuritsky, president and CEO of Parkway Corp. “That doesn’t mean banks are going to feel comfortable — it will be a year or two until they get back in the game — or that interest rates are going down. So I think that development is on hold for a long time.”

Charlie Crawford’s Hyperion Bank at Second Street and Girard Avenue is in the middle of one of Philadelphia’s hottest residential real estate markets in Northern Liberties. He says his small bank has continued to see demand for loans this year, but he anticipates his underwriting will be more conservative moving forward.

Developers will need to put up more of their own money upfront, which will be harder for smaller operators or new entrants.

Crawford says he fears that the tariffs will keep inflation elevated enough that the Federal Reserve will not lower interest rates substantially, or perhaps at all, this year.

“The next three quarters are more uncertain,” Crawford said. “If we have elevated inflation that means we’re not going to get lower short-term interest rates, and if [material] costs go up, that would dampen some [housing] starts.”

There are others who are counseling it’s simply too early to say what effects Trump’s trade policy will have.

“We’re talking about plus or minus 5% of total construction cost for the average residential project,” said Leo Addimando of Alterra Property Group, a Philadelphia-based multifamily residential developer. “If your project succeeds or fails based on a 5% cost increase, then you’ve got a bigger problem than tariffs.”

Addimando believes many construction materials can be sourced at a reasonable cost domestically. He notes that during the COVID-19 pandemic, supply chains flexibly adjusted to sudden pressures, especially in a country the size of the U.S.

He also argues that the volatility of Trump’s second term makes it hard to predict what the policy outcomes will look like.

“These tariffs were just announced,” Addimando said Tuesday. “We don’t even know what’s going to actually be implemented. We don’t know what sourcing options exist domestically versus internationally. It’s very premature to make any real predictions.”