Chicago Housing Development Shrinks Itself by 80% in Face of Trump Tariffs

The developer behind a new mixed-use property in Chicago has decided to scale the project back by nearly 80 percent in response to tariffs imposed by President Donald Trump.

Newsweek reached out to the developer, Mavrek, for comment via email.

Why It Matters

The United States is already facing a housing affordability crisis, with millions of Americans locked out of home ownership amid skyrocketing housing prices and stubbornly high mortgage rates that economists say are unlikely to come down anytime soon — especially given the hotter-than-expected January inflation reading released Wednesday.

The sized-down Chicago development reflects concerns from economists that Trump's tariffs could slow the construction of new residential and commercial buildings, exacerbating the already-existing problem of too few homes being built. Trump announced tariffs on steel and aluminum imports from Canada and Mexico over the weekend, while his larger, blanket tariffs on the two neighbors remain on pause.

What To Know

Mavrek planned to build a 210-unit mixed-use complex in Chicago's Lake View neighborhood but announced this week the development has shrunk to only 46 units amid concerns about the economy and tariffs, reported Crain's Chicago Business.

Mavrek CEO Adam Friedberg told Crain's thatthe developer will be focusing on smaller projects due to the uncertainty created by these economic pressures.

"Until there becomes a little bit more predictability and rates regulate, then I think the smaller projects should be a focus. It's not just Chicago – you look in almost any major city, there's very little new development right now," he told the publication.

The Chicago development reflects broader concerns about how construction costs—already outpacing inflation in many urban areas—may be further affected by tariffs that raise prices on input costs like steel.

Ryan Monarch, a professor of economics at Syracuse University, told Newsweek on Wednesday that it is "clear" tariffs on products like steel and aluminum will increase the cost of building housing and developments and, therefore, drive up the prices of housing in the U.S.

It will raise costs for things like nails, typically made of steel, affecting not just new constructions but also renovations on already-existing buildings, Monarch said, noting this could have an impact on prices for renters, as well.

"Any kind of improvement that homeowners want to make is also going to become more expensive. Think about some of the recovery from natural disasters in California or North Carolina. The costs of disaster recovery are also going to be higher," he said.

Thomas Prusa, an economics professor at Rutgers University, said he found it "unsurprising" that developers are scaling back their projects, pointing to steel and aluminum tariffs having a "considerable impact" on construction costs.

"That's not just cheap talk by them. That's the truth," he told Newsweek.

Prusa said the tariffs would lead to higher costs, exacerbating U.S. housing shortages. Lower-income Americans will be particularly affected, as they already spent more on consumer goods and housing expenses.

Trump's tariffs on lumber are on pause, so residential housing may not be as affected at this point, but developers should be "anticipating" these and "stockpiling," he said. That could also be compounded by Trump's immigration crackdown, which may leave fewer migrants working in construction, he added.

"You thought you were going to build a house for a $250,000 cost, and it goes up to be a $390,000 cost in some cases," he said. "You're absolutely going to see an impact, both on residential and non-residential construction."

While some jobs in the domestic sand or cement industries may be saved, others will be shed due to higher construction costs, Peter Simon, an economics professor at Northeastern University, told Newsweek.

"Since the U.S. imports from Canada and Mexico much sand, cement, steel and lumber, these tariffs will have a significant effect on construction," he said.

Monarch said that the economic impact of tariffs will also filter into interest rates. The average mortgage rate on February 9 was 6.95 percent, down slightly from 7 percent one week earlier, according to Bankrate.

"If people can't afford homes because they're too expensive and they also can't afford to get a mortgage, this is not going to be good for a housing market," he said.

Mark Williams, a professor of finance at Boston University, said U.S. developers source lumber and steel for Canada. Lumber costs about $12 per square foot for a new house, but tariffs will "significantly push up the framing cost, making housing that much less affordable.

"A newly built house or office building is comprised of a basket of raw materials such as wood, steel, copper, insulation and brick," he said. "For over a half-century, sourcing of these raw materials has been built around a global supply chain driven by lower cost and improved quality. Tariffs disrupt this supply chain, substituting arbitrary geographic boundaries, resulting in higher prices and many times reduced quantity."

What People Are Saying

Taylor Rogers, a spokesperson for the Trump-Vance team, previously told Newsweek in a statement: "President Trump will deliver on his promise to Make Housing Affordable Again by defeating historic inflation and reducing mortgage rates."

She added: "President Trump will ban mortgages for illegal immigrants who drive up the price of housing, eliminate federal regulations driving up housing costs, open portions of federal land with ultra-low taxes and regulations for large-scale housing construction. The cost of new homes will be cut in half, and President Trump will end the housing affordability crisis."

The National Association of Homebuilders, in a statement: "For years, NAHB has been leading the fight against tariffs because of their detrimental effect on housing affordability. In effect, the tariffs act as a tax on American builders, home buyers and consumers."

What Happens Next

The 25 percent tariffs on all goods imported from Canada and Mexico went on a 30-day pause starting February 3, and it's unclear whether an agreement will be reached to avert the implementation of those tariffs in the long term.

Update 2/12/25, 4:44 p.m. ET: This article was updated with comment from Mark Williams.